HB 305-UNEMPLOYMENT COMPENSATION BENEFITS  CHAIR CON BUNDE announced HB 305 to be up for consideration. 2:13 p.m. REPRESENTATIVE TOM ANDERSON, sponsor of HB 305, said it provides an 8.2 percent increase in the maximum weekly unemployment benefit amount. The increase would be phased in a three-year period and minimizes impact to employers and employees. Alaska th currently ranks 47 in the nation with a maximum benefit of th $248. Alaska would rank 28 if the benefit was fully increased to $308 in 2006. He reminded the committee members that this would not take effect for several years. In 2005, the maximum benefit for base period wages exceeding $26,750 will increase and in 2006, the maximum weekly benefit amount will increase for Alaskan's whose base period wages exceed $29,750. In 2007, wages will be $32,750. REPRESENTATIVE ANDERSON concluded by saying that unemployment insurance promotes economic stability and creates a balance for those who are not working. CHAIR BUNDE reminded the committee that the business community was being impacted with increased workers' compensation assessments, as well. TAPE 04-3, SIDE B    CHAIR BUNDE asked where Alaska stands among other states in terms of qualification for benefits. REPRESENTATIVE ANDERSON deferred to the commissioner. COMMISSIONER GREG O'CLARAY, Department of Labor and Workforce Development, said Governor Murkowski recently launched his Alaska hire program that pressures employers to meet and exceed the 90 percent Alaskan hire rule and the importance of the unemployment benefits are often overlooked. He further apprised the committee that: Over $150 million went on the street in unemployment benefits that stayed within Alaska's boundaries. That kept skilled workers here that could afford to remain in Alaska at those rates. I think it's important to remember we haven't had an increase in several years and this particular bill does push out the negative impact or the rate increases some two years from the effective date of the new benefits.... CHAIR BUNDE asked if it was possible for someone to draw Alaska unemployment benefits in another state. COMMISSIONER O'CLARAY deferred to Bill Kramer, Chief, Unemployment Insurance Program. MR. BILL KRAMER, Chief, Unemployment Insurance Program, replied that Alaska is part of the National Interstate Benefit Agreement. He explained that a client who has an unemployment claim based on wages he earned while working in Alaska may move about the country and continue to draw benefits based on wages he earned while he was in Alaska. CHAIR BUNDE asked if he knew how many people do that. MR. KRAMER replied that about 17 percent of the benefits annually go to interstate clients. CHAIR BUNDE asked where Alaska ranked among other states for eligibility for the unemployment insurance program. MR. KRAMER replied that the department tracks the recipient rate and that Alaska ranks within the top 20 percent. SENATOR SEEKINS asked if someone files for unemployment in a state other than Alaska, are they paid at the Alaska rate. MR. KRAMER replied that claims are based on Alaska's unemployment insurance law and an individual would be paid based on the wages earned while in Alaska. CHAIR BUNDE commented: "So, it logically follows that if we're th 47, they might want to move to someplace that was a little higher on the scale than that." SENATOR SEEKINS asked the commissioner if the zero fiscal note is still accurate. COMMISSIONER O'CLARAY replied that the fiscal note is still zero. He added that the State of Washington ranks second in the United States for its maximum weekly benefit. What usually occurs when an Alaskan worker in the construction trades, as an example, moved or relocated in the Washington area, they would choose to return to work in order to get at this [Washington state's] benefit rather than ours. That's the concern that I have in terms of the construction workers - is that we are losing valuable trained workforce - that end up staying south when our construction season starts. And so, it's going to lead to a shortage at some point among our trained journeymen. We're already looking at a 20 percent replacement factor in our journeymen construction workers over the next five years.... SENATOR SEEKINS sought to clarify whether the change in rate would have a fiscal effect on employees of the State of Alaska. COMMISSIONER O'CLARAY replied that was correct, but the rate increase would happen in 2006. CHAIR BUNDE added that employers would feel the full impact in 2010 and that employees would be impacted with a 0.4 percent increase. COMMISSIONER O'CLARAY replied that was correct, but 0.4 percent is not a major increase. SENATOR SEEKINS said the state would be impacted fiscally in 2006. He explained that in the previous session this bill had a significant fiscal note and now the fiscal note for the same bill is zero. He pondered: In my mind, I was just trying to figure out, if the State of Alaska were anticipating no one from state employment drawing unemployment, then I understand that it could have a zero fiscal impact. I'm not trying to be argumentative, but just trying to qualify it. I see zeros across the board all the way through 2009, but yet I see an increase in the rate. Is the State of Alaska exempt from that rate increase or does the state participate in that rate increase and, therefore, result in a fiscal note? That's the only thing I am trying to determine. MR. KRAMER replied that Senator Seekins' thinking is accurate. The State of Alaska pays dollar for dollar for any benefits that are paid out on their former employees' behalf. So, starting in, depending on when this bill is effective, if it's effective next January 2005, as the department pays out unemployment benefits to individuals whose claims are based on their wages from the State of Alaska, the State of Alaska will receive a bill - dollar for dollar - for any benefits that we pay out. So, there will be some increase in the cost of their benefits, because we will be paying out a higher benefit amount for them. SENATOR SEEKINS wondered if the fiscal note should be revised for accuracy and clarity. CHAIR BUNDE noted that the bill's sponsor was taking note of that question. He asked the next person to testify, Don Etheridge. MR. DON ETHERIDGE, Alaska Federal of Labor - Congress of Industrial Organizations (AFL-CIO), supported HB 305 saying: This is our third year trying to get something moved through to help the unemployed of our state to be able to remain here. He related how a laborer who just transferred to Alaska from Washington State was getting ready to move back there because he can survive much better on Washington unemployment payments when he is out of work. "Half my list is talking about moving to Washington and starting to go to work, now." MR. ETHERIDGE urged the committee to move an immediate effective date rather than January 2005, but said he could live with HB 305 the way it is if it is allowed to move out of committee now. SENATOR SEEKINS asked Mr. Etheridge to comment on the huge disparity in the construction trades' wages in the State of Alaska versus the State of Washington, because: At one time, the incentive was for people to remain in the workforce because of the disproportionately higher wage rate that they received up here. Is that still there? MR. ETHERIDGE replied that wages are not as disproportionate as they used to be and some areas of the country have wages that are higher than Alaska's. He reiterated that: We are comparable with the state of Washington on most of our construction trades.... There is not a big incentive for them to stay here anymore when they can go down there and make almost as much an hour on the paycheck and benefits and then draw a lot more on unemployment when they aren't working. He pointed out that tax rates are the major difference. MS. PAM LABOLLE, President, Alaska State Chamber of Commerce, said qualifications and benefits of the unemployment insurance program have historically been confusing. Few states provide a benefit for dependents and Alaska does. Nearly half of the claims in Alaska include a dependent benefit and the extra $72 per week puts Alaska in the middle of the pack; the increase would put Alaska in the top 10 percent. Further, she said the increase would cost employers $8 million. MS. LABOLLE said in the past the Chamber of Commerce has supported the first year increase and half of the second increase in the past. She painted the employers' big picture by pointing out that the minimum wage increased last year and a significant workers' compensation increase started just this month, an average increase of 21 percent. MS. LABOLLE agreed that the Department of Labor would have a zero fiscal note, because it just administers the program, but felt strongly that the state [as an employer] should provide a fiscal note. She informed the committee that Washington State is overhauling its [unemployment] tax structure because companies, like Boeing, are leaving in part or considering leaving totally. Alaska, on the other hand, is trying to create a business friendly climate. MS. LABOLLE stated that the unemployment insurance program was created for people who become unemployed through no fault of their own. Forty-six states provide for a complete denial of benefits for the duration of a claimant's unemployment until he gets another job, earns a certain level of wages and applies again. Of the other four states, Alaska's policy is the most liberal. SENATOR SEEKINS asked her to briefly comment on last year's task force on this issue. MS. LABOLLE responded that the Alaska State Chamber of Commerce was asked to join a working group last year, but because of various scheduling problems, didn't make any of the three meetings. It was not because of unwillingness to attend. SENATOR FRENCH asked if other states have a separate dependent provision like Alaska's. MS. LABOLLE replied that Alaska pays $24 per dependent child up to three children and is one of twelve states that do that. About 44 percent of claimants in 1999 or 2000 received dependent benefits. SENATOR FRENCH commented that he had just entertained his 15- year old son over the weekend in Juneau and, "Twenty-four dollars would barely get you through the first pizza party." CHAIR BUNDE set HB 305 aside and encouraged the sponsor to consider the enforcement issues and to try to find middle ground between labor and the chamber.