Council Members Present:
Labor: Phil Neuenfeldt, Red Platz, Robert Lyons
Management: James Buchen, Alfred Peck, Earl Gustafson, Robert Oyler, Daniel Petersen
Chair: Gregory Frigo
Department Staff Present: Bruce Hagen, Al Jaloviar, Richard Tillema, Michelle Kho, Thomas Smith, Carol Laudenbach, Sue Lowry, Peter Goertz, Brian Bradley, Teresa Wojick, Frances Healy, Tim Haering, Chris Marschman and Chris Wolle of Secretary?s Office
Others present: Sen. Bob Jauch, Ed Lump of Wisconsin Restaurant
Association, John Metcalf of WMC, Jason Rostan of Rep. Hundertmark?s Office,
Jim Pflasterer of LIRC, Joel Dresang of Milwaukee Journal Sentinel
1:15 -- Frigo called the meeting to order and introduced Hagen?s presentation on a temporary emergency UI program for Wisconsin as recommended required by SB 303 (2001 Wis. Act 36). Hagen explained the dual mandates of the bill ? implement the federal EB plan ( if one passes before Jan. 1, 2002) or make recommendations to the Legislature by Jan. 31, 2002 for a state EB plan. He stated that Congress is scheduled to take up their EB plan when they return Jan. 23, but there is no guarantee of passage, so the Council must make recommendations to the Legislature.
Hagen discussed the potential $4.3 billion Reed Act distribution expected some time this Fall, of which Wisconsin is scheduled to receive $90 million, which could be used to defray the cost of any Wisconsin program the Council might approve. Hagen also noted that Congress could elect to delay, redirect or refuse the distribution, at their discretion.
Hagen projected 120% increase in UI caseload for 2002, projected 16-week Wisconsin Supplemental Benefits (WSB) would trigger on the week of Feb 2, 2002, regardless of Council action, would trigger off the week of May 25, then on again the week of Dec. 11.
Hagen said DWD does not recommend WSB as an extended benefit option because it excludes about half the people extended benefits are intended to help ? the lower wage recipients. Gustafson asked why. Hagen explained that the maximum UI benefit of 40% of base-period wages is still effective under WSB.
Hagen presented the Council with 5 options: no action, waiting for WSB, setting lower on trigger for WSB, pressing our Congressional delegation for federal EB action or recommending a special EB program. Hagen suggested he, Sec. Reinert, labor and management Council chairs could go to Washington, D.C. to meet with our Congressional delegation.
Hagen said the Administration is recommending a special 8-week Wisconsin program, Temporary Supplemental Benefits (TSB), to begin March 4, 2002 and end Dec. 28, 2002. Claimants would be eligible if they exhausted regular UI benefits on or after March 11, 2001 (widely regarded to be the start of the national recession). Hagen justified 8-week program by noting 4 states have 8-week supplemental benefits programs and it would be less costly to the trust fund ? about $109 million.
Hagen gave a trust fund balance projection, showing declining balances and changes to higher tax schedules predicted to occur by 2003. Hagen noted the state has been on lowest tax schedule, Schedule D, for ten years, but that higher-than-expected benefit payouts show a schedule changing trust fund balance could be reached by the following year.
Buchen asked for clarification. Hagen said TSB could be mostly offset by expected Oct. 1 Reed Act distribution, which could also delay the 2003 schedule change.
Tillema discussed that he uses same projection tools as Departments of Administration and Revenue. Oyler asked Tillema about the projected end to the recession. Tillema said 2002.
Hagen noted declining trust fund balances would end in 2004 and begin recovery and stated that 10 states? UI trust funds are near insolvency, which boosts the need for Congressional action.
Hagen concluded the cost for TSB would be about $109 million and would cover roughly 90,000 people. Peck asked some more hypothetical questions. Hagen, Peck and Buchen discussed the solvency and balancing accounts.
Lyons asked about the Department?s proposed sunset date. Hagen noted Dec. 28 is the end of the benefit year and the recession is projected to be over. Buchen urged consideration of TSB?s cost and its effect on the economy. He indicated that a sunset date lends some certainty to employers looking for a stable economy.
Neuenfeldt said these are uncertain times, thanked Hagen for his thoughtful presentation, thanked Sen. Jauch and Rep. Hundertmark for their help passing SB 303 and their vision in pursuing a benefit extension, noted the Jauch letter to the Council. He noted that Congress is considering a 13-week benefit extension, urged the Council to look on the human side of the equation and recommend 13-week benefit extension, and assured council it would not over-tax the trust fund.
Neuenfeldt also expressed irritation at Congressional inaction, suggested a letter from the Council to state members of Congress. He noted that benefit exhaustees are not finding jobs, still have mortgages and families to support.
Oyler asked about the cost increase for 13 weeks, if it was just proportional increase from 8 weeks. Tillema said the increase is not proportional.
Buchen suggested shortening the 26-week maximum regular UI benefits to pay for longer extended benefits. Neuenfeldt asked to see the cost difference between 8 and 13 weeks.
Platz asked when the higher tax rate would kick in. Hagen noted the expected Reed Act funds could delay a schedule change/tax rate increase, but schedule change by 2004 is inevitable.
Frigo introduced Sen. Jauch. Jauch thanked the Council for their help passing his bill. He explained the unusually high unemployment in his northern district, expressed sympathies with small businesses, since his district?s economy is largely small businesses.
Jauch pitched a 13-week extension as a moral obligation, to maintain Wisconsin?s leadership among states and to encourage congressional action, where high-income tax cuts are replacing help for average workers. He argued that even if the recession ends at year?s end, jobs would not return immediately, added he is not disappointed with 8 weeks, but 13 weeks would get recipients closer to when their jobs would return. Jauch recalled the early 80?s UI trust fund crisis, expressed great pride in his vote to borrow federal funds to fill the $750 million deficit. He further argued that 13 weeks was morally right, economically sensible and would aid economic recovery.
Gustafson asked how federal action would affect WSB or other benefit extension. Hagen noted any state extension would not be federally reimbursable, but he expected Reed Act funds would cover most of the cost. Hagen added that Department-recommended TSB would be a non-charge to employers? UI accounts, but WSB would be charged to employers.
Peck asked for clarification on why so WSB would exclude so many people. Lowry explained the unique economic conditions when WSB was created, when maximum benefit period dropped from 34 to 26 weeks, and how it is no longer relevant, and further explained the 40% of maximum benefit limitation that would disqualify many low wage earners from claiming benefit extensions.
Frigo suggested fixing WSB in the next UIAC bill. Buchen noted the state has yet to re-experience the conditions which led to WSB and said Reed Act funds would cover most of TSB. Frigo and Hagen reminded the Council of the uncertainties of Reed Act funds disposition. Peck added that Reed Act funds are excess UI taxes.
Hagen and Frigo passed around letters from the Council to the state Congressional delegation for Council signatures. Gustafson noted the cost increase between 8 and 13 weeks is not an intuitive calculation. Neuenfeldt noted Gov. McCallum had suggest 8 weeks at a minimum.
Buchen moved to go to closed caucus, Platz seconded. Frigo announced the reason for the closed caucus and the authority pursuant to state statute ? 19.85(1)(ee). Buchen, Petersen, Gustafson, Oyler, Peck, Neuenfeldt, Platz and Lyons approved closed caucus to discuss a Council proposal, to return at 3 PM.
3:15 ? Frigo reconvened the council. He noted that the 2001 UIAC bill had been sent to the US DOL, who took issue with the Social Security offset language and suggested a no-substantive, one-sentence change, which Frigo vowed would be included in the next bill, since it has no administrative bearing on the provision.
Buchen offered the Council?s agreed-to plan:
Neuenfeldt noted labor agreed to 8-week TSB to give the plan a better chance to pass the Legislature and out of concern for the health of the trust fund, noted it is still a $100 million benefit.
Gustafson suggested language to prevent overlap with any federal EB program, inquired if TSB benefits could be made state income tax exempt. . Frigo, Neuenfeldt noted this would create a GPR state budget expense, not likely to pass considering the current budget deficit, and probably beyond the Council?s purview to recommend. Jauch agreed with the last point.
Peck asked about TSB interplay with potential federal EB start date. Buchen noted the bill language should clarify that if the federal EB is more generous than TSB, TSB would be totally suspended, but if the federal EB is less generous than TSB, TSB would make up the difference. Platz agreed such language should be included.
Peck moved to approve the Council plan, Neuenfeldt seconded. Buchen, Petersen, Gustafson, Oyler, Peck, Neuenfeldt, Platz and Lyons approved the TSB.
Frigo said the Department would begin drafting the bill, an informal vote could be taken once the bill is completed and reviewed by members. Adjourned.
END OF MEETING