Legislature(1995 - 1996)

04/26/1996 01:50 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                 
  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  originally enacted as  a pilot  program to provide  training                 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                 
  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                      
       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                 
  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                 
  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.                               
  stressed  that  the identification  of  appropriate training                 
  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                 

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