SB 170-UNEMPLOYMENT AMENDMENTS: FED STIMULUS  1:13:09 PM CHAIR PASKVAN announced the consideration of SB 170. SENATOR DAVIS joined the committee. SENATOR ELLIS, sponsor of SB 170, thanked the Alaska State Chamber of Commerce and the National Federation of Independent Business (NFIB) for their work on making this bill as beneficial as possible. He explained that the bill represents a small change in the UI eligibility standards in the State of Alaska even though the state has modernized its UI system already. This is one minor change that would bring great benefits to some unemployed people and has no strings attached. He explained that current eligibility is based on meeting minimum earnings in the first four of the five previously completed quarters. SB 170 gives workers who do not meet that qualification the option of recalculating using their earnings from the last four completed quarters. This would benefit about 1,300 people who would otherwise become eligible for UI payments three months later by eliminating the three-month lag time. If this policy had been in place in 2008 it would have provided $8 million in benefits. The really good news, too, is that the federal stimulus dollars fully fund this minor change bringing in $17 million for job training as well as enhancing the UI trust fund. If some money is deposited in the UI trust fund, there would be no impact to business taxes. That is why the NFIB and the State Chamber think this is a good opportunity. The Department of Labor and Workforce Development (DOLWD) and Representative Hawker's office are taking the lead on the exact amount. The department has not taken a position on the bill, but has been very helpful and professional in representing the Palin administration. Representative Hawker thinks between $3 million and $5 million needs to go into the UI trust fund that currently is more than solvent with a $350 million balance. 1:17:28 PM He said that these are one-time dollars and that Alaska is already experiencing the highest unemployment in a generation; it may feel the effects of the national and world-wide recession even more later this year. Alaska is also preparing for the largest infrastructure project in U.S. history with the gasline. There is a perfect confluence of events that gives Alaska a perfect opportunity to use federal dollars allocated to Alaska for a targeted and timely expansion of job training. This is a reasonable act to take and has a net gain on two or three levels. He said this bill comes out of the intent of the legislative leaders of both bodies and both parties to closely examine all available stimulus dollars and accept only those that make sense for Alaska in the long term. 1:19:04 PM MAX HENSLEY, staff to Senator Ellis, said the bill is one section; it gives unemployed workers the option if they do not qualify for unemployment insurance based on their earnings to recalculate them using the most recent four completed calendar quarters rather than the first four quarters of their last five. It takes effect on January 1, 2010. He informed them that the DOLWD generally calculates unemployment insurance benefits on a calendar year rather than a fiscal year basis. He said a number of states are concerned that the unemployment insurance modernization, which actually totals about $7 billion in incentive money from the federal stimulus package, would require significant expansions to eligibility requirements, but the federal stimulus makes the pot of money that is allocated to each state dependent on two sets of criteria. The first third of the money is available to states that offer the alternative base period, which Alaska currently does not and SB 170 will provide. The second two-thirds of the stimulus money is based on a state offering UI benefits to unemployed workers who are members of at least two of the following four categories: part time workers, workers who are enrolled in training programs, workers who leave their jobs for compelling family reasons and additional benefits for workers with dependents. 1:21:15 PM Alaska already meets the final two categories; if we make the change to become eligible for the initial one-third of the money, we will get the full pot of money without any further changes. The reason this is a big issue in other states is that they would have to make all the changes at once and those could be substantial for some. 1:21:50 PM MR. HENSLEY said another concern is that usually an expansion of benefits expands employer/employee contributions to the trust fund, but Alaska's UI trust fund is one of the healthiest in the nation with a balance of about $350 million in 2008. The additional monies in the stimulus package are more than enough to cover this small addition in liability. 1:22:24 PM A third major question that people have asked is whether this change would expose the state to a permanent and ongoing liability. It has been found that nothing in the stimulus provides that states can't change their laws back at some point in the future, but it can't be explicitly temporary or sunsetted. A letter from the federal Department of Labor certified that there are "no claw back provisions." 1:23:04 PM The additional money beyond what is needed to shore up the UI trust fund could be used for increased administration and job training, although the department feels it doesn't need to increase administration. He noted also that this is a one-time grant, and after the money goes into the UI trust fund it can be appropriated by the state without an end date, unlike many other stimulus funds which must be spent over the next year or two. The state could choose to space this money out more widely, and no state match is required. MR. HENSLEY said the funds have already been appropriated by the federal government and funds we do not accept will be sent to another state to either benefit their job training or their unemployed workers. 1:24:59 PM SENATOR THOMAS asked him to review the criteria again on what would be new. MR. HENSLEY said there are two pots of money within Alaska's portion of the UI modernization incentive. The first third is contingent on the acceptance of the alternative base period, which it outlined in this bill. The second two-thirds is contingent on the state offering UI benefits to at least two of the four categories: part time workers, extended benefits to workers who are enrolled in training programs, workers who leave their jobs for compelling personal reasons, and the expanded benefits for workers who have dependents. Alaska meets the final two criteria and would not need to change its statutes to receive the second two-thirds of the money. However we cannot receive the second two-thirds unless we receive the first third. SENATOR THOMAS asked if the department would testify or be available for questions. 1:27:45 PM PAULA SCAVARA, Special Assistant/Legislative Liaison to the Department of Transportation and Public Facilities (DOTPF), said she brought a couple of department people to answer questions, Tom Nelson and James Wilson. JAMES WILSON, Economist, Research and Analysis Section, Department of Labor and Workforce Development (DOLWD), introduced himself and said he was available to answer questions. 1:29:53 PM SENATOR BUNDE asked why the department hadn't done this already if it's such a good idea, and "before we were bribed by this money." He was concerned that if we make this change the extra $2 million would likely be an ongoing cost, and after the stimulus money goes away, that would be a continuing impact on the program. TOM NELSON, Director, Division of Employment Security, Department of Labor and Workforce Development (DOLWD), answered that they calculated an actual number of 1,293 individuals that otherwise would have been eligible for benefits in 2008. Of the $1.9 million impact to the trust fund, 26 percent is borne by the actual worker. If approximately $3 million would be left in the trust fund, the trust fund solvency factor would cover at least the first year of the costs in the years outgoing. 1:31:37 PM SENATOR BUNDE asked about putting a sunset on this. MR. NELSON replied that 18 states already have this program before the stimulus package came out, and some of them had a sunset provision. The federal guidance is that they understand the ability of state legislatures to change laws after this is over with and they only require a certification that the states are acting on good faith. SENATOR BUNDE commented that the feds might not understand the politics behind trying to change unemployment benefits. 1:32:42 PM SENATOR BUNDE remarked that one of the bones of contention in changing UI in Alaska has always been that workers who are fired for cause can claim UI insurance, and this doesn't change that. MR. NELSON replied that is correct, but he added that they go through a six-week waiting period. 1:33:24 PM SENATOR THOMAS asked the department's position. MS. SCAVARA replied the department and the administration is neutral. SENATOR THOMAS asked in that case if the attached zero fiscal note goes out to only 2015 or to a point beyond that when the federal money is gone. 1:34:15 PM MR. NELSON explained that the fiscal note is zero because regardless of how many claims they process throughout a year, the workload actually dictates what the federal government reimburses back to the state. He couldn't speculate on why the fiscal note only goes out to 2015. MS. SCAVARA added that the form goes to 2015, so they just put zeros across. SENATOR THOMAS asked if the department agreed with the explanation from Senator Ellis' staff. 1:35:03 PM MR. NELSON replied yes. 1:35:33 PM SENATOR BUNDE said he is stuck on the idea that calculating eligibility for more than 1,300 people seems like a fairly minor technicality, but he was curious about why the department did not choose to do that in the first place. Would there be an economic impact? MS. SCAVARA responded that UI eligibility would require a statutory change, and she has worked at the department for six years and has not heard of it being brought up. 1:36:39 PM DENNY DEWITT, National Federation of Independent Businesses (NFIB), supported SB 170. They worked hard with the department, legislators, staff and consultants on this issue in the federal arena to unwind all the requirements particularly whether or not the expanded benefits changed the character of the program and what the impact on premiums would be. And they are satisfied that the deposits via the Finance committees will offset the costs quite a ways into the future. In terms of change in the base period and how ongoing benefits are paid, they have been assured that the character of the program will remain intact. He thanked Senator Ellis and his staff for their work and help. 1:39:44 PM CHAIR PASKVAN closed public testimony. He observed that this is the type of bill that deserves the support of this committee and added that the business community supports it. 1:40:15 PM SENATOR THOMAS moved to report SB 170, version E, from committee with individual recommendations and attached fiscal note(s). There were no objections and it was so ordered.