The 4th meeting of the Interim Joint Committee on Labor and Industry was held on Wednesday, September 10, 2014, at 10:30 AM (CDT), at Kentucky Dam Village State Resort Park in Gilbertsville, Kentucky. 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 Perry B. Clark, Carroll Gibson, Chris Girdler, Denise Harper Angel, Ernie Harris, Jimmy Higdon, and Dennis Parrett; Representatives Lynn Bechler, Denver Butler, Will Coursey, Jeffery Donohue, C.B. Embry Jr., Dennis Horlander, Joni L. Jenkins, Adam Koenig, Mary Lou Marzian, Charles Miller, Terry Mills, Tom Riner, Jim Stewart III, and Brent Yonts.
Guests: Secretary Larry Roberts, Kentucky Labor Cabinet; Kim Perry, Director, Division of Occupational Safety and Health Education and Training, Kentucky Labor Cabinet; Commissioner of Workforce Investment Beth Brinly, Kentucky Education and Workforce Development Cabinet.
LRC Staff: Carla Montgomery, Matt Ross, Adanna Hydes, and Sasche Allen.
Approval of Minutes
A motion by Representative Koenig and a second by Senator Kerr to approve the minutes of the August 21 meeting carried by voice vote.
Announcement
Secretary Larry Roberts announced that Senator Julian Carroll’s wife passed away. Co-Chair Nelson requested a moment of silence.
Cooperation and Collaboration in Workplace Safety and Apprenticeship
Secretary Larry Roberts welcomed members to the 37th annual Labor Management Conference, whose theme for 2014 is A Blueprint for Success. As a participant, staff, sponsor, or supporter, Secretary Roberts has been involved with the conference for 36 years. Through partnerships with the Cabinet for Economic Development and the Education and Workforce Development Cabinet, the Labor Cabinet is able to promote health and safety programs, apprenticeship initiatives, and positive labor management relations.
Kim Perry, Director of the Division of Occupational Safety and Health (OSH) Education and Training, highlighted some of the Labor Cabinet’s current and upcoming programs, projects, and partnerships. One of the major programs is the 2014 Fall Prevention Stand Down. The Fall Prevention Stand Down campaign’s main goal is to bring awareness to employers and employees about safety in the workplace and, in particular, fall hazards and prevention. Falls are the main cause of death in the construction industry. Out of 774 deaths nationwide that occurred in construction workplaces in 2010, 264 were the result of falling, which is entirely preventable.
The employers that take part in the program include government agencies, professional societies, consumer and labor management interest organizations, and also sub-and independent contractors. The cabinet’s Fall Prevention Stand Down receives aid from the Occupational Safety and Health Administration (OSHA), whose partnerships include the National Institute for Occupational Safety and Health (NIOSH), the Center for Construction Research and Training (CPWR), and the American Society of Safety Engineers (ASSE)
Many sources have been used to promote Fall Prevention Stand Down, including social media, email blasts, and press releases. Flyers were distributed in both English and Spanish that included various statistics, such as 46.8 percent of deaths among Kentucky construction workers from 2007 to the present were the result of a fall. In June 2014, the Labor Cabinet hosted OSH Stand Down events where it showcased the eLearning program module that concentrates on fall prevention to employers and employees. The module is also available online with an English and Spanish version. By hosting these events, the Kentucky OSH was able to reach 480 employees from 25 different employers. The online modules and other online resources available, Stand Up and Be Recognized, reached 7,600 employees from 37 different employers.
Ms. Perry discussed other projects that the Labor Cabinet is involved with through partnerships with various companies. The Construction Partnership Program has allowed the cabinet to facilitate the restoration of the National Corvette Museum with Scott, Murphy & Daniel Building Construction Specialists, the expansion of the Louisville Ford Motor Company Truck Plant with Abel, Aristeo, and Walbridge companies, and the creation of the Louisville Ford Truck Plant Paint Shop with the company Durr. Another partnership is the $90 million project with Gray Construction that will allow Canadian-based Champion Pet Food Kitchen to open—projected in 2016—its first U.S. production company in Kentucky.
Other projects discussed were the collaboration with Skanska USA Inc. and Congleton-Hacker Company for the expansion of Commonwealth Stadium at the University of Kentucky and the agreement with Walsh Construction to complete the Ohio River bridges project. Eastern Kentucky University will have a training-based partnership with the OSHA Training Institute that will offer an undergraduate program for occupational safety and health.
The cabinet is working with the Kentucky Department of Education’s Office of Career and Technical Education (CTE) on the Track Program. The Track Program is an apprenticeship program that aids high school students with their transition into the workforce by offering hands-on training, the Labor Cabinet’s eLearning resource and online modules, and credit that can go towards college. The Labor Cabinet and CTE developed a survey to gather comments and suggestions from teachers and principals to better serve the students who are entering the Track Program. They received constructive feedback.
Secretary Roberts spoke briefly about the partnership agreements that Kim Perry discussed. The partnerships are those of both organized and unorganized companies. Additionally, the cabinet is working with all partners to advocate a safe work environment. He elaborated further on the Track Program. There are several new, improved, and upcoming Track initiatives. Track works with high school juniors and seniors to pinpoint curriculum that can equate with a registered apprenticeship program, giving students opportunities for job placement. Although the apprenticeships are largely in the manufacturing industry, the Labor Cabinet hopes to expand into other areas.
Responding to a question from Representative Miller, Ms. Perry stated that the purpose for the survey was to see what areas were in demand for the students entering the Track Program so that those modules could be offered to them to better serve their areas of interest. By using the feedback that was received, new modules will be developed to better serve future participants in the Track Program.
Unemployment Insurance Trust Fund
Commissioner Beth Brinly, Department of Workforce Investment, Education and Workforce Development Cabinet, reported on the status of the unemployment insurance trust fund and affirmed the progress of repaying the federal unemployment insurance loan. The initial loan balance was $1.1 billion, but the current balance is $339 million due to efforts of the Governor, legislature, and employees. Commissioner Brinly commended the committee for its cooperation with the cabinet that resulted in the strengthening of the unemployment insurance trust fund.
In regards to the amount of benefits paid, there has been a decrease of 19.4 percent from last year, falling from $324.4 million to $260.5 million. From January 2014 to August 2014, covered employers’ contributions have increased 5.1 percent, rising from $459.9 million to $483 million. Initial claims went from 147,302 to 126,349, down 14.2 percent, and the number of weeks that benefits were claimed has been lowered by 14.8 percent. There has been an overwhelming amount of contribution to the surcharge program, with surcharge collections at $24.7 million. The payment of interest on the unemployment insurance loan is scheduled for September 30, 2014, while the quarterly and principle payments to JP Morgan Chase were made August 29, 2014, with both payments amounting to $22.3 million.
Kentucky started 2014 with a federal unemployment balance of $639.8 million; the current balance is $339 million. The goal for the payoff of the unemployment insurance loan is 2015, seven years earlier than originally foreseen, and may help employers save $130 million in 2016. The earlier than anticipated payoff target is due to enhancements in the economy, being responsible by putting all unemployment insurance contributions towards the loan and only borrowing as needed to pay the benefits, and structural improvements that have been made through legislation. The structural changes that were made were due to House Bill 5 in the 2010 Special Session and House Bill 495 in the 2012 Regular Session, which increased the tax bill wage base, lowered wage benefit rates, and applied a waiting week in federal credit reduction.
The unemployment insurance systems are being updated. Out of 61 recommendations from the Business Efficiency and Effectiveness Report, one-third has been completed, a third is in progress, and a third is pending future completion. Due to House Bill 495, the unemployment insurance surcharge of 0.22 percent went into effect in January 2014. Collections from the surcharge were used to make the quarterly and principle payments of the commercial loan to JP Morgan Chase on August 29, 2014, and will also be used to pay interest on the federal unemployment insurance loan scheduled for September 30, 2014. The fifth-year waiver and substitution application was submitted in June 2014 to the U.S. Department of Labor. There were no steps taken that would reduce the solvency of the unemployment insurance trust fund, which would help in the approval of the waiver.
Commissioner Brinly gave an in-depth description of the progression of the unemployment insurance trust fund, stating that in 2009 Kentucky became the sixth borrowing state, which resulted in the formation of the Unemployment Insurance Task Force and passage of House Bill 5. In the same year, Kentucky borrowed $622.5 million but began paying off the loan in 2012 as a result of the law changes, the economy improving, and the federal credit reduction. By 2013, the state began applying contributions on a daily basis towards paying off the loan, which saved over $500,000 in interest payments in 2014. House Bill 495 authorized the commercial loan with JP Morgan Chase to pay the interest. As a result, the surcharge of the state taxable wage base of 0.22 percent went in to effect January of 2014, and thus far amounts to more than $24.7 million. Surcharge collections were used to pay the principle repayment and interest payment to JP Morgan Chase on August 29, 2014, which amounted to $9.2 million, and will be used to pay the interest on the federal loan on September 30, 2014, which will amount to $13.1 million.
Commissioner Brinly reported that, because Kentucky had an unemployment insurance loan balance for a fifth year, there may be a supplementary add-on tax increase on employers called a benefit cost rate (BCR). This add-on tax will collect approximately one percent from employers on the $7,000 federal taxable wage base. For 2014, the total BCR for Kentucky employers is anticipated to be $112 million. Furthermore, the possible fifth year waiver of the add-on could be received by November 10, 2014. She thanked the committee for the actions taken in maintaining the progress of the unemployment insurance trust fund.
Replying to a question from Senator Kerr, Commissioner Brinly said there is a good chance of receiving the add-on waiver because there have not been any judicial decisions or legislative action to negatively affect the unemployment insurance trust fund. It is crucial that, until the federal loan is paid, there should not be any executive, legislative, or judicial decisions that would have a considerable affect on the unemployment insurance trust fund, such as new categories of unemployment insurance recipients or a reversal of the increase of the wage base.
Addressing Senator Kerr’s follow up question, Commissioner Brinly said the estimated BCR for Kentucky employers would be $112 million from an estimated 84,000 employers in the state. She could not address the specific costs per employee.
Responding to Representative Yonts, Commissioner Brinly confirmed that the 0.22 percent surcharge is scheduled to be in effect until 2022. The surcharge was made effective until that time due to 2022 being the original anticipated time of repayment.
Responding to Representative Bechler, Commissioner Brinly verified that the payoff expectancy is August 2015. If the trust fund becomes solvent, the cabinet will request the legislature to terminate the surcharge to employers.
There being no further business, the meeting adjourned at 11:30 a.m.