Legislature(2017 - 2018)BELTZ 105 (TSBldg)

04/14/2018 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Meeting Postponed to 3:30 p.m. --
Moved CSSJR 7(L&C) Out of Committee
Moved SCS CSHB 170(L&C) Out of Committee
Moved SCS CSHB 142(L&C) Out of Committee
Moved CSHB 301(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
              HB 142-UNEMPLOYMENT INSURANCE BENEFITS                                                                        
4:04:11 PM                                                                                                                    
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration  of  HB  142  relating  to  unemployment  insurance                                                               
benefits. She requested a motion  to adopt the proposed committee                                                               
substitute (CS).                                                                                                                
4:04:38 PM                                                                                                                    
SENATOR MEYER  moved to adopt the  work draft Senate CS  for CSHB
142, labeled 30-LS0530\T, as the working document.                                                                              
4:04:52 PM                                                                                                                    
SENATOR GARDNER objected.                                                                                                       
CHAIR COSTELLO noted  who was available to  answer questions, and                                                               
asked Ms. McClanahan to go through the explanation of changes.                                                                  
4:05:39 PM                                                                                                                    
NATASHA  MCCLANAHAN, Staff,  Senator Mia  Costello, Alaska  State                                                               
Legislature, Juneau, Alaska, stated  that she would introduce the                                                               
CS and then walk through the explanation of changes document.                                                                   
She  explained that  the  CS  for HB  142  increases the  current                                                               
maximum  weekly benefit  from $370  to $434.  It also  raises the                                                               
total  gross income  an individual  must earn  over two  calendar                                                               
quarters of the base period  from $2,500 to $3,000. These changes                                                               
strike  a  balance  in  providing   additional  benefits  to  the                                                               
unemployed  while recognizing  the  impacts to  the economy  when                                                               
businesses face higher taxes.                                                                                                   
MS. MCCLANAHAN  paraphrased the following explanation  of changes                                                               
document for HB 142, version R to version T:                                                                                    
     Page 1, line 5 & Page 2, line 4                                                                                            
      Changes the base required for eligibility to $3,000                                                                       
        from $2,500 for the base period covered by this                                                                         
     chapter.  As the  benefit is  increased,  the base  for                                                                    
     eligibility  is  also  increased to  offer  balance  to                                                                    
     employees and employers who are the premium payers.                                                                        
     Page 8, lines 8 & 9                                                                                                        
     Changes  the increase  in the  maximum qualifying  wage                                                                    
     scale to $50,000. This allows  for an increase to those                                                                    
     unemployed  who qualify  for  benefits while  lessening                                                                    
     the fiscal  impact to  employees and  employers. Alaska                                                                    
     would  move   to  the  top  half   of  states'  maximum                                                                    
     Version T removes Section 2  of version R regarding the                                                                    
     automatic  calculation  and  administration  of  yearly                                                                    
     increases  to   the  state's  maximum   weekly  benefit                                                                    
     amount. This  preserves the Legislature's  authority to                                                                    
     examine increases.                                                                                                         
4:07:21 PM                                                                                                                    
SENATOR GARDNER removed her objection.                                                                                          
CHAIR  COSTELLO found  no  further objection  and  version T  was                                                               
adopted. She opened public testimony on version T of HB 142.                                                                    
4:08:06 PM                                                                                                                    
AL TAMAGNI Sr., Chair, Alaska  Chapter of the National Federation                                                               
of  Independent  Businesses  stated   support  for  the  proposed                                                               
changes appearing in version T of HB 142.                                                                                       
SENATOR MICCICHE asked if he  was stating support for the changes                                                               
or the bill itself.                                                                                                             
MR. TAMAGNI  clarified that  NFIB supports the  Senate CS  for HB
142, version T.                                                                                                                 
4:10:37 PM                                                                                                                    
HEIDI  DRYGAS, Commissioner,  Department of  Labor and  Workforce                                                               
Development,  Juneau,  Alaska,  said  she  appreciates  that  the                                                               
committee  recognizes that  the  current  maximum weekly  benefit                                                               
amount is insufficient, but the  $64 increase reflected in the CS                                                               
is woefully  inadequate, particularly when there  is no provision                                                               
for upward adjustment. It means that  Alaska will go from 52nd in                                                               
the nation  on the wage  replacement ratio  to 49th. This  is the                                                               
first increase  in 10 years and  it could be another  10-12 years                                                               
before  the  legislature  addresses this  issue  again.  Further,                                                               
increasing the minimum amount of  the base year wages from $2,500                                                               
to  $3,000  basically means  that  100  Alaskans who  would  have                                                               
received a maximum  weekly benefit of $56, will  now get nothing.                                                               
She highlighted  that the department's economist  calculated that                                                               
the latter  change wouldn't result  in much savings to  the trust                                                               
4:12:34 PM                                                                                                                    
SENATOR MEYER asked about the current status of the trust fund.                                                                 
COMMISSIONER DRYGAS deferred the question to Mr. Weller.                                                                        
SENATOR MEYER asked,  based on the CS, how much  more an employee                                                               
who makes  $100,000 a year  will have withdrawn from  their check                                                               
each month.                                                                                                                     
COMMISSIONER DRYGAS deferred the question to Mr. Weller.                                                                        
SENATOR MEYER said he'd be concerned  if employees take a big hit                                                               
each month.                                                                                                                     
4:14:15 PM                                                                                                                    
LENNON  WELLER,  Economist  and   Actuary  for  the  Unemployment                                                               
Insurance System,  Research and  Analysis Section,  Department of                                                               
Labor and Workforce Development  (DOLWD), Juneau, Alaska, advised                                                               
that the fund was solvent. At  the end of February the trust fund                                                               
had a balance  of $442.7 million. That equates to  a 3.64 percent                                                               
reserve  ratio. He  reminded members  that the  goal was  to have                                                               
between 3 percent and 3.3 percent  of wages in reserve. He opined                                                               
that the  current balance  was sufficient to  cover the  array of                                                               
potential costs that the system may face.                                                                                       
SENATOR MEYER  asked how  the change proposed  in the  CS impacts                                                               
the trust fund.                                                                                                                 
MR.  WELLER explained  that changing  the maximum  weekly benefit                                                               
from $370  to $434  will not change  employer and  employee costs                                                               
for the next  two years. In 2021, an employer  will pay a maximum                                                               
additional $52 per  employee making at or above  the taxable wage                                                               
base. This  is reduced  to $47  in 2022 and  increases to  a $128                                                               
maximum difference in 2023.                                                                                                     
SENATOR MEYER asked if that was per month.                                                                                      
MR.  WELLER  clarified  it  would be  an  annual  difference.  He                                                               
continued saying  that the maximum difference  between their base                                                               
line  projection with  this  change is  about  $116 per  employee                                                               
making at  or above the  taxable wage  base for the  average rate                                                               
tax class, which is classes 10 and 11.                                                                                          
SENATOR  MEYER asked  the additional  amount  an employee  making                                                               
$100,000 in 2021 would pay.                                                                                                     
MR. WELLER explained that wages are  only taxed up to the taxable                                                               
wage base so the foregoing is  the maximum they would pay for the                                                               
average tax class.                                                                                                              
4:18:24 PM                                                                                                                    
COMMISSIONER  DRYGAS added  that Alaska's  Unemployment Insurance                                                               
(UI) Trust  Fund has been healthy  since it was created.  The way                                                               
the  rates are  calculated and  solvency is  determined has  been                                                               
used as  a model by  other states. "It  is a very  well operating                                                               
trust fund."                                                                                                                    
SENATOR MEYER asked if in her  opening comments she said that the                                                               
CS may jeopardize the health of the trust fund.                                                                                 
COMMISSIONER DRYGAS replied she did  not say that. The trust fund                                                               
will remain healthy if the  maximum weekly benefit is either $434                                                               
or $510.                                                                                                                        
4:19:42 PM                                                                                                                    
SENATOR MICCICHE calculated  that the annual wages  in Alaska are                                                               
somewhere around $12.159 billion if  the $442.7 million in the UI                                                               
fund represents 3.641 percent of wages.                                                                                         
MR. WELLER agreed.                                                                                                              
SENATOR MICCICHE  asked if  funding to 3  percent to  3.3 percent                                                               
was based on a national model.                                                                                                  
MR. WELLER  said a  3 percent  to 3.3  percent reserve  ratio was                                                               
determined  to  be  adequate  based   on  Alaska's  history  with                                                               
unemployment insurance.                                                                                                         
He  explained  that the  federal  Department  of Labor  uses  two                                                               
official values for  trust fund adequacy. One is  an average high                                                               
cost   multiple  that   determines  whether   the  reserves   are                                                               
sufficient to handle  three of a state's highest cost  years as a                                                               
percentage of  wages. The other  value is the high  cost multiple                                                               
which is  essentially the year in  which a state had  the highest                                                               
costs  as a  percentage of  wages covered  throughout its  entire                                                               
history. For Alaska,  it was about 4.2 percent  in the mid-1970s.                                                               
But over the last 30 years,  the 3 percent to 3.3 percent reserve                                                               
ratio  has been  sufficient to  handle  the claims  loads the  UI                                                               
System  has experienced.  He  opined that  the  targets for  fund                                                               
solvency and financing have stood the test of time.                                                                             
4:23:08 PM                                                                                                                    
SENATOR  MICCICHE  commented  that  recessions  obviously  matter                                                               
because statewide earnings  are down about $1.5  billion over the                                                               
last couple of years.                                                                                                           
4:23:36 PM                                                                                                                    
SENATOR STEVENS  said he  appreciates the  Commissioner's concern                                                               
that the  CS only boosts Alaska  from 52nd to 49th  in the nation                                                               
on the wage replacement ratio. He  asked what it would take to be                                                               
25th in the nation.                                                                                                             
MR.  WELLER calculated  that the  average replacement  rate would                                                               
need to  be 42  percent to rank  25.  He  noted that  the current                                                               
average replacement rate was just  under 29 percent. With the CS,                                                               
the replacement rate would be 32 percent to 33 percent.                                                                         
4:26:08 PM                                                                                                                    
At ease                                                                                                                         
4:26:13 PM                                                                                                                    
CHAIR COSTELLO  reconvened the meeting  and asked Ms.  Kloster to                                                               
comment on the CS.                                                                                                              
4:26:48 PM                                                                                                                    
KENDRA KLOSTER,  Staff, Representative  Chris Tuck,  Alaska State                                                               
Legislature, Juneau,  Alaska, said  she agreed  with Commissioner                                                               
Drygas's assessment  of the CS.  She expressed  appreciation that                                                               
the committee recognized  that UI benefits need  to be increased.                                                               
However, the sponsor was concerned  about removing Section 2 (the                                                               
automatic adjustment  for wage replacement)  because it  had only                                                               
been  updated once  in  22  years. He  was  also concerned  about                                                               
changing  the base  rate from  $2,500 to  $3,000. It  will affect                                                               
about 100 Alaskans, mostly from rural areas.                                                                                    
CHAIR COSTELLO said your comments are noted.                                                                                    
4:28:21 PM                                                                                                                    
SENATOR  MEYER  moved to  report  the  Senate  CS for  CSHB  142,                                                               
version  T, from  committee with  individual recommendations  and                                                               
attached fiscal note(s).                                                                                                        
4:28:46 PM                                                                                                                    
CHAIR COSTELLO  found no  objection and  SCS CSHB  142(L&C) moved                                                               
from the Senate Labor and Commerce Standing Committee.                                                                          

Document Name Date/Time Subjects
SCS CSHB170(L&C) Ver. R.pdf SL&C 4/14/2018 1:30:00 PM
HB 170
SCS CSHB170(L&C) Explanation of Changes Ver. O to R.pdf SL&C 4/14/2018 1:30:00 PM
HB 170
SCS CSHB142 (L&C) Version T.pdf SL&C 4/14/2018 1:30:00 PM
HB 142
SCS CSHB142 (L&C) Version R to T.pdf SL&C 4/14/2018 1:30:00 PM
HB 142
CS SJR 7 Version D.pdf SL&C 4/14/2018 1:30:00 PM
CS SJR 7 Explanation of Changes Ver. A to D.pdf SL&C 4/14/2018 1:30:00 PM
Supporting Document SCS CSHB142(L&C).pdf SL&C 4/14/2018 1:30:00 PM
HB 142