HOUSE BILL NO. 7 An Act relating to the calculation and payment of unemployment compensation benefits; and providing for an effective date. REPRESENTATIVE HARRY CRAWFORD, SPONSOR, stated that HB 7 would increase the maximum weekly benefit available through unemployment insurance from $248 to $336. Alaska's current benefits fall short in helping families cover living expenses during periods of unemployment. Alaska's maximum weekly unemployment insurance benefit of $248 is the fourth lowest in the nation. Increasing the maximum weekly benefit is not only overdue, it is essential in alleviating skill shortages by ensuring Alaskan workers and their families survive periods of unemployment. Representative Crawford added that the average weekly benefit amount of $248 dollars is only 35% of Alaska's average weekly wage, the third lowest percentage in the country. Other western states provide a much higher percentage of average weekly earnings in their maximum weekly benefit amount: Washington-67%; Hawaii-66%; Oregon- 63%; and Idaho-59%. Retaining a well-trained Alaskan workforce is essential for a strong economy. Providing an overdue increase in the weekly benefit amount is necessary to keep Alaska's workers in Alaska. Linking the method for future benefit calculations to average weekly earnings will ensure any changes are in concert with Alaska's economy. 4:53:35 PM Vice-Chair Stoltze asked if Alaska had a provision for family members. Representative Crawford replied the State does and that it is in the amount of $24 dollars per week per dependant up to three dependants. That has been in structure since the beginning of Alaska employment law here. 4:54:36 PM Vice-Chair Stoltze asked if the statistical size of an average family had been factored into that number and compared to the other states. Representative Crawford replied there were higher wages paid in Alaska, however, that has been ameliorated over the years. 4:56:27 PM Representative Holm referred to the costs to the employers at $64 dollars per employee per year. Representative Crawford explained that it would be spread over five years and would amount to an increment of $10 for five years. Those calculations were based on numbers from the Department of Labor and Workforce Development; a determination needed to keep the Unemployment Insurance (UI) Trust Fund intact. 4:58:36 PM WAYNE STEVENS, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE, stated that the Alaska State Chamber of Commerce understands the need to raise the benefits paid through the unemployment insurance program. The State Chamber understands that the Unemployment Insurance (UI) benefit payments are second to the lowest in the nation. However, the additional cost to business, combined with the rapidly rising costs of Workers Compensation Insurance and the ever escalating costs of health care insurance for employees, together make it extremely difficult for businesses to survive without making dramatic cuts to employee costs. After a cursory review of the UI program, it appears that the costs of providing the new level of benefits envisioned in HB 7 is estimated to be $12.4 million dollars annually. In calendar year 2004, Alaska paid a total of $135.7 million dollars in Unemployment Insurance benefits. Mr. Stevens suggested that business could support the increase in UI benefits if there were adjustments made in other areas of the program that would make the cost of the increases, revenue neutral to business. Alaska is one of very few states that allow a worker to separate from employment without good cause and then after a six-week disqualification period, is able to collect unemployment insurance. Alaska is also one of a few states, to pay dependent benefits. Currently, a claimant may claim dependants' allowance of $24 per child up to 3 children per week in addition to the base benefit. The dependants' allowance cost the program, totaled $12.8 million dollars in 2004. To neutralize the increased cost to business, the State Chamber encourages extending the separation-waiting period to 12 weeks. Another option would be to delete the dependent benefit. The changes would pay for the increased UI benefits without adding to the already escalating insurance and workers compensation cost affecting business. 5:02:14 PM BILL KRAMER, CHIEF, UNEMPLOYMENT INSURANCE, DIVISION OF EMPLOYMENT SECURITY, ALASKA DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, responded to queries by Vice Chair Stoltze regarding the child benefit. If the State takes the $12.8 million dollars paid in dependence allowance in 2004 and divided it equally amongst all weeks paid, it would increase the average weekly payment by $18.73. The maximum benefit amount without the allowance factored in shows th Alaska ranking 48 compared to the other states. Including nd the dependence allowance places Alaska at 42. Representative Holm asked if it was intended to change the percentage paid amount. PATRICK SHIER, ACTING DEPUTY DIRECTOR, EMPLOYMENT SECURITY TAX, DIVISION OF EMPLOYMENT SECURITY, ALASKA DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, noted that the federal rate was in excess of 6% percent against which Alaskan employers enjoy a credit of almost 100%. The average employer rate is around 3% percent. In 2006, the average rate for the employer portion moved to 2.08%; in Alaska, employees contribute ½ of 1%. The State would be looking at an increase of slightly over 10% over six years. Some employers will see their rate staying lower. An employer that has fluctuations in their payroll might see their rate increase beyond that percentage. 5:09:27 PM Representative Holm worried about the adverse effect for those employers with seasonal employees. Mr. Shier advised that the employers with a lowest level would see less of a rate increase that those at the higher end. The decline of payroll from one quarter to the next drives the higher rate from one quarter to the next. For those employers that do not have that experience, their increase would be real from 1% percent to 1.05% percent in the out years up until 2012. 5:10:57 PM Co-Chair Chenault MOVED to ADOPT Amendment #1. (Copy on File). Vice-Chair Stoltze OBJECTED for the purpose of discussion. Mr. Stevens spoke to the amendment. He explained that the cost of the program portion that allows people to quit for no reason or be fired with cause, waiting period be changed from 6 to 12 weeks. He emphasized that might balance the cost of the program. 5:13:14 PM Representative Crawford spoke against the amendment. He explained that the average amount of time for a person to be unemployed in the State of Alaska is 11 weeks. He concluded that the average person would never collect a check. Workers would be squeezed to the point where they would not remain in the State. He believed that Alaska business has been given a break over the past years, since the unemployment rates have not increased. The average weekly benefit paid out with the dependents is $194.04, placing th Alaska in 49 position nationwide. He maintained that the amendment would create incentives for firing employees when work becomes slack. He spoke against the amendment. 5:17:07 PM Mr. Shier clarified that the affect of the amendment would increase the period from 6 weeks to 12 weeks. The Department of Labor and Workforce Development would support the bill with the amendment as it would reduce the cost of unemployment insurance for employers and would raise the dollar amount of the weekly benefit to help employees. 5:19:14 PM Vice-Chair Stoltze inquired if "discharged for misconduct" meant more than being fired. Mr. Kramer advised that the language of the amendment duplicates current statute in regard to that provision. Vice-Chair Stoltze wondered if the legislation would encourage firing employees, asking if legal protections were in place to prevent such action. 5:21:25 PM Mr. Shier responded that there have been many discussions regarding that issue. There is a process to allow employees to challenge a decision on their employment status. Mr. Shier noted that the Appeal Tribunal would render a decision based on the facts. 5:23:36 PM Representative Croft stated that the amendment undermines the purpose of the program. There are many reasons to leave a job. A roll call vote was taken on the motion. IN FAVOR: Holm, Kelly, Moses, Chenault OPPOSED: Croft, Joule, Stoltze Representatives Foster, Hawker, Meyer were absent from the vote. The MOTION FAILED (4-3). 5:26:38 PM Representative Kelly requested to amend Amendment #2. (Copy on File). The change would be to Page 6, Line 23, insert "$33,250" and delete "$33,000". Representative Kelly MOVED to ADOPT the amended Amendment #2. Co-Chair Chenault OBJECTED for discussion purposes. Representative Kelly explained that the amendment would adjust the bill to reflect a weekly ceiling to $300 dollars rather than the proposed $336 dollars. Representative Croft questioned if additional changes were needed. Mr. Shier indicated that Amendment #2 would place th Alaska 35 nationally. 5:31:44 PM Representative Crawford stated his intent was to increase the amount of unemployment received as much as possible. Co-Chair Chenault WITHDREW his OBJECTION. There being NO further OBJECTIONS, Amendment #2 was adopted. Representative Hawker MOVED to REPORT CSHB 7 (FIN) out of Committee with individual recommendations and with the accompanying revised fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 7 (FIN) was reported out of Committee with a "do pass" recommendation and with a new note by the Department of Administration, a new zero note by the Department of Labor & Workforce Development and fiscal note #2 by the Department of Administration. 5:34:36 PM