HOUSE BILL NO. 305 An Act relating to the calculation and payment of unemployment compensation benefits; and providing for an effective date. REPRESENTATIVE TOM ANDERSON explained that HB 305 would provide for an 8.2% increase to the maximum weekly unemployment benefit amount. The increase, phased in over a three-year period, minimizes the impact to employers, employees, and the Unemployment Insurance (UI) Trust Fund. th Alaska currently ranks 47 in the nation with a maximum weekly benefit of $248 dollars. Alaska would rank at an th estimated 28 in the nation when the maximum weekly benefit is increased to $308 in 2006. The fully increased maximum benefit amount would be available to claimants earning $34,250 or more per year. Representative Anderson pointed out that the full impact of the increase in benefit costs would not be reflected in the employer tax rates until 2010. When the cumulative impact of the increased benefit costs is included in the tax rate calculation by 2010, the average employer tax rate would increase by 0.17% and the average employee tax rate would only increase by 0.04%. Alaska's unemployment benefits assist Alaskans who find themselves temporarily without work. The benefits are distributed back into the local economy, which in turn maintains economic stability for communities, business, and workers. HB 305 will enable Alaskan workers to weather periods of economic downturn and alleviates skill shortages by keeping trained workers in State. GREG O'CLARAY, COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, spoke to the legislation. He noted that the bill before the Committee was identical to the one that overwhelmingly passed the House two years ago except for the effective date. The last increase had been cut in half. The Governor requested a compromise. The handout outlines the amount of dollars that would potentially re- enter the economy from the unemployment program. He referenced the handout. (Copy on File). Unemployment payments total $40 million dollars per year for only the Anchorage municipality; in Mat-Su Borough that number totals nearly $50 million dollars. He pointed out that nearly $28 million dollars goes out of State. Much of that money results from skilled workers who cannot afford to stay in Alaska because of high costs. One of the Department's directives from the Governor was to focus on creating good jobs with good pay for the Alaskan workforce. Commissioner O'Claray advised that over the next five years, 30% of the skilled workforce would be retiring. The new Division of Business Partnerships was created to help address the concerns for training workers in Alaska. HB 350 was crafted by a coalition of labor and management. He pointed out that two sectors choose not to attend because of conflict. Those are the parties that are holding the legislation up in the "other body". The bill proposes a th modest increase. The State of Alaska currently ranks 47 of the 50 states in the amount paying toward UI benefits. The proposed amounts do not include a "dependant allowance" of $24 dollars per dependant with a maximum of 3. Commissioner O'Claray emphasized that the proposed legislation was part of the economic plan to retain skilled workers. Co-Chair Harris noted that he supports the bill. He asked for a breakdown of who pays for the benefits. Commissioner O'Claray explained that the employer pays 80% of the costs while the employees contribute 20%. The first increase would not take affect until 2005; the maximum an employer pays with the increase would be about $5 dollars per year per employee. Co-Chair Harris pointed out that the sponsor statement indicates that Alaska ranks 47th in the nation in the rate paid for UI benefits and that with passage of the bill, th Alaska could rank around 27. The estimated cost-of-living differential in the State of Alaska ranges around 22.5%. He admitted that there is speculation regarding the number as it differs throughout the country. JOHN BROWN, PRESIDENT, FAIRBANKS CENTRAL LABOR COUNCIL, FAIRBANKS, testified that the Labor Council is in "strong" support of HB 305. He noted that it is important to have a viable unemployment system to help retain qualified workers. It is very important to have people trained in running equipment. Without a viable UI system, the State will loose qualified workers. Mr. Brown urged passage of the bill from Committee. DON ETHERIDGE, ALASKA AFL-CIO, JUNEAU, voiced strong support for the proposed legislation. He reiterated that all interested parties had an opportunity to come to the table to work out concerns. Everyone that participated reached an agreement. Co-Chair Harris asked when the last unemployment benefit had been raised. Mr. Etheridge thought that it was five or six years ago. Representative Stoltze asked who had not come to the negotiating table. Mr. Etheridge replied that the Alaska State Chamber did not participate. JEFF ACHERMAN, OPERATING ENGINEERS & ANCHORAGE CENTRAL COUNCIL, ANCHORAGE, testified that they do support passage of the bill. Construction work is seasonal employment. The legislation will help people throughout the State that work in construction, fishing and tourism industry by providing a much-needed increase. PAM LABOLLE, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE, JUNEAU, clarified that the State Chamber had not boycotted the meetings. The meetings were scheduled at the same times that the House Judiciary and Senate Judiciary committees met. Ms. LaBolle indicated that the Chamber would support an increase; however, on the third step, they would recommend that it only be increased ½ way. Ms. LaBolle identified the increase costs to the employers. At the current tax rate, the increase would be 8%, which would be $44 dollars per employee by the time the full increase was in effect. She understood that the State was self insured for unemployment insurance costs. The Alaska Railroad has indicated that the proposed increase would cost them around $550 thousand dollars. Ms. LaBolle spoke to the dependent benefit amount. The goal of the UI program nationally is that 50% of the wage be replaced by the benefit amount. With the benefit amount included for three dependents, Alaska would be at the $320 per week amount. With the increase, Alaska will rank in the top 25%. She pointed out that 44% of the dependents claimed received benefits this past year. Alaska is one of only 12 states that offer dependant coverage. She stated that the lower amount would be adequate since Alaska is one of the easiest State's to get UI benefits from, which differs from other State's I which claimants must show that they are actively seeking employment. Ms. LaBolle stated that the State Chamber would support some increase, however, the proposed amount places a burden on the employer. Representative Berkowitz pointed out that at one time, the Chamber supported the $320 maximum. Ms. LaBolle explained that was the amount proposed last year and that the Chamber did not support it, but instead would have supported the first step around $273 dollars. Representative Berkowitz questioned why no one from the Chamber had participated in any of the discussions. Ms. LaBolle reiterated that she was the only staff person that the State Chamber has that could address this type of issue. A new employee was hired at the end of session for specifically attending these types of activities. The State Chamber has a small staff. Representative Stoltze questioned which issue was more important to the State Chamber, the Consumer Price Index (CPI) increase or HB 305. Ms. LaBolle listed issues of importance: the UI increase, the CPI and HB 255. Representative Stoltze asked if there were concerns that would affect the membership more drastically. Ms. LaBolle responded that the impact for the proposed increase would be felt within 2 to 6 years; the more immediate impact would be the CPI. Co-Chair Harris inquired when the CPI index would take st effect. Commissioner O'Claray replied on January 1, 2004. Representative Hawker asked what the State Chamber believes the appropriate increment should be. Ms. LaBolle advised that last year, they had agreed to go ½ through the second step. The proposed bill would take the State ½ through the rd 3 step. Ms. LaBolle added that there has been no fiscal note prepared to indicate the impact on the State. Representative Hawker acknowledged that the level proposed by the State Chamber was substantially less than proposed through the legislation. He noted his concern that if the Chamber had felt so strongly on the issue, why hadn't they rearranged their priority schedule to be able to attend the meetings. Ms. LaBolle explained that only three people from management had been invited to participate. Those areas were construction, tourism services and the State Chamber. The first two have the greatest turnover in employment. She did not know the ultimate plan and noted that she had no input for scheduling the meetings. BARBARA HUFF TUCKNESS, DIRECTOR OF LEGISLATIVE AND GOVERNMENT AFFAIRS, GENERAL TEAMSTERS, LOCAL 959, ANCHORAGE, advised that she had been present for the discussions on the bill. The meetings attempted to attain a compromise for unemployed workers. She pointed out that the bill was a compromise. It has received full support from the general teamsters. She added that she had participated in some of the meetings via teleconference. Ms. Huff Tuckness acknowledged that everyone was busy at that time of year but realized that the message from the Department of Labor was one of compromise. The unemployment insurance program offers an economic buffer against the ripple effect of unemployment. In Alaska, the maximum weekly benefits have increased four times in the last 20 years. The last increase was in 1997 and the payments are made to eligible participants. There are specific eligibility requirements that must be met to qualify for the benefits. The benefit is not intended to replace the wage but does act as a partial benefit intended to cover shelter, food and clothing for those workers. She addressed the economic benefits to the State. Representative Stoltze asked if the Alaska UI program had a requirement to show that people were actively looking for work. Ms. Huff Tuckness understood that there was an eligibility requirement both by the State and federal. She deferred the question to the Department of Labor & Workforce Development. ROYCE ROCK, (TESTIFIED VIA TELECONFERENCE), CARPENTERS UNION, ANCHORAGE, spoke in support of the bill. He advised that Alaska is one of the few states in which the employees pay a part of their UI benefit. He urged that the bill pass from Committee. DICK CATTANAUGH, (TESTIFIED VIA TELECONFERENCE), EXECTUTIVE DIRECTOR, ASSOCIATION OF GENERAL CONTRACTORS, ANCHORAGE, noted that he was part of the committee that worked on the legislation and that the process had been fair. The cost will amount to about a 1% increase per year. He encouraged the Committee to support the bill. Vice-Chair Meyer noted that he did support the UI program, however, voiced concern with the combination to increase minimum wage, a potential sales tax, alcohol tax, increase to business license fees and with this legislation an increase to the unemployment compensation. He warned it could create an unbalanced situation, shifting too much economic burden to the small business. Commissioner O'Claray advised that it is the Governor's intent to grow the State's economy by producing good jobs with good pay. HB 305 does not register much to employer costs. The first increment of cost on average would be $5 dollars per employee per year. Vice-Chair Meyer MOVED to report HB 305 out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 305 was reported out of Committee with a "do pass" recommendation and with zero note #1 by Department of Labor & Workforce Development. TAPE HFC 03 - 95, Side B