Call to Order and Roll Call
The 2nd meeting of the Interim Joint Committee on Labor and Industry was held on Thursday, July 21, 2011, at 10:00 AM, in Room 131 of the Capitol Annex. Representative Rick G. Nelson, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative Rick G. Nelson, Co-Chair; Senators Jared Carpenter, Julian M. Carroll, Ernie Harris, Tim Shaughnessy, and Jack Westwood; Representatives Will Coursey, C. B. Embry Jr., Bill Farmer, Richard Henderson, Wade Hurt, Joni L. Jenkins, Thomas Kerr, Mary Lou Marzian, Charles Miller, Terry Mills, Mike Nemes, Tanya Pullin, Tom Riner, Jim Stewart III, and Brent Yonts
Guests: Joe Meyer, Secretary, Education and Workforce Development Cabinet; Beth Brinly, Commissioner, Department of Workforce Investment; and Allen Larson, Director, Division of Unemployment Insurance
LRC Staff: Linda Bussell, Adanna Hydes, Carla Montgomery, and Betsy Nickens
Representative Nelson welcomed Representative Pullin as a new member of the committee. Representative Mills moved to approve the minutes of the first meeting of the interim and Representative Pullin seconded. Representative Nelson introduced Secretary Joe Meyer, Education and Workforce Development Cabinet, to present an update from the Cabinet.
Employment and Unemployment in Kentucky
Secretary Meyer introduced Director Allen Larson, Division of Unemployment Insurance, and Commissioner Beth Brinly, Department of Workforce Investment. The unemployment rate in Kentucky is 9.8 percent (May 2011). Secretary Meyer noted decreases in the number receiving unemployment benefits and the number of monthly initial claims. Kentucky leads in job growth when compared to the surrounding states. April 2010 – April 2011, the job growth rate was 1.5 percent with 26,200 new positions hired.
As of June 30, 2011, the trust fund balance was $145,493,972. Kentucky has borrowed and owes to the federal government $948,700,000 for funding the unemployment insurance trust fund.
HB 5 (2010 SS) Unemployment Insurance Reform: Implementation Update
Secretary Meyer presented a list of changes completed within the program, noting efforts made in fraud detection and increasing public awareness. The Education and Workforce Development Cabinet has issued press releases, produced television broadcasts, placed electronic billboards within offices, and created an email hotline for fraud reports. A training program for employers has been established to help employers understand the appeals process. Changes made to the taxable wage base, waiting week, and wage replacement rate, pursuant to 2010 SS HB 5, will take effect January 1, 2012. Regulations have been filed for several procedure and policy updates, including updates in forms and publications.
Secretary Meyer noted several strategies used in enhancing re-employment efforts. Job matching software that is intended to build a resume database and match positions to workers will be unveiled in two parts. The first part was initiated in June for employees; the second part will be available to employers in the fall of 2011. A new unemployment insurance portal is in development that will require applicants for unemployment insurance to apply for employment services at the same time. Applicants will be able to receive automated email notices when positions become available.
Commissioner Brinly explained the re-employment eligibility assessment grant, instituted by the United States Department of Labor. Using job profiling data, individuals most likely to exhaust their unemployment insurance benefits will be identified and notified to come to a one-stop location within two days. If the individual fails to attend orientation with employment services, he or she is flagged for failure to comply with the rules and regulations under which they received their unemployment insurance benefits.
Unemployment Insurance Program Integrity: Federal Requirements and State Implementation
Director Larson discussed the Benefit Audit Reporting Tracking System. The Division of Unemployment Insurance conducts 400 to 500 audits per quarter. The division has entered into information sharing agreements with the Social Security Administration, Internal Revenue Service, Secretary of State, and the Labor Cabinet to determine if claimants are receiving other benefit payments. The division is reviewing the possibility of doing simultaneous audits with the Labor Cabinet. The division is also utilizing the alien verification program to determine if a claimant may be in the United States illegally. Director Larson addressed working closely with the Inspector General evaluating possible overpayments.
The United States Department of Labor awarded approximately $500,000 for the State and Information Data Exchange system for claims process. The goal is to save time and cost, provide more accurate information, and improve program integrity.
Interest on Unemployment Insurance Debt
Secretary Meyer testified to the fact that the state has borrowed $948,700,000 to pay unemployment insurance benefits, and an interest payment is due on September 30, 2011. The stimulus act waived interest through December 31, 2010. The interest that is due is for the period of January 1, 2011 to September 30, 2011. The state cannot use money from the trust fund and has no authority to use other state resources to make the interest payment. There has been no general fund appropriation for any payment of interest. The task force considered this issue, but did not make any recommendations. The cabinet has been working with state business associations to achieve a federal solution to the problem such as a continuation of the waiver of interest, deferral of interest due date, authority to use benefit monies to make a one time payment, or simply a waiver of the penalty provisions. The business associations have been working with their national counterparts to bring attention to this matter. Governor Breshear and other governors through the National Governor’s Association have signed a joint letter asking Congress to consider options on the interest. The cabinet has also been in contact with the state congressional delegation requesting assistance. Several states are in similar situations, some with a much larger debt and interest payment due.
The long term solution is for the cabinet to be granted assessment authority through statute so employers can be assessed for the appropriate share of interest. The cabinet has been working with the business associations on an assessment methodology.
In 1982, when unemployment insurance was last reformed, assessment authority was granted to the cabinet in 1984 by the General Assembly. However, that authority was repealed around 1998.
Workforce Investment Act (WIA) Funding Cuts: Impact on Services to Unemployed
Since 2000, nationally, WIA has withstood a 19 percent cut to adult program funding, a 16 percent cut to dislocated worker programs, and a 34 percent cut to youth programs. The Commonwealth of Kentucky has achieved performance goals with the United States Department of Labor during eight of the eleven years since the program’s inception, which has resulted in incentive grants. In 2011, Kentucky experienced a 12 percent cut to youth programs, a 12 percent cut to adult programs, and a 17 percent cut to dislocated worker programs. The department estimated a $900,000 shortfall in its ability to keep every dislocated worker in their current training program. Through a partnership with the Department of Workforce Investment, the Kentucky Community and Technical College System (KCTCS) will offer a tuition adjustment during the fall semester in order to keep every dislocated worker enrolled. Commissioner Brinly said there are many people on waiting lists for enrollment in various training programs.
Representative Nelson allowed committee members to ask questions. In response to questions from Representative Yonts, Commissioner Brinly informed the committee of the online eligibility review process, which is being tested and will be available in October 2011. The online process will electronically notify applicants of career specific employment opportunities based on the information provided by the applicant. Secretary Meyer said recipients are required to obtain eligibility for employment services within six weeks of unemployment and the department will monitor the applicant’s progress in training and seeking employment through the online system. Secretary Meyer said 61,390 protest claims from employers were filed in 2010. In 70 percent of the cases, the employers’ argument won.
In response to questions from Senator Kerr, Commissioner Brinly explained that state and regional industry partnerships with the Workforce Development Cabinet help to identify critical career pathways which help develop programs within the school systems. A partnership between adult education, KCTCS, and the Workforce Development Cabinet has implemented a program, ABE to Credentials, where a person can attain their GED and a technical certificate at the same time. Eight community colleges will be participating in ABE to Credentials.
In response to Senator Kerr’s question, Secretary Meyer said that repayment of interest was not the focus of the unemployment insurance task force; it was not their intention to get into the details of an assessment system. Secretary Meyer said that during the deliberations of the task force, it was unknown how the federal government would deal with repayment.
Commissioner Brinly said that the Workforce Development Cabinet works with school counselors, one-stop employment locations and adult education programs to inform the public that manufacturing jobs are steadily changing and readily available to those with advanced technical training, in response to questions from Representative Embry. The Office of Career and Technical Education presents “Close the Deal” programs where students can receive technical certifications while receiving their high school diplomas. Commissioner Brinly noted “Operation Preparation,” which will be implemented in August, where the employer community will be utilized as mentors and counselors to eight and tenth graders. Secretary Meyer said 30 percent of high school graduates will receive a college degree.
In response to Representative Farmer, Secretary Meyer said a combination of people who are uncovered, ineligible, whose eligibility has expired, or for other factors are not enrolled in unemployment insurance make up for the discrepancy between the number of people unemployed and those who are receiving unemployment insurance benefits. Secretary Meyer said the total unemployment rate (9.8 percent) is different from the insured unemployment rate (less than 3 percent).
There being no further business the meeting adjourned.