Legislature(1993 - 1994)

04/13/1993 09:30 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  SENATE BILL NO. 162:                                                         
       An Act relating  to the  implementation of the  federal                 
       emergency  unemployment  compensation  program;  making                 
       changes relating to unemployment compensation under the                 
       extended benefits  program and  the supplemental  state                 
       benefits program; and providing for an effective date.                  
  Co-chair  Peace  announced  that  SB   162  was  before  the                 
  committee.  SENATOR TIM KELLY voiced his support of the bill                 
  but asked for clarification in terms  of state dollars.  Co-                 
  chair  Pearce  invited  Jim  Coate,  Unemployment  Insurance                 
  Program Manager, Division of Employment Security, Department                 
  of Labor, and Judy Knight,  Director, Division of Employment                 
  Security, to  join the members at the table and speak to the                 
  JUDY  KNIGHT said that  SB 162  did three  main things.   It                 
  would allow the state to  continue its participation in  the                 
  emergency unemployment compensation  program which  Congress                 
  has  enacted  and  amended  for  the  fourth  time.    Prior                 
  legislation allowed  the department  to participate  in that                 
  program  and  the participation  was  limited to  two years,                 
  ending December 1993.   Currently Congress has  extended the                 
  program  to pay benefits through the middle of January 1994.                 
  Secondly,  the  other  provisions  allow  the state  law  to                 
  conform with federal  law in  the extended benefits  program                 
  (changes made last year by Congress).   The third item is an                 
  optional trigger allowing the department to pay the extended                 
  benefits program when the employment  rate reaches a certain                 
  level.  She explained emergency unemployment compensation is                 
  financed 100 percent by federal revenues.   It is being paid                 
  because of high unemployment throughout the nation.  When an                 
  individual  becomes  unemployed,  they  first  draw  regular                 
  benefits for  16 to 26  weeks, and during  a period  of high                 
  unemployment, they  may be  eligible for  extended benefits.                 
  Since   Congress   passed    the   emergency    unemployment                 
  compensation program, we have bypassed  the extended benefit                 
  program and used the federal program.                                        
  Senator  Kelly  asked which  fund  would pay  those extended                 
  benefits.   Ms.  Knight  said  that in  Alaska,  like  other                 
  states,  there  is  an unemployment  insurance  trust  fund.                 
  Employers and employees  are taxed and  the money goes  into                 
  that fund.   Regular unemployment  benefits are paid  out of                 
  that  fund.   Emergency unemployment  compensation is  drawn                 
  from the U.S. Department of Labor fund.  Senator Kelly asked                 
  if the state fund had a surplus.  Ms. Knight said that there                 
  was  not a  surplus  but a  sufficient  balance to  maintain                 
  solvency.    This balance  was  equal  to 3  percent  of the                 
  state's total wages.   She  explained, in case  of a  severe                 
  recession, employers' taxes  would not have to  be increased                 
  to maintain solvency of the fund.                                            
  JIM  COATE said that  the formula that  determines tax rates                 
  has  what is  called a solvency  adjustment.   That solvency                 
  adjustment is both positive and negative.  As the balance in                 
  the trust fund gets too large, by formula, a negative tax is                 
  applied to  the overall  tax rate,  reducing it.   It is  an                 
  automatic and controlled balance.                                            
  Senator Kelly asked if  SB 162 would pass this  session, how                 
  much federal money  would be distributed  throughout Alaska.                 
  Ms. Knight said that over $100 million had already been paid                 
  out  since the  state  started  the  emergency  unemployment                 
  compensation program.  It is expected that an additional $40                 
  million would be paid out between now and January 1994.  Ms.                 
  Knight  said  that the  state  would save  approximately $20                 
  million  in the  coming  year because  claims would  be paid                 
  under  the  emergency  program  and  not under  the  state's                 
  extended program.  There are other provisions that the state                 
  must pass to coincide with  federal law.  If the state  does                 
  not  pass  these  statutes  to meet  federal  law,  then the                 
  Secretary of Labor, through a hearing process could find the                 
  state  out  of   compliance,  and   the  state  would   lose                 
  administrative funds.  The administrative  funds are all the                 
  federal employment and  training dollars that come  into the                 
  state.  Those funds  come from the U.S. Department  of Labor                 
  for  administrative costs  for  unemployment insurance,  the                 
  employment service and training partnership.                                 
  In answer to Senator Kelly, Mr.  Coate said that the statute                 
  changes in  order to come into federal  compliance would not                 
  cost any state dollars.  However,  the six weeks of benefits                 
  that the state would not be able to pay, if SB 162  does not                 
  pass, would be  a loss of about  $1.5 million to  the state.                 
  The danger is that federal law mandates extended benefits be                 
  paid  through January  15, 1994,  and  state law  would stop                 
  payments in the first part of December 1993.  The compliance                 
  issue with the federal government  could cost the state $25-                 
  30 million in administrative funds that are expected to come                 
  into the state  to pay  for the administrative  part of  the                 
  three programs.                                                              
  Ms. Knight said  that the Labor  and Commerce Committee  had                 
  requested  an  amendment  that  would  repeal  the emergency                 
  compensation  provisions  and  that   was  provided  to  the                 
  committee as amendment 1.                                                    
  Senator Kelly MOVED amendment 1.  No objections being heard,                 
  amendment 1 was ADOPTED.                                                     
  Discussion was had by Mr. Knight and Senator Kelly regarding                 
  additional  costs  to  the  state   regarding  the  extended                 
  Senator  Kerttula  MOVED  for passage  of  CSSB  162(FIN) as                 
  amended from committee with individual recommendations.   No                 
  objections  being  heard,  CSSB   162(FIN)  as  amended  was                 
  REPORTED  OUT  of committee  with a  "do  pass," and  a zero                 
  fiscal note  for the Department  of Labor.   Co-chairs Frank                 
  and  Pearce,  Senators Kelly,  Rieger,  and Kelly  voted "do                 
  pass." Senators Jacko and Sharp were absent from the meeting                 
  and did not sign.                                                            

Document Name Date/Time Subjects