HB 151-UNEMPLOYMENT BENEFITS FOR COVID-19  4:27:50 PM CO-CHAIR FIELDS announced that the final 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." 4:28:41 PM REPRESENTATIVE SPOHNHOLZ moved to adopt Amendment 1, labeled 32- LS0704\B.4, Wayne, 3/31/21, which read as follows: Page 2, line 28: Delete "This" Insert "Section 1 of this" Page 2, following line 28: Insert a new bill section to read: "* Sec. 5. Section 2 of this Act is repealed March 31, 2022." Renumber the following bill sections accordingly. 4:28:44 PM CO-CHAIR FIELDS objected for the purpose of discussion 4:28:45 PM REPRESENTATIVE SPOHNHOLZ explained that, because HB 151 was designed to align with the American Rescue Plan Act of 2021 (ARPA), the original expiration date of all provisions was in September. However, she said, unemployment rates in Alaska begin to rise in September, and she expressed wanting the "per dependent" benefit to extend to one year hence, allowing time for a broader update of the unemployment insurance (UI) program in the state. She said that she wants to ensure that people with children aren't penalized because the proposed legislation is aligned with a federal act. 4:29:49 PM CO-CHAIR FIELDS expressed his agreement with Amendment 1 and withdrew his objection. 4:29:51 PM REPRESENTATIVES MCCARTY and KAUFMAN objected. 4:30:03 PM REPRESENTATIVE MCCARTY shared his perspective that HB 151 is intended to be a "transition" bill to taper the UI program. He said that there would be later opportunity to draft legislation to make permanent changes to the UI program. 4:30:38 PM REPRESENTATIVE KAUFMAN said that his concern is that both HB 151 and Amendment 1 would not incentivize people to go back to work and business to resume. He characterized actions taken by the legislature as "doubling down that we are in an emergency" and expressed concern about detrimental effects on businesses that are "trying to get people to come back to work." He shared that he has spoken with business owners who expressed the idea that people won't return to work because "they're comfortable where they are for the time that the money's flowing." 4:32:00 PM REPRESENTATIVE NELSON asked whether Amendment 1 would change the fiscal note. 4:32:43 PM LENNON WELLER, Economist, Research and Analysis Section, Department of Labor and Workforce Development, answered that modeling the extension through the six-month period of April through September would add approximately $13.5 million to the total chargeable benefit costs. If the $75 per dependent benefit was extended through the end of March 2022, he said, the total cost would be $21.2 million. 4:34:16 PM PATSY WESTCOTT, Director, Division of Employment and Training Services, Department of Labor and Workforce Development, concurred with Mr. Weller's response. 4:34:35 PM REPRESENTATIVE NELSON asked whether the $21.2 million would be reimbursed by the federal government. MS. WESTCOTT responded that the benefits don't technically come out of the "state coffers," they come out of the unemployment insurance trust fund. The resulting impact would be more dollars out of the trust fund, potentially having an impact on tax rates in future years. She stressed that the money is not from the general fund, then deferred to Mr. Weller. 4:35:40 PM MR. WELLER noted that, given the state's overall costs and solvency, any additional outlays would impact tax rates in future years. He said, "Any roughly $10 million draw out of the fund will bring it down by roughly one-tenth of a percentage point." He noted that September is an important month because it's the month used to determine the reserve ratio, and explained that one-tenth of a percentage point would be directly added to employers' solvency taxes for the calendar year 2022. 4:37:06 PM REPRESENTATIVE SPOHNHOLZ pointed out that Mr. Weller said that the provision would cost an addition $8 million over the course of six months to prevent a "benefits cliff" for people who have children and are on unemployment. She also pointed out that the UI fund is not a public assistance benefit, but an insurance fund that every employee pays into. She recalled the March 29, 2021, testimony of Nolan Klouda with the Center for Economic Development at the University of Alaska Anchorage, during which he expressed that there does exist anecdotal evidence of people reducing their work because of UI, but statistically speaking, that is not the case. She said, "Receiving unemployment insurance benefit does not reduce people's interest in working. People want to work. Alaskans want to work. You get meaning, you get dignity that comes with it." She stressed that one- third of those receiving UI benefits have children and commensurate expenses. Regarding Representative McCarty's assertion that the per-dependent benefit under HB 151 is a "transition piece," she said that under the current draft of the proposed legislation, the provision would expire in September and that a special session would be required for the legislature to act. She stated, "Therefore, I think that it seemed like the responsible thing to do, to ensure that people with children continue to get this higher benefit level while we come back and do a deeper dive on what should an updated unemployment insurance benefit look like moving forward, this seemed like a modest compromise." 4:39:25 PM REPRESENTATIVE SNYDER asked whether it would be correct to say that, regardless of the repeal date listed, the provision is in effect so long as there is a national or state emergency due to the COVID-19 outbreak. 4:40:01 PM MEGAN HOLLAND, Staff, Representative Ivy Spohnholz, Alaska State Legislature, responded that HB 151 is drafted in such a way that the benefits will end on the repeal date. She noted that, as there is no state emergency declaration in place, an end to the national emergency would end the benefits. 4:40:36 PM REPRESENTATIVE NELSON recapped the discussion and asked Ms. Westcott whether DOLWD supports Amendment 1. MS. WESTCOTT replied that DOLWD is "neutral" on the proposed legislation. REPRESENTATIVE NELSON asked about DOLWD's view of Amendment 1. MS. WESCOT replied that DOLWD is "neutral" on Amendment 1. 4:42:05 PM REPRESENTATIVE KAUFMAN restated his earlier remarks about business owners' belief that people are refusing to return to work. He opined that it's not the UI benefits that are incentivizing people to not work, but the cumulative funding, including emergency relief. He stated that he also has an "issue" with the existence of a national emergency declaration because the situation may not affect Alaska, yet would still "trigger benefits." 4:43:27 PM CO-CHAIR FIELDS asked Ms. Westcott whether there are statistics on "refusal to work" issues. MS. WESTCOTT answered that DOLWD began tracking pandemic- specific data on March 1, 2020, and she said the department has received a little over 3,000 reports of what she called "refusal of suitable work" issues. The vast majority of those were cleared, she said, because the offer of work was either unsuitable or it wasn't a genuine offer of work. Of those 3,000 reports, she said, 398 fact-finding investigations concluded that the offer of work was not suitable, and there have been 208 "refusal of suitable work" issues denied. 4:45:14 PM REPRESENTATIVE MCCARTY asked Ms. Westcott to confirm the difference between federal and state UI. MS. WESTCOTT replied that the Federal Unemployment Tax Act (FUTA) has provisions providing for the administrative funding for the UI program, and the collection of tax contributions at the state level to fund the UI trust fund. Employers in Alaska pay the FUTA tax, which provides funding for the administration of the program, and they also pay a state contribution tax, which supplies the funds to the UI trust fund in order to pay benefits. REPRESENTATIVE MCCARTY remarked that he is a business owner, so he understands. He then asked whether the $13.5 million for the per-dependent allowance extension would come out of the state UI trust fund. MS. WESTCOTT replied yes, and explained that since the allowance for dependents is a state provision, any benefit that Alaska pays out would come from the UI trust fund. REPRESENTATIVE MCCARTY stated his perception that, due to the COVID-19 pandemic, "the employers' contribution to the unemployment insurance has gone up almost a full percent to employers, but not to the employees." MS. WESTCOTT replied that she doesn't know how much the tax rates have increased, and deferred to Mr. Weller. MR. WELLER answered that in 2020 the average rate class for employers was the statutory minimum of 1 percent, and the average rate class is 1.41 percent in 2021. He explained that there are 20 rate classes, ranging from a minimum rate of 1 percent for rate classes one through five, and 2.07 percent for rate class 20. He said, "It is potentially true that you could have had a doubling, or a full percentage point increase, in your tax rate, but you would have had to have been in tax class 20, meaning that you would have had to have some pretty significant swings, or fluctuations, in your payroll, so you were likely a highly seasonal employer, meaning your employees, or former employees, are likely drawing significant dollars from the fund." 4:49:41 PM REPRESENTATIVE SPOHNHOLZ clarified that the federal money from ARPA funds would only apply to the waiver of the one-week waiting period. She also stated that the committee has heard research presented that the federal relief funds increased consumer spending by 44 percent. She then pointed out that the $600 per week federal wage replacement, which was so concerning to employers, expired last July. She shared her understanding that there is an amount that an employers' tax rate for UI can increase, and that it can only be increased three-tenths of a percent per increment, so it couldn't double in a short period of time. 4:51:00 PM A roll call vote was taken. Representatives Fields, Spohnholz, Schrage, and Snyder voted in favor of Amendment 1. Representatives Nelson, Kaufman, and McCarty voted against it. Therefore, by a vote of 4-3, Amendment 1 was adopted. 4:51:49 PM CO-CHAIR FIELDS opened public testimony on HB 151. 4:52:03 PM CARA DURR, Director of Public Engagement, Food Bank of Alaska, presented a statement [included in the committee packet] in support of HB 151, which read as follows [original punctuation provided]: During the pandemic, hunger has increased dramatically. Map the Meal Gap, which is a research project of Feeding America, estimates that food insecurity in Alaska has increased 32% in 2020. Looking at children specifically, hunger has increased 44%. The Kulsilvak Census Area has emerged as the most food insecure region of the country for kids during the pandemic. Southeast Alaska, which typically experiences lower levels of food insecurity, has seen a huge jump in child food insecurity. Skagway, for example, has seen an estimated 72% increase in child food insecurity during the pandemic. To meet these needs, Food Bank of Alaska and our over 150 agency partners statewide have worked incredibly hard to source and distribute more food than ever before. Food Bank distributed 43% more pounds of food in the last six months of 2020, compared with the same time frame in 2019. We are still experiencing heightened levels of need, and we have seen record numbers within multiple programs in just the last few months. We anticipate that we will continue to see elevated numbers for quite some time, even as things related to the pandemic improve, as the economic impacts will linger. Hunger does not exist in a vacuum, and a lack of food is a direct result of a lack of resources. Unemployment insurance has been a critical resource for so many Alaskans during this pandemic. Families have been hit hard during this pandemic, as many have struggled with the loss of income and a lack of childcare options. This bill strengthens this resource in important and targeted ways. While we have many reasons to feel optimistic about the future, economic recovery is not going to happen with the flip of a switch and will likely be experienced unevenly by different groups of people. The better we can support Alaskans as we move towards recovery, the faster the recovery will be, and the shorter our lines at the food bank will be. 4:53:50 PM TREVOR STORRS, President and CEO, Alaska Children's Trust, testified in support of HB 151. He said that one of the most effective ways of preventing child abuse and neglect is by addressing the social determinants contributing to an environment that promotes trauma and discourages building the skills necessary to manage it. A key social determinant, he said, is economic well-being. Alaska is ranked thirty-sixth in the nation for overall child well-being, and thirty-fourth for family economic well-being. He said that growing up in poverty is a major barrier to healthy development and increases the likelihood of poor academic, cognitive, and health outcomes. In 2019, he said, 14 percent of Alaska's children lived at, or below, the federal poverty level, and 6 percent lived in families experiencing "extreme" poverty, defined as 50 percent of the federal poverty level. One quarter of children live in households with a high housing cost burden, he said, and he pointed out that these figures are all pre-pandemic. The pandemic has magnified these issues, he said, and nearly 20 percent of adults living in households with children reported "little or no confidence" in their ability to pay the next rent or mortgage payment on time, and nearly 15 percent reported "sometimes or often" not having enough food. He said that an average of 38 percent of adults living in households with children reported having difficulty paying for the usual household expenses, and over 50 percent have lost their jobs since March 2020. He said that HB 151 would directly provide a measure of economic stability to Alaska's most vulnerable families, and that without it, there would be greater strain on families, thereby putting children at risk. 4:56:09 PM CO-CHAIR FIELDS, after ascertaining that no one else wished to testify, closed public testimony on HB 151. 4:56:23 PM The committee took a brief at-ease. 4:56:30 PM REPRESENTATIVE SCHRAGE moved to report HB 151, as amended, out of committee with individual recommendations and the accompanying fiscal notes. 4:56:48 PM REPRESENTATIVE NELSON objected for the purpose of discussion. REPRESENTATIVE NELSON asked Ms. Westcott whether there would be an updated fiscal impact forecast. MS. WESTCOTT said that the committee could be provided with updated information. REPRESENTATIVE NELSON said that he would like to wait for the updated information before voting. 4:57:39 PM CO-CHAIR FIELDS noted that the committee coordinated with DOLWD on the fiscal impact of Amendment 1. 4:57:45 PM MS. HOLLAND pointed out that even without a formal fiscal note, the fiscal impact is clear. She recounted a conversation with Mr. Weller and said that he characterized the fiscal impact resulting from Amendment 1 as a "rather nominal change" from the original version of the proposed legislation. 4:58:27 PM CO-CHAIR FIELDS added that the committee looked at different options for transitioning away from the elevated levels of benefits, and the provisions in Amendment 1 had a "very modest" impact on the fund. MR. WELLER concurred with Co-Chair Fields' statement and said, "The total difference went from about $13.5 million to $21.2 [million], the difference between the two being roughly $8 million total over that 12-month period." He said that under either scenario he expects the fund to remain solvent. CO-CHAIR FIELDS asked what the size of the fund is. MR. WELLER replied that the latest balance was approximately $265 million. Without the change, he said, he would expect the March 2022 balance to be $285.2 million; with the change, the March 2022 balance should be $263.4 million. CO-CHAIR FIELDS said that the change would not affect sustainability. 4:59:40 PM REPRESENTATIVE KAUFMAN commented that this proposed legislation would create a "local obligation" and said, "It was noted earlier that the federal money is available for the first week ... but as amended, so that extends that period into a period where that first week would not be funded federally." He restated his perception that business owners are hurting and that returning to work should be incentivized. He then said, "There's so much federal money coming that I believe that [if] it was properly applied, it could do much of the work that's being expected of this bill, without creating the local obligation." He stated that, even though he is sympathetic to those who have lost their jobs, he does not support HB 151. 5:01:00 PM CO-CHAIR FIELDS asked Ms. Westcott to clarify what would be covered by federal funds. MS. WESTCOTT stated that federal funds would continue to cover the first week of benefits if a state has a waiting week waiver provision. The way HB 151 was drafted, she said, the first week of benefits would be federally funded through September 6, 2021. She stressed that the provision for dependents, not the waiting week provision, would affect the UI trust fund. CO-CHAIR FIELDS pointed out that the provision for dependents is $50 per week, which he characterized as approximately what it costs to feed a child. He said, "We have an opportunity to reduce childhood hunger," pointing out that his district has seen "sharp" increases in child hunger and that it's difficult for children to do well in school if they're hungry. 5:03:02 PM REPRESENTATIVE KAUFMAN restated his perception that "there's so much other money coming," and restated his belief that relief funds disincentivizes returning to work. 5:03:41 PM REPRESENTATIVE NELSON asked whether there would be a timeframe for the updated fiscal note to be available. MS. WESTCOTT replied that her staff would begin work on the fiscal note now that the amendment has been adopted. She gave the approximate timeframe of mid-afternoon the following day. 5:04:28 PM REPRESENTATIVE SCHRAGE stated that he supports HB 151 and recounted various points from the testifiers. He said, "I think there is an argument to be said for making sure that folks are motivated to get back to work, but given the numbers of families that we see utilizing the food bank and struggling during this time, I have a hard time believing that those families would refuse a job, if offered one." He expressed that the proposed legislation would allow the flexibility to smoothly navigate the situation while helping those who most need it. 5:05:49 PM REPRESENTATIVE MCCARTY stated his support for HB 151 and said, "I, personally, as an employer, have witnessed two occasions where people have refused work because they're making unemployment money bigger than that, or they just like the unemployment money and not going to work ... I witnessed it, I have many employers have shared the same stories in my district." 5:06:56 PM REPRESENTATIVE KAUFMAN opined that one of the reasons for the lines at the food banks is because businesses are shut down, and he said that he's talked to businesses who could have operated and hired people. He expressed the desire to take a more "managed risk" to open the economy, and said that while it's "great" to support people in times of need, what the committee should be focusing on is commerce and getting businesses "back to work." He said: I'm taking the tough decision to say 'We need to start looking at the differently,' and that goes all the way from these wholesale disaster declarations which enabled bills like this, to the concept that get flowed down to the communities where they're all too willing to shut things down because of fear, or whatever the motivation may be. But we need to get Alaska back to work. REPRESENTATIVE KAUFMAN said that, with regrets, he cannot support HB 151 as written or amended. 5:09:46 PM REPRESENTATIVE SPOHNHOLZ stated that she supports Alaska being "open for business" and said that no one in the legislature wants Alaska to be closed. She said that she wants people to have the opportunity for meaningful work, saying, "I just want to be really clear that what people are describing when they're saying that folks are declining work in order to continue to collect unemployment benefits is, in fact, unemployment insurance fraud, and that is prosecutable by law." She stated that establishing a provision to take advantage of federal funds and allow very modest, sustainable per-dependent benefits does not enable people to break the law. She stressed that HB 151 would not increase benefits "across the board," but that the per-dependent benefit would allow those who have children and are not able to work should be able to get what she characterized as a "modest" increase. 5:11:09 PM A roll call vote was taken. Representatives Schrage, Snyder, Nelson, Spohnholz, Fields, and McCarty voted in favor of reporting HB 151, as amended, out of the House Labor and Commerce Standing Committee. Representative Kaufman voted against it. Therefore, by a vote of 6-1, CSHB 151(L&C) was reported out of the House Labor and Commerce Standing Committee.