HOUSE BILL NO. 151 "An Act relating to unemployment benefits during a period of state or national emergency resulting from a novel coronavirus disease (COVID-19) outbreak; and providing for an effective date." 9:03:08 AM REPRESENTATIVE IVY SPOHNHOLZ, SPONSOR, introduced herself. She relayed that the bill extended the provisions of HB 308 which the previous legislature passed to align with the American Rescue Plan Act and did three things. First, it waived the standard one week waiting period for receiving benefits which would leverage $2.4 million in benefits for Alaskans that was paid for entirely by the federal government. Second, it extended the increase of the weekly per-dependent benefit from $24 to $75 and removed the cap of three dependents for which applicants could receive a supplemental benefit. It was critical because some families had more than three children in the State of Alaska. For example, there was a family last year with seven children in the news for whom the increase in the per-dependent benefit was very important. Representative Spohnholz reported that although things were getting much better in Alaska, the state had not turned the corner yet. According to the Department of Labor and Workforce Development (DOL), Unemployment Insurance (UI) claims in February were about 208 percent higher than last year. Alaskans continued to suffer record unemployment levels due to no fault of their own, and one-third of them had children or people living with them with disabilities. She clarified that UI was not Public Assistance or an entitlement program. It was an insurance benefit that Alaskans had paid into for years so it was available when needed. Representative Spohnholz continued that the State of Alaska had the lowest wage replacement rates for UI. The benefit of $51 per-dependent was temporary and targeted going to Alaskan families that needed it. A temporary extension of the benefits would provide some certainty for Alaskans, particularly those with families and children and ensure that no federal dollars were left on the table and support Alaska's economic recovery. She was available for questions. Co-Chair Merrick indicated Representative Edgmon had joined the meeting. 9:05:55 AM MEGAN HOLLAND, STAFF, REPRESENTATIVE IVY SPOHNHOLZ, introduced herself. She read the sectional analysis: Section 1: Removes the work search requirement for applicants who cannot fulfill it as a result of a COVID-19 outbreak and are otherwise eligible for unemployment insurance (UI) benefits. Additionally, this section waives the one-week waiting period before applicants begin receiving UI benefits. Section 2: Increases the per dependent UI benefit from $24 per dependent to $75 per dependent. Additionally, this section removes the existing cap of three dependents for which applicants can receive a supplemental benefit. Section 3: Amends uncodified law to give the Commissioner of Labor and Workforce Development authority to adopt regulations necessary to implement this act. Section 4: Repeals the work search and one-week waiting period waiver, (section 1), on September 6th, 2021. Section 5: Repeals the increased per dependent benefit, (section 2), on March 31st, 2022. Section 6: Provides an effective date for sections 1-3 of the bill, retroactive to April 1, 2021. Section 7: Provides for an immediate effective date. Representative Edgmon asked about the nexus of the bill in relation to the bill the committee would be hearing soon. He wanted to understand the tie-in from Representative Spohnholz's legislation to the American Rescue Plan Act. Representative Spohnholz responded that the American Rescue Plan Act had additional funding for wage replacement for the one-week waiting period. She did not know about additional pandemic-related unemployment assistance. She indicated Patsy Westcott was available to provide more details. 9:09:07 AM PATSY WESTCOTT, DIRECTOR, DIVISION OF EMPLOYMENT AND TRAINING SERVICES, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT (via teleconference), was aware that congress was looking at some changes in how the UI Program would be administered. Presently, she did not have any detail about the potential provisions. Representative Edgmon asked if the legislation would put the state in a better position. He wondered if his assumption was correct. Ms. Westcott responded that the bill would align the date of the waiting week waiver with the date proposed in federal legislation. Based on forecasting by the department, she anticipated that between April 1, 2021, and the expiration proposed in HB 151 of September 6, 2021, the state would have 10,825 new filers who would be the beneficiaries of UI one week earlier than without a waiting week provision. She confirmed that about $2.5 million in federal dollars would benefit Alaskans. Ms. Westcott commented on the dependent's allowance. She indicated that the number of filers from one week to the next changed as people came on or dropped off. She reported that in the previous week of the just under 27,000 UI clients that filed, 9,668 or them had one or more dependents and would be the recipients of the enhanced dependent's allowance if it were to be extended. She thought it was highly possible for congress to make additional changes to the Unemployment Insurance Program, but she did not know what those would be. Representative Edgmon believed the bill was very important. He spoke about the cruise ship industry and how it had been hit hard in the current year. In looking at the impact to the hospitality and leisure industry, he thought jobs would be greatly diminished. He spoke in support of the bill. 9:14:00 AM Representative Wool asked about eligibility for seasonal workers. He wondered if a seasonal worker could refile for unemployment. Ms. Westcott responded that regular state unemployment benefits were based on wages that an individual earned during their base period. She added that in order to be eligible for back-to-back benefit years, sometime after filing the first benefit year an individual had to return to work and earn requalifying wages in order to be eligible for the second benefit year. She agreed with Representative Edgmon that there were many cases where individuals had been unemployed for over a year and did not meet the requalifying requirements. Ms. Westcott continued that there were a number of federal programs and extensions in play as a result of the CARES Act and ARPA which have added additional weeks of benefits and eligibility. She did not have the number of total weeks at her fingertips but could provide a chart listing the various programs and the number of weeks available for each program. She suggested that while there were individuals that might not qualify for a second benefit year of state UI benefits, they were still receiving benefits under their first benefit year because of all of the various federal extension programs. Shae asked if she had answered the representative's question. Representative Wool responded in the positive. For a person who was unemployed from the prior year, had various federal extensions, and was still receiving benefits, he wondered whether that person would have to apply again once their benefits lapsed and remained out of work. He understood that the bill would eliminate the one week waiting period. However, it seemed that many people had waited more than 50 weeks. If someone was currently working but lost their job, he wondered how long a person would have to wait to receive their first unemployment benefit check. Ms. Westcott responded to Representative Wool's question about filing for another benefit year if a person's benefits expired. She responded that before the state could continue to pay a person from a federal program, the department would have to run a test claim to make sure the person was not eligible for regular state UI benefits. Ms. Westcott had a copy of the chart she had referred to earlier. It showed that under regular state UI benefits, a person could receive state UI benefits for a maximum of 26 weeks. The Pandemic Emergency Compensation Program was currently in play and paid benefits for a maximum of 53 weeks. Both benefits combined totaled 79 weeks. She continued that Alaska had also triggered extended benefits allowing for an additional 13 weeks. She suggested that a year into the pandemic it was unlikely that many clients had exhausted all the weeks available to them. She asked the representative to repeat his second question. Representative Wool commented that it appeared 92 weeks of benefits might be available to a client. His second question pertained to the timing of receiving an initial payment of UI benefits. Ms. Westcott explained that when someone filed for benefits the week started on Sunday and ended on a Saturday. Regarding UI benefits, in the case of an individual whose last day of work fell on a Friday, wages were reported in the week in which they were earned, not in the week in which they were paid. For an individual whose last day was on a Friday and they filed their claim immediately, their effective date would be the Sunday prior and would not be eligible for the first week because they had reported wages for the first week. Under normal circumstances the first week would be a person's waiting week and would not receive benefits for the week. If the waiting week waiver provision was in place, the first week of benefits would be payable. They would file and receive benefits the following week. Representative Wool reiterated that if a person lost their job on Friday, Sunday would be their first week of unemployment, they could file their claim on Monday and receive their first check on the following Monday. He thought in both the expedited and non-expedited process, a person would receive their benefits in the same week. Ms. Westcott replied that without the waiting week waiver provision they would not be eligible for benefits for the first week. The first week would be considered a person's waiting week. They would be eligible the following week. They would be in receipt of the benefits the following week. 9:23:45 AM Representative Carpenter asked if Ms. Westcott had data regarding how many available jobs went unfilled. Ms. Wescott responded that she would have to reach out to the department's Research and Analysis Section to see if any data was available. Representative Carpenter asked if the administration reached out to the employers of a person's previous job to confirm they were still laid off or was it a self-reporting system. Ms. Westcott replied that when an individual filed an initial UI claim, notification was sent to the employer to determine the reason the individual was no longer employed. From the time of layoff going forward the claimant had to report every work application they submitted and to attest that they remained unemployed due to a lack of work rather than refusing an offer of work. Representative Carpenter posed his question because he had been hearing from constituents that they had had difficulty finding people to come to work. They suspected it was due to unemployment benefits. He thought he heard Ms. Wescott report that the only way the state would know whether a person receiving UI benefits was looking for work or had refused a job offer, because they were self-reporting, was through an investigation. Representative Spohnholz clarified that if someone did not accept a job that was available to them and they were applying for and receiving benefits, it would be considered unemployment fraud which was against the law. The person would be prosecuted and the benefits would be taken back. She also noted an additional testifier online that could provide additional information or address questions about unemployment's affect on people's willingness to return to work. He had done some research in the topic. Co-Chair Marrick indicated the committee would be hearing from the testifier shortly. She invited Ms. Wescott to address Representative Carpenter's question. Ms. Westcott reported that the department had heard employers were having difficulty getting individuals to return to work after things started reopening. The state had a refusal-of-suitable-work provision in statute which stated that a person would be ineligible for benefits if they refused an offer of bonified, suitable work without good cause. The division issued a press release and reached out to employers to let them know how to report those issues to the department. Ms. Westcott continued that the division also started tracking the refusal-of-suitable-work cases. To-date, the division had allowed 413 instances of refusal-of- suitable-work. For example, there might not have really been a job offer, or the work was really not suitable (the individual did not have the skills or training to do the job). She also reported that the division had denied 213 refusal-of-suitable-work cases. The division took the issue very seriously, conducted investigations, and denied benefits when appropriate. 9:29:37 AM Representative Rasmussen referred to section 4 of the bill which repealed the work search. She wondered why the section was included, as there was a challenge of finding people willing to apply to work based on the amount of money the state paid recently in UI benefits. Representative Spohnholz was open to the will of the committee regarding the specific issue. She had taken all of the provisions in HB 308 which passed in the prior year with widespread partisan support. She had heard from the department that changing the benefits would require new programing, as the state still operated in an antiquated data system which required significant effort. For the simplicity of implementation, she chose to take the previous' years bill and extend it. The one change that she made was to extend the effective date of the per-dependent benefit because she felt for children it was very important. If it was the will of the committee to eliminate the provision because there were more jobs available presently, she was open to amending the bill. Representative Rasmussen asked how many families had more than 4 dependents. 9:31:59 AM LENNON WELLER, ECONOMIST AND UNEMPLOYMENT INSURANCE ACTUARY, DIVISION OF RESEARCH AND ANALYSIS, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT (via teleconference), introduced himself. He did not have the latest count of how many families would have more than 4 dependents. However, he had data for calendar year 2020, which included most months the provision was in place. There were about 700 of 86,307 claimants who reported having greater than 3 dependents. The subset was very small. He also reported that roughly 30 percent of claimants as a whole had 1 or more dependents. Representative Rasmussen relayed some calculations noting that for a family with 7 dependents receiving $75 per dependent per week and federal benefits, they would receive approximately $4500 per month which equated to $28 per hour. She thought it was a threshold families might have a difficult time achieving. She wondered how many people were receiving the full benefit versus a portion of the benefit. Representative Spohnholz thought Mr. Weller could address the question in more detail. She clarified that not everyone on unemployment received the maximum benefit. Alaska's maximum unemployment benefit per week was $370. Additionally, a person could receive federal benefits and per dependent benefits if applicable. She relayed that the minimum state benefit was $56 per week. Dependent benefits could be added. She had an additional comment regarding the waiver of work search. She suggested that the legislature might want to consider that there were some reasons why people might not be able to go back to work relating to the need to care for children. There might be a specific health concern in the family that might prevent them from sending their children back to childcare or school. 9:35:29 AM Mr. Weller asked Representative Rasmussen to repeat the question. Representative Rasmussen asked how many families received the full benefit. Mr. Weller responded that on average an individual received approximately $250 per week in their regular qualifying benefit amount. The majority of claimants claimed zero dependents. On average, if a claimant claimed any dependents, it was predominantly 2. He did not have the number of claimants that would claim $370 or more as well as dependents. He could certainly get a frequency of those who file and at least receive the maximum of $370 per week. It tended to be a high number because of the state's outdated benefit schedule which capped the amount at $370. He relayed that approximately 30 percent of claimants in any given year reached the maximum benefit amount. He reiterated that the average was $250 per week across all claimants. Representative Rasmussen asked for a breakdown of how much Alaskans received including a range and broken into quarters. She asked whether individuals qualified for other state assistance such as SNAP [Supplemental Nutrition Assistance Program] while on unemployment. Representative Spohnholz clarified that $370 per week was the maximum benefit. She also relayed that Alaska had the lowest wage replacement value in the entire country. For example, for someone earning $100,000 prior to being unemployed also only received $370 per week. She thought the information provided important context. It was her understanding that for the purpose of public assistance, people could apply but their unemployment insurance benefit would apply as income against their eligibility for public assistance. Mr. Weller had been able to run a quick frequency. It appeared that for those individuals in the March file who qualified for a regular weekly benefit amount beginning with $56 per week up to $370 per week (every benefit amount category went up by $2 for every $250 in base wages), about three-tenths of a percent fell into the $2 increment buckets up to $370. At the $370 amount there was about 16.5 percent of claimants collecting UI at the maximum weekly benefit amount. 9:40:07 AM Representative Wool asked for the current federal subsidy for unemployment. He wondered how long it would last. Mr. Weller understood that the federal benefit was a $300 add- on and would extend to March 2022. Representative Wool asked that if an individual was laid off but did not apply for unemployment right away, would the waiver apply. Ms. Westcott responded that if someone waited to apply for unemployment insurance, their benefit year would be effective the week in which they applied. If the legislation was still in effect at the time, they would still be the beneficiary of the waiting week waiver provision and would receive benefits for the first week of their claim. Currently, the way HB 151 was drafted, the provision would expire September 6th. If a claimant filed after that date, they would be subject to serving the waiting week. She corrected a statement made earlier. She noted that the current addition of $300 would only extend to September. Representative Wool was aware that the reason for termination determined the waiting period. He wondered if a person who was fired would be eligible to receive benefits on an expedited timeline if the bill was extended. Ms. Westcott indicated that if someone voluntarily quit their job without good cause or if they were fired, there were provisions for the denial of benefits for a 6-week period. Following the 6-week period, the first week they file would be there waiting week. If the waiting week waiver provision was still in effect, the person would be eligible for benefits that week. 9:44:23 AM Representative Wool commented that everyone would receive the waiver benefit. He had a question about the job search requirement. Years ago, people would have to have a paper signed by a potential employer when searching for work. He thought the process had switched to an online method. He asked about the current job search reporting requirement. Ms. Westcott replied that an individual had to apply for 2 jobs per week and were required to self-report. The division was required to do random work search audits. She pointed out that section 1 of HB 151 did not waive the work search requirement unilaterally. It gave the department some flexibility for waiving the able and availability requirements under certain circumstances. Representative Wool commented that 86,000 people were currently collecting unemployment benefits. He asked how many claimants would be audited. Ms. Wescott responded that she would have to get back to the committee with the information. Representative Spohnholz clarified that the waiver of the waiting period portion was funded by the federal government. If the state wanted to waive the waiting period, although it did not have to, it would be federally funded. Representative Josephson thought it was no different than any other funding the state received readily from the federal government. He asked if he was correct. Representative Spohnholz responded, "Yes." Representative Josephson noted Ms. Westcott had talked about the rapid turn-around of the applications. He asked how long it had been taking to approve or disapprove a claim. Ms. Westcott was not sure. She explained that back in April, May, and June 2020 processing times were significant. The division still had a 2-month backlog and the load was extensive. 9:50:09 AM Vice-Chair Ortiz asked if the proof of a work search included searches with new employers. Ms. Westcott responded that after a period of time the unemployed person was expected to expand their work search looking for other types of work where they had the required skills and training or the aptitude. It was not acceptable to report a work search with the same employer week-after- week. Vice-Chair Ortiz asked if there were exceptions made in certain circumstances. He provided an example applicable to one of his constituents. The constituent was having a difficult time widening their search, as there were only so many employers. Ms. Westcott responded that everyone's work search circumstances were different. When the division was reviewing the work search activities, it looked at an individual's work history, what type of work they were currently looking for, and what type of employment was currently available in their local area. Vice-Chair Ortiz asked if the Department of Labor and Workforce Development currently could waive the work search requirement absent HB 151. Ms. Westcott responded, "No, not specifically because of Covid." 9:54:13 AM Representative Carpenter asked if Mr. Weller would comment on his unfiled jobs question he had asked earlier. Mr. Weller thought Representative Carpenter was highlighting the relationship between unemployed individuals and job openings or the demand for labor. The Bureau of Labor Statistics put a Job Openings and Labor Turnover Survey. At the national level, their preliminary estimate through February was a ratio of 1.4 of unemployed individuals to job openings. Looking at the information in a historic context, there was roughly 40 percent more individuals looking for jobs than there were openings at a national level. He could not speak specifically to Alaska. However, he thought it was indicative of the large pool of unemployed individuals relative to the jobs currently available. He hoped it provided an indication of why Alaska was seeing so many individuals being unemployed and continuing to file for unemployment insurance benefits. Representative Carpenter thought he heard that 86,000 people were receiving benefits. He wondered how many individuals were in the $13-$15 range for the work they were doing previously. Mr. Weller clarified that the 86,000 statistic was unique for individuals in calendar year 2020. The latest weekly data he had was that roughly 43,000 individuals filed for a week of benefits across all programs that were currently available. The level was about half of the unique individual count was for the previous calendar year. He did not have an exact figure of the number of individuals that would meet the hourly range that the representative had mentioned. He agreed that the cross over point would be in the $14-$15 per hour range. 9:58:06 AM Representative Carpenter asked if the information was knowable. He requested the information. Representative Johnson asked if the bill would only be in effect if there was a state of emergency. Representative Spohnholz responded in the negative. Representative Johnson asked if the state had to be in a state of emergency in order to receive federal funds. Ms. Holland responded that there were 2 elements of the legislation that were tied to a state of emergency. There was currently a national emergency in place. The elements tied to that included the waiver of the one week waiting period and the increased per-dependent benefit. Representative Johnson asked if federal legislation had to be tied to a state of emergency or if HB 151 had to be tied to a state of emergency. Ms. Holland responded that HB 151 required that a national or state emergency declaration be in place for the waiver of the one week waiting period to take effect. There was currently a national emergency declaration in place. She did not believe it would be removed. It would take an act of congress or the President's command to remove it. Given that congress also passed legislation stating that if states waived the period, they would be reimbursed 100 percent by the federal government until September 6th, she thought it was safe to assume that the state of emergency would not be repealed. Representative Johnson asked if the declaration provision was necessary. Ms. Holland indicated it was not required to receive federal dollars. Representative Johnson commented that Southeast Alaska was significantly hit through the tourism industry. She wondered if statistics were available that showed how many employees were from in-state versus out-of-state. Mr. Weller indicated that roughly 15.5 percent of current claimants were filing from outside of Alaska. Representative Spohnholz emphasized that unemployment insurance was not a public assistance benefit. The funds were coming from the unemployment insurance fund which was paid into by employees and employers which was the reason the state paid benefits to non-residents, as they were people who had worked in Alaska and had paid into the Unemployment Insurance Fund and were eligible to collect benefits. An Unemployment Insurance benefit was the same as a person's car insurance or health insurance. A person paid into so it was available for them when they needed it. 10:03:33 AM Representative Wool asked if the paid benefits were taxed. Ms. Westcott replied that UI benefits did not have the same deductions as a regular paycheck. Unemployment Insurance benefits were considered taxable income that had to be reported by the individual on the federal income tax return. Upon their initial claim, individuals could have 10 percent of their benefits withheld for federal taxes. She noted that ARPA included a provision that for calendar year 2020, the first $10,000 in UI benefits were non-taxable. Representative Wool asked whether FICA and FUTA were deducted from UI benefits. Ms. Westcott responded in the negative. 10:05:30 AM Representative Edgmon returned to the subject of the UI fund. He mentioned that when HB 308 was being discussed in the prior year in the House Rules Committee, the fund had a significant amount in it around $300 million to $400 million. He wondered where the fund stood in terms of capitalization presently. Representative Spohnholz responded that currently the UI Fund balance was over $250 million. The solvency of the fund was not at risk. Mr. Weller added that the latest balance of the fund as of April 16, 2021, was $261.9 million. Regarding the relative provision, given the current total level of wages that were the entire liability pool was between $12.5 billion to $13 billion. For every $12.5 million that was pulled from the fund, it would change by about one-tenth of a percentage point. At tax calculation time for 2021 the reserve ratio was approximately 2.57 percent. The department's target for solvency pre-recession or pre-labor market shock was between 3 percent and 3.3 percent. Currently, the state was at a 2 percent reserve ratio. The state had two-thirds of what the department liked to have in the fund pre-labor market shock. Representative Edgmon wondered if he was accurate in saying that the bill impacted Alaskans in the lower economic strata. Mr. Weller replied that it was certainly the case that UI claimants tended to have lower earnings than Alaska's labor market as a whole. For those who had a dependent, their average weekly benefit amount tended to be smaller than those claimants without a dependent. He thought it would be a fair characterization to say that the bill disproportionately helped those at the lower income spectrum. Representative Spohnholz added that what she had seen in looking at the economic impacts of Covid-19 was that it had disproportionately impacted the hospitality industry and other low-income industries. Therefore, the program was impacting low-income Alaskans which underscored the importance of the per dependent benefit in particular. Representative Edgmon agreed with Representative Spohnholz. He thought there were two competing viewpoints regarding the subject matter. First, there were many people living on unemployment benefits who had no incentive to work and were perhaps making more on UI benefits. Another viewpoint was that Alaska with a highly seasonal workplace environment had many areas with very little employment with the cancelation of cruise ships. He did not think it was an easy process to collect unemployment. He opined the pandemic was not over, and there were still several challenges that people faced. He suggested that the bill should be in the legislature's tool box. Representative Spohnholz thanked Representative Edgmon for his comments. She agreed that the state was not through the pandemic yet. She noted that although several people in the tourism industry were non-residents, many of them were also Alaskans. She wanted to make sure that they were able to continue to take care of their families. She wanted to give the department the flexibility to waive the work search requirement if they deemed it appropriate. Representative Spohnholz indicated there were several reasons why people were unable to work. She was sorry the committee was unable to hear from Mr. Kouda because he could speak to the research on unemployment and its impacts on people's willingness to look for work. The evidence showed that while there had been some anecdata, the actual research done by professional researchers was that unemployment assistance did not reduce people's interest in or commitment to working. In fact, Americans (Alaskans in particular) wanted to work, because it provided dignity and autonomy. No one wanted to go through the hassle of applying for unemployment. However, it was a necessity at times in order to pay for rent, utilities, and food. Representative Spohnholz noted there was a time sensitivity element to the bill. She explained that HB 308 expired at the end of March. and the department would have to dramatically shift what it was doing while the state still had significantly high unemployment double what it would typically be at present. There was an urgency in passing the bill and the issue was addressed. Otherwise, the department would have to make another massive shift in changes in the way it implemented UI at a time when the state had record-high unemployment. Co-Chair Merrick hoped Mr. Klouda could join the committee at another hearing. She reviewed the agenda for this afternoon's meeting. HB 151 was HEARD and HELD in committee for further consideration.