Legislature(1995 - 1996)
04/26/1996 01:50 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 229 "An Act relating to employment contributions and to making the state training and employment program a permanent state program; and providing for an effective date." DWIGHT PERKINS, SPECIAL ASSISTANT, DEPARTMENT OF LABOR testified in support of SB 229. He explained that the legislation extends the life of the State Training and Employment Program (STEP) for an additional two years and raises the maximum weekly benefit amount for unemployment insurance (UI) from $212 to $248. The STEP program was originally enacted as a pilot program to provide training for Alaska workers. It diverts part of the employee share of the unemployment insurance tax to a training fund from which training grants are awarded. Covered employees pay one-tenth of one percent of their taxable wages into the training fund. The program will expire on June 30 of this year without legislative action. Mr. Perkins observed that the bill as originally submitted by the Governor would have made STEP permanent in the same form as the current temporary program, with the exception that the Alaska Human Resource Investment Council would serve as the coordinating entity, in place of the defunct Alaska Job Training Council. The Senate, Community and Regional Affairs Committee made three changes to the bill. First, it provided for a sunset date of June 30, 1998, at which time the efficiency of service delivery and program goals can again be evaluated. Second, it inserted a provision requiring the Alaska Human Resource Investment Council to impose accounting and grant administration standards on all entities and their grantees participating in the program. Third, it imposed a 20 percent cap on administrative overhead. Mr. Perkins noted that in the Senate Labor and Commerce 11 Committee the UI weekly benefit amount provisions in SB 276 were added to the bill, with changes. This was the version passed and transmitted to the House. Mr. Perkins emphasized that except for the above-noted changes, the provisions of the bill follow the original pilot program closely. He maintained that the STEP Program is an integral component of Alaska's job training program and has enabled participants to increase their average quarterly earnings from nine to 12 percent. Since its inception, STEP has trained 4,890 Alaska workers at an average cost of $2,000 per participant. The program is financed entirely by employee payroll contributions with no employer contributions or general fund monies. Mr. Perkins stressed that STEP serves workers who would often be ineligible for employment training assistance through other programs. It offers workers the opportunity to acquire skills by investing in themselves, and helps those workers who have been displaced from their jobs to learn more skills. Nearly 60 percent of those entering the program are receiving unemployment benefits, and over 80 percent of the participants successful complete the training and increase their employment opportunities. Mr. Perkins maintained that as federal training money decreases from year to year, continuing the STEP Program will help Alaskans receive the training they need to respond to the changing needs of business and industry. Mr. Perkins observed that the Governor's original UI benefit increase proposal was introduced as SB 276. It proposed a flexible maximum weekly benefit amount, computed from the wage base, defined by statute as 75 percent of the average annual wage, in effect for the calendar year. The bill was combined with SB 229 in the Labor and Commerce Committee, with the following changes: 1. The benefit cap was set at a maximum of $248 dollars. The flexible schedule was discarded. 2. The respective employer/employee shares of the benefit cost rate were changed from 82/18 to 80/20. 3. The resulting employee tax rate was rounded to the nearest one/hundredth of one percent (from one/tenth of one percent). Mr. Perkins observed that these changes will result in additional costs to the fund over time, but the respective 12 employer and employee shares of those costs will change. Employees will be contributing a full one-fifth of the benefit cost rate, and the employer share will decrease to four-fifths. He noted that the schedule of benefits for unemployment insurance has not been adjusted to increase the maximum weekly benefit amount since 1990. Alaska currently ranks 49th in the nation in unemployment insurance wage replacement, with the average weekly benefit amount only slightly more than 27 percent of the average weekly wage for the state. In terms of the maximum weekly benefit amount, Alaska ranks 35th in the nation, notwithstanding the higher cost of living. Alaska currently has the lowest regular maximum benefit amount of all western states except Arizona. Mr. Perkins stated that this increase will provide a modest improvement in wage replacement, coupled with an increase in the employee share of UI costs. He noted that the employee will share in the increase of costs. The additional cost to the employer is a savings of $15 dollars per employee per year. The additional cost to the employee will be $20 dollars more per year or an additional cost per week of .38 cents. In response to a question by Representative Brown, Mr. Perkins stated that Alaska's rating will not be changed by the legislation. Employees will get a modest increase during times of unemployment. Representative Mulder maintained that there was no effort to try to shift state costs. The effort was to increase the employment benefit. Representative Brown noted that the employer as a whole is contributing less and employees are contributing more. She asserted that the burden is being shifted from the employers to the workers. Mr Perkins emphasized that lower scale individuals will pay less than $20 dollars. RON TORGENSON, DEPARTMENT OF LABOR explained that the current unemployment schedule is bottom heavy. He stated that the benefit is proportional to the burden. He stated that the change will cause the people making less and not benefiting from the increase to pay only pennies a year more. The only people that will be paying $25 dollars a year are the people at the top end of the scale. Representative Martin expressed concern with a lack of jobs for individuals that attend training programs. MARK MICKELSON, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS stressed that the identification of appropriate training 13 only happens when there is an identifiable career or employment goal. He stressed that if there is no evidence of employment money will not be spent on training. Individual involvement in the program varies. The success rate of training entities are taken into account. He estimated a 60 percent employment rate for those that have successfully completed training. Representative Brown MOVED to report CSSB 229 (L&C) out of Committee with individual recommendations and with the accompanying fiscal notes. CSSB 229 (L&C) was reported out of Committee with a "do pass" recommendation and with four fiscal impact notes; two by the Department of Community and Regional Affairs, dated 3/20/96; two by the Department of Labor, dated 3/22/96; and with a zero fiscal note by the Office of the Governor, dated 3/20/96.