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." Co-Chair Merrick indicated that Mr. Klouda would provide his testimony regarding HB 151. 10:59:27 AM NOLAN KLOUDA, EXECUTIVE DIRECTOR, CENTER FOR ECONOMIC DEVELOPMENT, UNIVERSITY OF ALASKA (via teleconference), reported he had been invited to make a few comments related to the state's economic situation and unemployment benefits related to HB 151. He reported that in March, the state was still down about 22,000 jobs. He highlighted that the state had not experienced much real employment recovery happen since the previous November when the state had experienced much higher job losses related to seasonality. He was not seeing clear improvement in the employment market, and Alaska was lagging slightly from some of the U.S. employment numbers and U.S. job reports. He and many of the economists in the state thought it would not return to previous 2019 employment levels for 3 years to 5 years. He suggested the state was looking at a prolonged period of many jobless individuals well into the future. Mr. Klouda indicated he had also been asked to speak about the unemployment benefits provided during the pandemic through a couple of acts of congress that made the unemployment benefits more generous. They had sparked some controversy around the question of whether they had disincentivized work whether they were encouraging people not to return to the workforce when they were able to. There had been several studies that spoke to the issue at the national level, none specific to Alaska. However, he thought they were pretty important and illuminating. Most studies indicated that the more generous pandemic unemployment benefits, especially the extra $600 from the Coronavirus Aid, Relief, and Economic Security (CARES) Act that expired last summer, did not decrease employment (the number of people who were actually employed). There were several studies that looked at how there were different levels of generosity in those benefits. Some people had more than 100 percent of their prior wage replaced and some that had less than that depending on what they were making. In theory, those people who were receiving more on unemployment had less reason to go back into the workforce when they were able to. However, studies did not show that to be the case. Generally, it did not have an effect overall on employment numbers. Mr. Klouda continued that there had also been some research done when the benefits expired at the end of July. The economists looked for an effect where employment might increase if those benefits expired which they did not. Some states were more generous than others and vice versa. The less generous states did not see employment rebound any faster than anywhere else. States that were paying slightly less in UI benefits did not see people returning to the workforce in any greater numbers. Some studies found that job search intensity decreased slightly. In other words, there was a small decline in people looking for work. However, it was generally dwarfed by the fact that fewer jobs were available. Early in the pandemic one study reported that job openings decreased by about 64 percent but job applications had only fallen about 20 percent (job openings decreased approximately 3 times as fast as searching for work). 11:03:41 AM Mr. Klouda also noted that the more generous UI benefits seemed to have a strong stimulative affect on spending. The money paid to unemployed individuals was typically spent quickly into local economies. One report found that individuals who were unemployed were spending about 44 percent more in their local economies as a result of the benefits. It was money that circulated to local businesses and probably helped local economies by spending, circulating money, and creating jobs. He was happy to answer any questions. Representative Wool heard from several business owners about their difficulty in hiring employees due to the additional unemployment benefits of $600 per week paid with CARES Act funding. He suggested that if a person worked in a higher paying job they might not be influenced. However, for individuals working for lower wages, finding employees had been an issue. He had spoken with several people in the restaurant and hospitality industries who paid their employees under $15 per hour. He made some computations and speculated that for those employees on unemployment with the addition of CARES Act funding they might receive around $800 per week or about $20 per hour, more than they had ever made per hour. Waitresses and bartenders received tips but those were down due to Covid. In the lower salary range, it had been difficult to find a workforce. He wondered if industry specific studies had been done. Mr. Klouda had heard the same feedback from business owners. Much of the work his center did was focus on helping businesses and implementing programs. It seemed pervasive in the state. Even though it was anecdotal, he had a difficult time completely discounting it because of how common the concerns were. He thought it was a reality for many individual businesses. However, he could not speak to how many, how common, or across what sectors it applied. No one had done the research. Some of the economists were talking about how they would like to see more of a sector breakdown. There might be more of an effect on one industry versus another. He did not think there was enough data to be able to look at it. He brought up another issue regarding the pandemic. The current pandemic employment benefits were an extra $300 per week. Whereas, it had been $600 per week at the beginning of the pandemic under the CARES Act. If there was a disincentive effect, he thought the $300 amount would have less of a disincentive than $600. He relayed that it was an area where there was a shortage of data. 11:08:47 AM MEGAN HOLLAND, STAFF, REPRESENTATIVE IVY SPOHNHOLZ, noted that one of the national studies that Mr. Klouda had brought to her attention was in the data and sampling. Half of the business owners were in the hospitality and food and drink industry. The finding was that the additional unemployment benefits did not disincentivize work. The conclusion was if there was any moral hazard (a temptation not to go back to work because of exceptionally high benefits), it would be in this group. The study found that it was not the case. Representative Rasmussen reported speaking to several business owners in Anchorage to get a better understanding about the need for employees. She reviewed a list of businesses and individuals she had spoken with. She talked to Alaska Mill and Feed, a local garden and pet supply store. She talked with the Anchorage School District who was having a difficult time filling teacher's assistant, kitchen staff, and noon duty positions. Bread and Brew, a local restaurant in Anchorage, was offering a $300 signing bonus and a $22 per hour wage. They had not been able to fill their positions. Other restaurants having problems filing positions included La Mex and the Little Dipper Diner. Pivot Maintenance was looking for a handyman and a bookkeeper. A local cleaning crew small business started employees out at $22 per hour with a $5 increase after 6 months and could not find anyone to go to work. She continued to list several other businesses that were having trouble hiring employees. Representative Rasmussen reported that other small businesses had reached out to her reporting that in prior years they would see upwards of 100 applications for positions open at their companies. Currently, they were lucky to receive 5 applications. It was evident that there was a lack of employment opportunities for more skilled workers such as architects and engineers. Representative Rasmussen had an additional concern. She received an email that had been forwarded to her from an individual. She read a portion of the email: "The decision regarding eligibility for unemployment insurance is based on the following facts, laws, and regulations. You've quit your job with blank on 10/15/20 because you were concerned about contracting Covid-19 and possibly spreading it to your family. Under Alaska Statute 23.20.379 an individual is disqualified for waiting week credit or benefits for the first week in which the individual is unemployed and for the next 5 weeks that the individual last left a suitable work voluntarily without good cause. The maximum potential benefit will be reduced by 3 times the weekly benefit amount. Conclusion of facts: You voluntarily left your work. The circumstances involved in your leaving established good cause for voluntarily leaving work. Benefits are, therefore, allowed beginning 10/18/2020 if you are otherwise eligible." Representative Rasmussen was concerned because she thought the state had a fine balance ahead with medical necessity. She did not want somebody being forced into a workforce and possibly being exposed to Covid-19. However, the way the program currently worked, somebody could say they were afraid of contracting Covid whether or not they had any medical conditions or cause for greater concern for contracting the virus. She questioned whether it was enough for a person to leave their job and qualify for unemployment. She referred back to the national study that was mentioned. She asked how much information for the study came from Alaska specifically. She believed it was possible Anchorage might be an anomaly. She found it alarming that so many small businesses were struggling to find employees and looking at having to close their doors as a result. 11:13:43 AM REPRESENTATIVE IVY SPOHNHOLZ, CHAIR OF THE HOUSE LABOR AND COMMERCE COMMITTEE, SPONSOR, deferred to Patsy Westcott regarding Representative Rasmussen's first question and to Megan Holland to answer her second question. PATSY WESTCOTT, DIRECTOR, EMPLOYMENT AND TRAINING SERVICES, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT (via teleconference), explained that a general fear of contracting COVID was not a sufficient reason to refuse an offer of work, not return to work, or to quit a job. It was unfortunate that the determination that Representative Rasmussen read was very brief in its description of why benefits were being allowed. She indicated that the program conducted a very thorough investigation looking at all of the mitigation factors related to an individual prior to making a determination of whether or not to allow benefits. Some of those factors included an individual's personal health circumstances and the protections in place at the workplace to ensure workers' safety. She reiterated that a general fear of contracting Covid was not considered good cause. Ms. Holland had not seen any studies that spoke to Alaska-specific data. She was working with the information that was available. She thought the bill sponsor would be interested in continuing the outreach with members of the tourism industry small businesses digging into the topic further. She thought Representative Rasmussen was asking why there were so many unfiled jobs and why businesses were having such a difficult time finding workers. She wondered if there was a correlation between increased unemployment benefits and the issue of businesses not being able to fill positions. She indicated that with the information that was currently available, she was not seeing the correlation even though it potentially deserved additional outreach. Representative Rasmussen thought it was good to see what was happening at the national level. However, Alaska and its economy could be very unique. It seemed Alaska lagged behind the lower 48 sometimes with certain trends. She thought it was very important for legislators to fully understand the impacts of the policies they were putting into place before making certain decisions, especially ones specific to Alaska small businesses. She did not want a snowball effect to occur where businesses begin to close their doors due to a lack of personnel. 11:17:33 AM Representative Spohnholz thought it was important to note that the bill did not substantially change wage replacement value in the State of Alaska. Alaska's wage replacement value as a percentage of income was the lowest in the entire country. The cost of living was very high in Alaska. The minimum benefit an Alaskan could receive was $56 per week. If $56 and $300 was added together it would not be enough for Alaskans to avoid going to work. She emphasized the importance of knowing what the bill did and did not do. The American Rescue Plan Act wage replacement that would supplement the State of Alaska's expired in September 2021. All she was attempting to do was to give the department some continued flexibility and allow people who had children an extension of the modest increase while the state did a deeper dive into what unemployment updates should be made over the longer-term. Representative Wool did not think the benefits offered in the bill would substantially change people's incentives. He thought the bill did good things. The wage increase that Representative Rasmussen mentioned that some of the businesses offered reminded him of a friend who owned a restaurant in Anchorage. Shortly after the pandemic he was desperate to hire people and had to offer at least more than a person was receiving on unemployment. He imagined that some of the job numbers that might have shown non-stagnation or improvement might have correlated with a higher wage. He brought up that he believed there was a wage disparity but admitted it was not the time to discuss the topic. However, he asked if wage changes had been considered with some of the studies. Ms. Holland did not recall but was happy to share the studies that Mr. Klouda had shared with her office with members of the finance committee. 11:20:36 AM Representative Josephson was surprised to hear Ms. Westcott report that COVID-19 was not enough of an excuse to claim unemployment. He wondered if the department would have had the flexibility to qualify a person for benefits if they were more vulnerable to Covid. Ms. Westcott responded that the department would have flexibility to determine whether someone was at a higher risk. The department would consider individual mitigating circumstances to determine a person's eligibility. For example, a person would be given special consideration if they had a preexisting condition that would put them at a higher risk of contracting Covid-19. Co-Chair Merrick thanked Mr. Klouda for his testimony. Representative Spohnholz asked for time for Mr. Klouda to respond to a question from Representative Wool. Mr. Klouda responded to the question about different wage replacement rates. For instance, for some people the unemployment benefits replaced more than 100 percent of their wage. For others, the amount was less than they were making before. The studies that he mentioned accounted for that factor. They found that it did not influences people's decision to go back to work in the data that they reviewed. The higher wage replacement rate did not deter people to return to work when they had the opportunity. He pointed out there was also the issue of childcare when it came to someone getting back into the workforce. He reported that 41 percent of unemployed parents who wanted to return to the workforce during 2020 were unable or uncertain they could because of childcare availability. Representative Spohnholz appreciated all of the great questions and the robust discussion about the bill. She thought it was important to consider all of the details about extending unemployment benefits. Moving forward the state continued to have record unemployment. She wanted to ensure that the legislature was eliminating unnecessary bureaucracy. She hoped to provide some flexibility in waving work search requirements if they deemed it appropriate on a case-by-case basis. She had stated in the previous day that potentially eliminating the work search requirement was something she would consider. Ms. Westcott had made a comment that they were not universally applying that measure. However, in the future it might be waived on a case-by-case basis. She noted that sometimes there were reasons that might mitigate someone's ability to go back to work including an underlying health condition and certain work environments that would place them at higher risk of contracting Covid. Representative Spohnholz indicated that Mr. Klouda also referenced childcare issues. She thought it was important the department was given a little flexibility to administer unemployment benefits presently while the state continued to be in a sticky situation despite the fact the economy was reopening. She hoped it would continue to do so and that everyone could get back to work. She would not support the waiver of the work search requirement, as she wanted to give the department some flexibility. 11:25:27 AM Representative Edgmon would like to hear from the department to demonstrate the benefits of the bill. Anecdotally, he knew of people benefiting from the bill such as the single mother living in a motor home in Muldoon. He asked the department to argue why the bill was not necessary. He commented that the state was down 22,000 jobs, many of which were tied to the unemployment rate. He would like to know why the bill would not benefit Alaskans. In other sectors of the economy were getting benefits via legislation this committee was going to pass with federal funds. He wanted a clear explanation from the department. HB 151 was HEARD and HELD in committee for further consideration. Co-Chair Merrick reviewed the agenda for the afternoon meeting.