HB 151-UNEMPLOYMENT BENEFITS FOR COVID-19  4:33:29 PM CO-CHAIR FIELDS announced that the next order of business would be 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." 4:34:17 PM CO-CHAIR SPOHNHOLZ, as prime sponsor, introduced HB 151. She explained that the proposed legislation would extend the provisions under House Bill 308, passed in March 2020, during the Thirty-First Legislative Session, and which provided for temporary changes to Alaska's unemployment insurance (UI) program in response to the COVID-19 pandemic. She said that the provisions would be extended until September 6, 2021, to align Alaska's UI program with the American Rescue Plan Act of 2021 (ARPA). The proposed legislation would waive the standard one- week waiting period before receiving benefits; increase the weekly per-dependent benefit from $24 to $75, as well as remove the cap of three dependents for which applicants can receive a supplemental benefit; and it would waive the work-search requirement for workers who have had to stay home to care for family members as a result of the pandemic. She noted that the proposed UI benefit extension is at the request of the Division of Employment and Training Services (DETS) at the Alaska Department of Labor and Workforce Development (DOLWD). CO-CHAIR SPOHNHOLZ explained that UI benefit claims during March 2021 were still over 200 percent higher than the previous year, Alaskans continue to suffer record levels of unemployment through no fault of their own, and one-third of Alaskans receiving UI benefits have dependent children or family members with disabilities. She stressed that UI is not public assistance or an entitlement program, but an insurance benefit that employees have paid into for years, expecting that the insurance would be there when it was needed. She said that average weekly claims paid in the past week were $440, and noted that the state of Alaska has the lowest UI benefits in the nation. For example, she said, an unemployed person who typically earns $100,000 per year can receive a maximum benefit of only $370 per week, totaling $19,610 annually. The minimum possible benefit, she said, is $56 per week, equating to $2,912 in annual equivalent income. She stated that temporarily extending the expansion of the UI benefits would provide certainty for Alaskans, support families with children, ensure that no federal dollars are left on the table, and support the recovery of the economy. 4:38:04 PM MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, detailed the sectional analysis on behalf of Co-Chair Spohnholz, prime sponsor, which read as follows [original punctuation provided]: 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 act in its entirety on September 6th, 2021. Section 5: Provides an effective date for sections 1- 3, retroactive to April 1, 2021. Section 6: Provides for an immediate effective date. 4:39:39 PM PATSY WESTCOTT, Director, Division of Employment and Training Services, Department of Labor and Workforce Development, provided testimony during the hearing on HB 151. She reiterated the provisions in the proposed legislation and said that she has nothing to add to Co-Chair Spohnholz's and Ms. Holland's statements. 4:40:38 PM NOLAN KLOUDA, Executive Director, Center for Economic Development, University of Alaska Anchorage, told the committee that he was asked to give an overview of the employment status in Alaska, as well as some of the effects of the UI benefits disbursed since the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 was passed at the beginning of the pandemic. He noted that in the months of April through August of 2020 the state saw a loss of approximately 48,000 jobs, or 15 percent of total employment; the number accounted for general job loss resulting from the pandemic as well as the seasonality of employment in Alaska. For reference, he said, the state lost only 13,000 jobs in the entirety of the 2013-2015 recession. He expressed that the total year-over-year job losses in the months of November 2020 through February 2021 were approximately 24,000, and that the winter job losses are lower than summer only because of the seasonality. "We actually really haven't seen a clear sign of employment recovery in the last several months," he said, with the biggest job losses in the areas of leisure and hospitality, food service, and personal services such as beauty salons. He said that many of the job losses are among workers who are younger and lower paid. MR. KLOUDA said that unemployment levels are expected to be elevated for "quite some time," with projections for employment growth of 2-3 percent per year, taking up to five years to reach 2019 levels. Even with a recovery well underway, he said, unemployment will remain high. As far as the pandemic unemployment compensation (PUC), he noted that the pre-pandemic average UI benefit was $260 per week, versus the national average of $360. When the CARES Act added $600 per week PUC, there was research looking at the effect of the PUC benefit. The "bonus" benefit, he said, did not decrease employment; it didn't lower the number of jobs that were available. He said that while the conventional wisdom says more generous unemployment compensation would cause more people to not work, resulting in a decline of overall levels of employment, which has not been the case. 4:44:41 PM MR. KLOUDA cited a 2020 study by economists at Yale University which found that, when given the opportunity to return to work and forego unemployment benefits that were larger than a paycheck, workers tended to return to employment. Another study examined the data around the July 2020 expiration of the PUC benefits, looking for evidence of increased employment as a result of the expiration and found, he said, "There was no evidence of that at all." He said that a third study duplicated the findings, finding only that there was "a slight decline in the level of search intensity" of unemployed people looking for jobs, but that it was a "relatively small" effect, with multiple applicants per job opening. He stressed that when the pandemic first hit, the number of vacancies declined about 300 percent faster than the number of applicants, so the employment situation was more about the availability of jobs rather than the generosity of benefits. MR. KLOUDA, regarding the impacts of the PUC, said that local spending increased by approximately 44 percent, creating a stimulative effect in the local economy. He recalled hearing from business owners who claim that they can't get people to work because they're receiving UI benefits; while there may be a few instances of such, he said, the data doesn't support the claim. He said that one aspect of deciding whether to return to work is the question of childcare; there is ample evidence of people not being able to return to the workforce because they don't have a good childcare solution, which has especially affected women. He cited a statistic that said that women between the ages of 25 and 44 are three times more likely than men to be not looking for work due to childcare demands. He said that the $600 PUC is now long over, though benefits of $300 per week have been extended, which is a much lower wage replacement rate; thus, he said, any effect from the larger benefit is now diminished by the smaller supplement. 4:48:49 PM REPRESENTATIVE KAUFMAN directed attention to the provision on line 14, page 1, of HB 151, "(1) providing care, including medical care, to one or more persons;". He asked, "Is that any care?" CO-CHAIR SPOHNHOLZ deferred to Ms. Westcott. 4:49:45 PM REPRESENTATIVE KAUFMAN repeated his question for Ms. Westcott, saying, "What I'm wondering is if that's not overly broad, in that that could be almost anything, that could be interpreted literally wide open ... can you advise if that seems to be adequately defined?" MS. WESTCOTT answered that the federal guidelines related to the provision are being followed, and she expressed her understanding that HB 151 contains language consistent with the federal legislation. She stressed that DOLWD has been following the guidelines since they were first issued in March 2020. REPRESENTATIVE KAUFMAN asked whether the provisions outlined in page 1, line 14, and page 2, lines 1-2, are necessary, given that the federal guidelines are already being followed. 4:52:51 PM CO-CHAIR SPOHNHOLZ answered that every time the law is changed in the state, the department has to issue new regulations and write new software code, which can take "many months". She said that because of the time factor, the proposed legislation is written as closely as possible to the previous statutes in order to reduce the administrative burden and lessen the chance of having eligible beneficiaries waiting months to receive benefits. She gave an example of a provision change in the per- dependent benefits which took almost six months to update in the software, and she said that the issue of providing medical care is "incredibly relevant" because there could be an outbreak in a person's childcare arrangement, rendering that person unable to work while their child is under quarantine. She noted that the number of people filing claims as of March 2021 is much lower than the previous summer; however, it still makes sense to keep consistency in the provisions. She stressed that the current provisions expire on April 1, 2021, and if they lapse it means that new laws would have to be written, software code would have to be updated, and implementation could take months. She said that the state's actuary has stated that the provisions would not have an impact on the ability of the state's UI fund to remain solvent. 4:54:56 PM CO-CHAIR FIELDS asked Ms. Wescott if the committee should be contemplating an end-date on the proposed legislation later than September 6, 2021, given that the legislature wouldn't be in session at that time to respond. MS. WESTCOTT responded that there have been certain sectors of the economy opening back up. She expressed that she foresees the situation improving over the summer, now that the vaccine is widely available; however, she can't predict what will happen over the fall and winter. CO-CHAIR FIELDS asked whether the DOLWD commissioner would have the flexibility to extend benefits if the committee were to extend the date beyond September 6. MS. WESTCOTT replied that if the legislature were to extend the provisions to December, the commissioner would have no discretion, as the benefits would be in place. If Alaska was to extend the waiting week beyond the federal level, she said, the cost of paying that week would be fully absorbed by the state's fund instead of being federally funded. In addition, she explained, if the flexibility of the work-search requirements was extended beyond what the federal provisions have directed, Alaska could be potentially out of conformity with federal directives if the federal government also does not extend them beyond September. 4:59:01 PM REPRESENTATIVE MCCARTY asked how many people are currently receiving UI benefits. He then asked what would be the anticipated rise in summer employment, should the tourism industry restart. MS. WESTCOTT replied that the number of individuals receiving UI benefits changes week to week, and is very fluid, but currently approximately 50,000 individuals receive UI benefits on a week- to-week basis. For the question on summer employment, she deferred to Mr. Weller. 5:00:30 PM LENNON WELLER, Economist, Research and Analysis Section, Department of Labor and Workforce Development, asked Representative McCarty to clarify his question about summer employment. REPRESENTATIVE MCCARTY said, "Just what do we see in the average?" MR. WELLER said that summer employment, defined as the second and third quarters of the year, tends to be significantly higher than winter employment. Aggregate summer employment averaged 300,000 in 2020 and 335,000 in 2019. The current employment forecast, he said, is 272,000 covered jobs in the second quarter of 2021, compared to 269,300 in 2020. Third quarter covered employment in 2021 is expected to be 287,100, compared to 283,600 in 2020. He said that probably the single largest factor in summer employment is whether cruise ships will come to Alaska. He noted that construction and seafood processing jobs increase in the summer, but the bulk of employment comes with those business that focus on tourism. He described expecting summer 2021 employment to be "much more muted." 5:04:23 PM REPRESENTATIVE MCCARTY asked whether a similar rise in employment in the fishing industry. MR. WELLER replied that he's not expecting much of a change in seafood processing, as employment in that sector was not significantly decreased. 5:04:57 PM CO-CHAIR FIELDS expressed understanding that employees in leisure and hospitality, construction, and seafood processing will be laid off at the end of the season. He asked if trust fund could handle a one or two month extension beyond what the federal government will pay for. MR. WELLER said that a waiting week doesn't change the duration an individual would receive UI benefits, it only shifts the period of eligibility by one week. He said that it's been nice having the federal government paying for that first week, but that week is built into the targets for trust fund solvency anyway. He noted that most people receiving UI compensation don't exhaust their benefit, and that he would expect to see even fewer exhausting the benefit going forward. He said that he would expect the extension to not have a large impact on trust fund solvency, especially because regular claims are expected to fall considerably with the arrival of late summer and fall of 2021. 5:07:28 PM CO-CHAIR SPOHNHOLZ shared that unemployment is not expected to be nearly as bad as it was in summer of 2020, when there were 67,600 claims per week at the peak in May and continuing through mid-July. She expressed that the fiscal impact of the provision under HB 151, with an attached fiscal note of $13 million, would be much lower than it would have been last year. She said that the summertime is traditionally the "high water mark" for employment, with unemployment rising with the transition into fall. She said that the UI fund in Alaska is built to accommodate the ebb and is well-capitalized. She mentioned that DOLWD is continuing to work with unemployment beneficiaries to move towards employment, providing retraining and work search support services. She described HB 151 as a "common sense measure that aligns our state statute with federal law and federal funding." 5:10:21 PM CO-CHAIR FIELDS announced that the amendment deadline of 3:15 p.m. on March 30, 2021. REPRESENTATIVE KAUFMAN asked why the amendment deadline is so soon. CO-CHAIR FIELDS explained that the provisions expire in April and the intention is to move the bill along quickly, in order to give DOLWD time to update their regulations to align with ARPA. MS. WESTCOFF commented that if the waiting week waiver is extended beyond September 6, the first week of extended benefits would have to be fully funded by the state instead of being funded by the federal government. REPRESENTATIVE KAUFMAN asked why HB 111 also had a due date of March 30, 2021, for amendments. CO-CHAIR FIELDS replied that there is a fairly long list of administration bills in process, so when one seems to be non- controversial, the intent is to give committee members the opportunity to move it right away. He asked Representative Kaufman whether he would like a longer amendment deadline on HB 111. REPRESENTATIVE KAUFMAN said that he had questions about radiation safety which may take longer than overnight to find out. CO-CHAIR FIELDS responded that if there are still questions, the committee can return to HB 111 later. [HB 151 was held over.]