SENATE BILL NO. 137 "An Act relating to the allocation of money appropriated to the Alaska Human Resource Investment Council; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. MARY JACKSON, staff to Senator Torgerson, testified that this bill extends the first year funding provision, or allocation provision, of the previous legislative session's SB 289. She detailed that the provision allocated funding for the newly created program through the University of Alaska, the Kotzebue Technical Center and the Alaska Vocational and Technical Center (AVTC) because the program itself was not yet established in a manner to receive funding. Ms. Jackson shared that these institutions provide technical and vocational programs in both urban and rural areas of Alaska. She stated that a review of the uses of the funds, "showed how necessary those funds were." She referred to supporting documentation from AVTC. Ms. Jackson explained that these funds allow the institutions to "properly prepare" for the influx of new students into their systems. Co-Chair Donley asked if the funds for this program come from the Unemployment Insurance (UI) fund. Co-Chair Kelly affirmed. Amendment #1: This amendment to Section 1 (a), page 1, lines 12-14, changes the distribution of the allocations between the three vocational technical facilities as follows. Delete: University of Alaska 52 percent Kotzebue Technical Center 16 percent Alaska Vocational Technical Center 32 percent Insert: University of Alaska 67 percent Kotzebue Technical Center 11 percent Alaska Vocational Technical Center 22 percent Senator Wilken moved for adoption. Senator Austerman objected for the purpose of discussion. Senator Wilken stated this amendment corrects a drafting error. He said that the existing percentage breakdown was a part of SB 289 and was determined by the intent to allocate $1 million to AVTC and $500,000 to Kotzebue Technical Center, with the remainder allocated to the University of Alaska system. He said the percentage change is necessary to continue funding the same fixed amounts to AVTC and Kotzebue Training Center. Ms. Jackson stated that the sponsor supports the amendment. Senator Leman asked if the intent is to fund the technical centers a fixed amount then why percentages were listed in the language instead of the allocations. He predicted changes would continue to be necessary in future years. Ms. Jackson replied, "The dollar values are always going to be approximate" She explained the actual allocation to AVTC the previous year was $1,032,000 and the projected amount for the current year is $1,001,000 out of a total allocation to the program of $4.5 million. Senator Leman again asked why the language contains the percentages, which require changing. Ms. Jackson answered that the previous allocation was not for the "full funding year" due to the inception of the program after the fiscal year began. Senator Leman asked if the expectation were therefore that the amended percentage amounts would be accurate in future years. Ms. Jackson affirmed. Senator Green expressed that she did not support the project the previous session and would not support it again this year either. She opined, "I think it's a misdirection of funds that were very clearly laid out how they were supposed to be used." She stressed that this legislation "goes totally against" the UI program. Senator Austerman removed his objection to adoption of the amendment. Senator Olson stated the UI fund is an employer contribution intended to have "a positive action" on employees. He did not understand why the University of Alaska was receiving the "lion's share" of the funds for this program. He predicted the university would continue to receive larger percentages of this fund and would eventually expect to receive all of the funds. He stressed that the emphasis of the program is for vocational and technical training and that the percentage shifts would take away from the original intention. He spoke of the preparations for a gas pipeline and the need to train Alaskans throughout the state for the jobs this project would bring. He saw this amendment as reducing funding for "the only technical institution in my area." As a result, he stated that he objected to its adoption. Senator Olson opined this amendment "polarizes", "separates the haves from the have-nots" and causes "a bigger burden to be placed upon those of us that are already overburdened by the lack of availability of training." Senator Olson expressed that the intent of the legislature is to provide a consensus and "a more even playing field." He saw this amendment as divisive. Co-Chair Kelly noted that the funds would be directed to vocational pursuits and therefore be used to help Alaskans develop the necessary skills for jobs, such as with the proposed gas pipeline. He stressed that this amendment does not change the amount originally intended for the university, but rather corrects language to allow it. Senator Wilken explained that the amount funded the program the previous year was only enough to fund three-fourths of the year because the program started after the fiscal year had begun. Senator Olson understood this, but stressed the need to provide training in rural areas of the state. Co-Chair Kelly recalled the original intent was to provide funding to the vocational training centers and that this amendment continues to do this. Senator Hoffman suggested that the intent of the program is to provide training for jobs in technical areas and that the university is an institution of higher learning. He said the question is actually whether the allocation to the university is appropriate. Senator Green reminded that there was "great heated debate" on SB 289 during the previous session about the method of changing the use of the UI funds. She remarked, "That's not what this money was intended for, it's not why the money was collected. It was not go to institutions. It was to got to individuals who had specific needs." While she understood the fund has a surplus, she argued that this money should go to individuals. She stated that SB 289 was "supposed to be a one-year budget fix." Co-Chair Kelly did not remember SB 189 as a "one-year budget fix." Senator Green asked if it was not, why the issue was before the Committee this session. Co-Chair Kelly recalled the original discussions included statements that the program would be on-going. Senator Wilken also did not remember the program as a "one-year budget fix." He stressed that funding for this program is not collected from the employee but rather from the employer's matching funds. He found it appropriate to train unemployed workers so they could qualify for other jobs, which would be an appropriate use of UI funds. He added that the University of Alaska is included in the program because it has a "statewide reach." He noted that while AVTC and Kotzebue Training Center are located in two rural areas, there are campuses of the University of Alaska in several more rural communities. He pointed out that University of Alaska President Hamilton understands the need to provide vocational and technical training. Co-Chair Kelly stated, "There is no reallocation of dollars from one institution to another." He stressed that this is a technical amendment. He reiterated that the university is the statewide entity able to funnel these funds into rural Alaska for vocational training. Senator Austerman asked for a breakdown of how the university spent the funds allocated to it for this program. Co-Chair Kelly stated this information is available on the Internet. Senator Green expressed, "the university [has] done a fine job" with the funds allocated for this program. She cited the "major emphasis" at the Mat-Su campus on vocational technical studies. However she repeated that the intended use of the UI fund was not for institutions, but rather to individuals with specific needs. She stated that the funds could be given to unemployed workers to pay for tuition at one of the institutions. Co-Chair Donley remembered the argument that was held during the Senate debate on SB 289 the previous session regarding employer- matching funds comprising the allocation to this program. He asked for an explanation of how the source of these funds affects the "bottom line." He understood that the "bottom line" is money available to pay benefits to unemployed Alaskans who contributed to the fund. He surmised that using UI funds for the vocational and technical training programs would reduce the amount available to unemployed Alaskans regardless of whether the funds were collected from the employer contribution or the employees. Senator Wilken recalled a chart referenced during the previous discussions, which he no longer possessed. He remembered that the unemployment benefits were based on the demand of the available money. He explained that the funds allocated to the vocational technical training program are "over and above" the demand and would not affect the benefits. He qualified that in the previous session, the Department of Labor and Workforce Development warned that using the excess amount in the fund for other purposes would affect benefits. He remarked that this was found to be untrue and that the excess balance has grown despite the withdrawal of funds for the vocational technical training program. Co-Chair Donley stated that it does not matter whether the funds allocated to the vocational and technical training program come from the employee or the employer share of the payments to the UI fund. He expressed that any usage of the fund for other purposes affects the amount available to pay unemployment benefits. He said this is because of the presupposition that the status quo is the proper policy call. He stated that the amount paid unemployed workers in benefits is "some of the most miserable lacking benefits in the nation." He suggested that the policy should actually be whether to increase the amount of benefit payments or direct the funds to other projects such as the vocational and technical training program. Senator Wilken disagreed and emphasized that the amount allocated from the UI fund to the vocational and technical training program is excess money in that fund, which constitutes a reserve. He stated that Co-Chair Donley's suggestion to increase benefit payments would need to be addressed as separate legislation. Senator Wilken admitted that while it could be stated that Alaska has "miserable" unemployment insurance, the state has other "extraordinary" benefits that compensate for this. Co-Chair Donley argued that the benefit payment issue is directly relevant to the legislation before the Committee. This, he stressed is because other usage of the UI funds "cuts off the availability," or impedes the flexibility to improve the benefits paid to uninsured Alaskans. Senator Wilken countered the bill does not address the possibility of using employer and employee contributions to the UI fund to increase the amount of benefits paid to individuals. He stressed that this bill allocates funds collected "over and above" the amount paid out in benefits and establishes the amount of reserve funds necessary. Co-Chair Kelly agreed Co-Chair Donley's concern is a subject for another bill. He explained that the existing structure of the UI fund enables payments for vocational programs without impacting the benefits paid to individuals. Senator Wilken noted that the matter is complicated, just as it was when it was first discussed the prior year. He asked that the Department of Labor and Workforce Development explain the issues. Co-Chair Kelly ordered the bill HELD until later in the hearing. The motion to adopt Amendment #1 remained on the table. SB 137-ALASKA HUMAN RESOURCE INVESTMENT COUNCIL [The Committee continued deliberations from earlier in the hearing. A motion to adopt Amendment #1 remained on the table.] Co-Chair Donley restated his objection to the bill as the same reason he voted against similar legislation the previous year. He expressed that this legislation utilizes funds that would "more appropriately" be used in improving the unemployment benefits to those workers who have paid into the system. He asserted that this is the "purpose of the system" and that the current benefit schedule is "sub par" and does not adequately compensate unemployed workers. He noted that the intended purposes contained in the legislation are worthy. Co-Chair Kelly reminded that the Committee debate has been whether this bill could adversely affect the potential to increase unemployment payments. SENATOR JOHN TORGERSON affirmed Co-Chair Donley's assertion that this legislation "intercepts" unemployment insurance (UI) funds. Senator Torgerson listed this amount as one-tenth of one percent of the amount paid into the fund by the employee. He remarked that the UI trust fund is "the most lucrative it has been in the history of our state" with a balance of approximately $220 million. He said the average balance is between $160 million and $180 million. He noted there is other legislation before this legislature that would increase the UI benefits. He stressed that if at any time the benefits need exceeds the balance of the UI trust, the employer would pay the difference. Therefore, he assured that the trust is never compromised. Senator Torgerson made the case that by providing funding for training facilities the number of workers reliant on UI benefits is reduced. In fact, he pointed out, these workers were instead employed and therefore contributing to the UI fund. He noted that this theory was also agreed upon when establishing the State Training Employment Program (STEP) several years earlier and as a result, the balance of the trust increased. Senator Ward referenced the amendment and asked if its necessity was caused by a mistake in SB 289, which set the original allocation percentages. Senator Torgerson replied, "this was actually driven by money" and that his intention was to allocate $3 million to the University of Alaska. He stated this was because the House of Representatives did not fund the full request in the FY 01 operating budget. He noted that other legislation was pending that could have accomplished this, but that SB 289 was chosen to also provide funds to AVTEC and Kotzebue Technical Center. Senator Ward asked the projected amount appropriated to the university under this amendment. Senator Torgerson answered, $3,051,046. SFC 01 # 47, Side A 10:44 AM Senator Leman requested that the debate return to the amendment before the Committee. Co-Chair Kelly pointed out that the amendment is a technical correction, but noted there was objection to the amendment based upon the program. He emphasized that the program continues, whether the amendment is adopted or not, but warned that if the amendment is not adopted, the program does not continue as intended in SB 289. He surmised that while this debate could be "healthy" it does not pertain to the amendment or the legislation before the members. He reiterated that the amendment adjusts the percentages to reflect a full fiscal year rather than the three-quarter year funded in the first year of the program. Senator Leman concluded that this amendment is "a fix that is necessary to get us to where we intend to be." He appreciated Senator Olson's comments but disagreed that this takes from the "have-nots" and gives to the "haves". Senator Leman did not think the redistribution was in a manner that would be detrimental to the Kotzebue Training Center. He supported the amendment because it is consistent to the intent of SB 289. He stated that like Co-Chair Donley and Senator Green, he objected to the use of the UI funds for an education program in the previous session and that he voted against the original legislation. He qualified that he did not oppose funding vocational technical programs. However, he stated that this amendment is appropriate given that the program is in place. Senator Olson moved to amend the amendment, changing the percentages to 61 percent to the University of Alaska, 13 percent to the Kotzebue Technical Center and 26 to the Alaska Vocational Technical Center. He said he offered this as a compromise saying it would provide a 40 percent increase to each institution. Co-Chair Kelly understood the amendment as stated but did not think it gave a 40 percent increase over what was requested in the prior year. Senator Torgerson pointed out that the Kotzebue Training Center is estimated to receive $516,000 under the previous year's appropriation and would receive $500,019 in the current year. He continued that AVTC was projected to receive $1,032,000 and would receive $1,001,000. He suggested that the percentages could be changed slightly to make up for these reductions. He stressed that the intent is to provide the same amount to each facility as in the prior year and for the university to receive the maximum amount possible. Co-Chair Kelly stated that because the actual amount would fluctuate every year, he did not support adjusting the percentages based on the previous year's funding. A roll call was taken on the motion to amend the amendment. IN FAVOR: Senator Hoffman and Senator Olson OPPOSED: Senator Wilken, Senator Austerman, Senator Leman, Senator Ward, Co-Chair Donley and Co-Chair Kelly ABSENT: Senator Green The motion FAILED (2-6-1) The amendment FAILED to be adopted. Senator Leman expressed that Senator Torgerson raised a "compelling" argument in that these numbers are not exact and suggested that a one-half percent adjustment would accomplish this. He surmised changing the Kotzebue Training Center percentage to 11.5, changing the AVTC percentage to 22.5 and the University of Alaska percentage to 66, would achieve the same funding amounts for each of the three facilities. Co-Chair Kelly stressed that although this might make the amounts the same as the previous year, they would be different in future years. He did not recommend adjusting the percentages to align exactly with the previous year's amounts, but rather supported establishing a percentage breakdown. Senator Torgerson affirmed that the actual amounts are fluctuating depending on the amount paid into the UI trust fund. Senator Leman stated that he would no offer this as an amendment to the amendment. A roll call was taken on the motion to adopt the amendment. IN FAVOR: Senator Leman, Senator Ward, Senator Wilken, Senator Austerman, Co-Chair Donley and Co-Chair Kelly OPPOSED: Senator Hoffman and Senator Olson ABSENT: Senator Green The motion PASSED (6-2-1) The amendment was ADOPTED. Co-Chair Donley stated that there was confusion as to whether this bill is necessary in order to extend the program. He referred to the sponsor statement; "…SB 137 extends the date of the direct allocations to named institutions for two more years." He asked if the bill accomplishes two functions, adjust the percentage levels and also extend the effect of SB 289 for two years. Senator Torgerson responded that SB 289 established a grant program that would be given to accredited institutions in Alaska based upon grant criteria. He stated that he introduced the current legislation because the Department of Labor and Workforce Development has not issued any regulations, nor has the Alaska Human Resource Investment Council (AHRIC) taken steps to issue these grants. Henceforth, he remarked, this legislation provides a direct grant to the three institutions, rather than require the institutions apply for the grants. Co-Chair Donley asked how this legislation with the set percentages, relates to the operating budget. He noted that because it does not set specific amounts, it is not an appropriations bill. He wanted to know if it is a guide or formula to be used when preparing the operating budget. Senator Torgerson replied that this legislation has nothing to do with the operating budget and that a forthcoming fiscal note will reflect the percentage breakdowns to each institution. Co-Chair Donley referred to an outdated zero fiscal note that stated the bill appropriates $4.5 million to the program. REMOND HENDERSON, Director, Division of Administrative Services, Department of Labor and Workforce Development, testified that a fiscal note would be necessary to appropriate the intended $4.5 million into the department's budget. This, he stated is because the funds are not included in the budget under the House of Representative's version of the FY 02 operating budget. He admitted that this request should have been submitted with the governor's proposed operating budget but was omitted. He stressed that if this bill passes without the related fiscal note, the department would not have the necessary $4.5 million to issue in grants to the three institutions. Senator Torgerson stated his intent to reflect the funds in a fiscal note in the event that the governor vetoes the bill. He explained that if the veto occurred, the funds would not be available for the department to expend otherwise and would be held for future appropriation. Co-Chair Kelly announced the Committee would wait for a proper fiscal note. Senator Torgerson offered to write the fiscal note. Co-Chair Kelly ordered the bill HELD in Committee.