HOUSE BILL NO. 76 "An Act relating to electronic filing of certain information with the Department of Labor and Workforce Development; relating to surcharges, rate increase reduction, prohibition on the relief of certain charges, the unemployment trust fund account, and the offset of certain unemployment compensation debt under the Alaska Employment Security Act; relating to the definition of 'covered unemployment compensation debt' in the Alaska Employment Security Act; and providing for an effective date." Representative Holmes MOVED to ADOPT Amendment 1 to the legislation. The amendment would change the sunset date from 2018 to 2016 (page 6, line 3). Representative Kawasaki OBJECTED for the purpose of discussion. Representative Holmes noted that the amendment changed the 5-year sunset date to a 3-year sunset and would provide a 3-year try out period to make sure the bill worked as intended. Vice-Chair Neuman asked about the meaning of 291 in layman's terms. ["291" was most likely made in reference to AS 23.20.291, which is the statute that Section 6 of the bill addressed.] Representative Holmes responded that the commissioner would probably be better suited to answer the question, but understood that it was associated with a formula that determined year-by-year whether the tax rates for the unemployment insurance needed to be raised; Section 6 of the bill gave the Department of Labor and Workforce Development, in certain circumstances, some discretion that it did not currently have. Representative Wilson inquired why the sunset date was being reduced by 2 years. Representative Holmes replied that she was not entirely sure what Section 6 did, but that it used a 3-year average in the formula calculation and thought that given the level of uncertainty involved, 3 years would provide a feel for how the bill was working without being too worried about the level of the fund. She concluded that the 3-year sunset period was not a magic number. Representative Wilson inquired if the intent of the original sunset in 2018 was to do the same look back. Representative Holmes replied that it was her understanding that the look back was consistent with Section 6 of the bill. Representative Gara noted that he had a question for the commissioner that was unrelated to the amendment. Representative Kawasaki WITHDREW his OBJECTION. There being NO further OBJECTION, Amendment 1 was ADOPTED. 4:52:18 PM DIANE BLUMER, COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, deferred the question to Mr. Dick. Representative Gara queried how much the surplus was currently, as well as the difference between income coming in and expenses going out for the past year or two. PAUL DICK, DIRECTOR, EMPLOYMENT SECURITY DIVISION, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, replied that the fund was a reserve concept and that the idea of a surplus was not really applicable to the orientation of the fund; however, the department did believe there was room for the exercise of discretion that was in Section 6 of the bill to allow for some reduction in the tax rates so that the reserve would remain solvent in the short-term and long-term future. Mr. Dick inquired what the second part of the question had been. Representative Gara queried what the surplus was now, as well as what the expenses and income were. Mr. Dick responded that the past several years there had been greater benefits paid out than revenues. He pointed out that FY12 was the last fiscal year on record and that the revenues were close to the benefits in that year. He thought that the department was coming out of a recession where there was a high cost of benefits, but that the trend was turning around; he offered that this was a typical business cycle that the department had seen over the years for unemployment insurance and claims. He added that there were years of high benefits that exceeded the revenue, but that the department was seeing that turning around as the economy came out of recession. Representative Gara understood that FY12 was roughly even in terms of revenues and benefits and inquired how much the deficit had been the year before, as well as what the surplus was. Mr. Dick believed the deficit had been approximately $10 million out of $170 million collected and that the current trust fund balance was $251 million. Representative Kawasaki offered that the term surplus was a misnomer and inquired if the fund had ever been in the negative since 1983. Mr. Dick replied that the fund had never been in the negative. Representative Kawasaki further queried if there had been years that the fund had put out more money than it had taken in. Mr. Dick replied in the affirmative. Representative Kawasaki observed that there were very few mechanical formulas that had worked successfully, but that this fund seemed to be one. He observed that the fund seemed well managed and expressed concern that tinkering with it would risk its solvency. 4:57:45 PM Representative Munoz inquired if the suspension of the increase would ultimately be due from the employer if a commissioner had determined that the increase was suspended. She further inquired if the payment would be ultimately due. BRYNN KEITH, ACTING DEPUTY COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, answered that ultimately, the tax would be collected. What the bill did as designed was defer that collection during a period of economic recovery in order to give employers more time to recover; furthermore, the fund would try to get to the "magical" 3 percent to 3.3 percent reserve rate that included the surplus that the department talked about. She explained that the department wanted to be at the surplus when there was an economic downturn; the system was designed so that that surplus was a buffer when the fund was paying out more money than it was taking in. Representative Munoz requested an explanation of the training programs that "this" funded. Ms. Keith replied that the training funds for both the State Training and Employment Program (STEP) and the Alaska Technical Vocational Education Program (TVEP) were from taxes that came off of employees' wages; it was the same amount irrespective of the unemployment insurance taxation. She expounded that any changes that would made in terms of the bill would be moot in relation to the contribution to STEP and TVEP; what would affect the 2 programs was how many individuals were working, what the average wage was, and other factors in the economy. Representative Costello discussed one zero fiscal note from the Department of Labor and Workforce Development and one fiscal impact note from the Department of Labor and Workforce Development. Representative Costello MOVED to REPORT CSHB 76 (FIN) out of committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 76(FIN) was REPORTED out of committee as amended with a "do pass" recommendation and with one new fiscal impact note from the Department of Labor and Workforce Development and one new zero fiscal note from the Department of Labor and Workforce Development. 5:01:04 PM AT EASE 5:02:14 PM RECONVENED