Call to Order and Roll Call
The 3rd meeting of the Interim Joint Committee on Labor and Industry was held on Tuesday, September 14, 2010, at 2:30 PM, at Kentucky Dam Village State Resort Park. Representative Charlie Hoffman, Vice-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senators Julian M. Carroll, Denise Harper Angel, and Robin L. Webb; Representatives John A. Arnold Jr., Will Coursey, C. B. Embry Jr., Bill Farmer, Joni L. Jenkins, Adam Koenig, Charles Miller, Terry Mills, Tom Riner and Charles Siler.
Guests: Joe Meyer, Secretary, Education and Workforce Development Cabinet (EWDC); Beth Brinly, Commissioner, EWDC; William Monterosso, Executive Director, Office of Employment and Training, Department of Workforce Investment; and Allen Larson, Director of Unemployment Insurance, Office of Employment and Training.
LRC Staff: Linda Bussell, Carla Montgomery and Betsy Bailey
Representative Charlie Hoffman, vice-chair, presided over the meeting. Co-chairs Senator Forgy-Kerr and Representative Rick Nelson were not present because of scheduling conflicts.
Update/Report on Unemployment Insurance and Implementation of 2010 SS HB 5
Secretary Meyer introduced three new agency officials: Beth Brinley, Commissioner of the Department for Workforce Investment; Bill Monterosso, Executive Director of the Office of Employment and Training; and Allen Larsen, Director of the Division of Unemployment Insurance.
Reporting on the unemployment situation, Secretary Meyer said the unemployment rate for July was 9.9 percent, down from 10.9 percent in February of this year. The reduced unemployment rate resulted from discouraged workers dropping out of the workforce rather than an improvement in the job situation. From July 2009 through July 2010, the number of unemployed workers decreased by 22,948 while the number of those employed increased by only 667. As of July, the number of unemployed workers was 203,299 and as of August, the number of workers receiving benefits was 111,398. Approximately 55 percent of the unemployed are actually receiving benefits. Although workers could potentially receive benefits for a maximum of ninety-nine weeks because of federal extensions of benefits, the actual average duration that an unemployed worker receives benefits is 19.6 weeks. The average duration was 14.1 weeks in 2008 illustrating that workers are remaining unemployed for longer periods. The average weekly payment has decreased from $309 to a current average of $288. The number of initial claims for benefits has declined from a maximum of 88,000 in December of 2008 to 23, 534 in August 2010. These numbers reflect that the loss of jobs has decreased, but the long-term unemployed and slow job growth remains a concern.
The unemployment insurance trust fund that pays benefits to unemployed workers was $91,202,082 as of September 7, 2010, and the amount owed to the federal government was $795 million. A little more than $100 million in additional borrowing is anticipated for the remainder of 2010. Secretary Meyer said this is a reminder that the change in the trust fund has occurred over a ten year period. In 2000, the trust fund had a balance of approximately $700 and currently, the trust fund has a net obligation to the federal government of approximately $630 million.
As example of why HB 5 was necessary, Secretary Meyer reported that as of August 31, total unemployment benefits paid was $1.27 billion. For calendar year 2009, total unemployment benefits paid was $1.83 billion. Most of the benefits paid so far this year have been funded by the federal government rather than from the state trust fund, indicating that the long term unemployed workers, those unemployed for longer than twenty-six weeks, are receiving their benefits from federal funds. As of August 31, Kentucky has received $1.48 billion in federal extension and stimulus benefits for the unemployment insurance program.
Reporting on the implementation of HB 5, Secretary Meyer said those changes that became effective on August 28 were: changes to the tax rate schedule triggers; revision of the calculation dates for employer rate notices; recovery of subsidized costs from reimbursing employers; and changes relating to the increase in the maximum weekly benefit amount.
The provisions of HB 5 that take effect on January 1, 2012 are the increase in the taxable wage base; imposition of a one-week waiting period; and the reduction in the wage replacement rate used to calculate a worker’s weekly benefit amount.
HB 5 required the agency to implement certain procedural changes before January 1, 2012. The changes are scheduled for implementation beginning February 2011 and continuing through June 2011, and include: revisions in the procedure for notifying employers that benefit claims have been filed against them; increasing the time period from ten days to fifteen days that employers are permitted to protest those claims; procedures relating to random work search audits; and changes relating to the appeals process.
In addition, Secretary Meyer reviewed other procedural and policy update initiatives being undertaken by the agency including: informing the public about fraud detection; information sharing among state agencies to improve compliance and enforcement of the unemployment insurance law and to reduce employee misclassification; reviewing forms and publications to facilitate better access to decisions and rulings on unemployment insurance issues; resuming training programs for employers about the unemployment insurance process; informing employers about their rights to make voluntary contributions; and enhancing re-employment efforts of the agency.
Other efforts being undertaken by the agency include implementing direct deposit of unemployment benefit checks; promulgation of an administrative regulation to permit benefit recipients to opt in to state income tax withholding; selecting a better forecasting tool for unemployment projections; improving customer service; and consideration of options to pay interest on the federal loans to the state.
Responding to questions from Representative Farmer, Representative Hoffman, Representative Miller and Senator Webb, Secretary Meyer stated that benefit recipients would have the option of having state income taxes withheld from unemployment benefit payments, no legislative changes to HB 5 will be recommended, federally funded time-limited employees are eligible to receive benefits when temporary employment ceases; and discussions have begun with employers to explore options for repayment of interest due on federal loans because federal law prohibits payment of the interest from the unemployment insurance trust fund and the penalty and interest account does not have sufficient funds to pay the interest.
Representative Hoffman informed members that the October meeting would be held in Lexington and members would be notified of the time and location of the meeting.
The meeting adjourned.