Unemployment Insurance Advisory Council Meeting Minutes

Thursday, January 29, 2009 – 9:30 A.M.

Dane County Job Center Ballroom
1819 Aberg Avenue
Madison, Wisconsin

Members Present

Management: Dan Petersen, Susan Haine, Ed Lump, and Earl Gustafson

Labor: Phil Neuenfeldt, Dennis Penkalski, Sally Feistel, Anthony Rainey, Patty Yunk

Chair: Daniel LaRocque

Department staff present: Secretary Roberta Gassman, Dick Jones, Hal Bergan, Andrea Reid, Tom McHugh, Troy Sterr, John Zwickey, Lutfi Shahrani, Carla Breber, Tracey Schwalbe, Dick Tillema, Mary Pronschinske.

Others present: Jim Pflasterer (LIRC), Michael Metz (WI Independent Businesses), Bob Andersen (Legal Action of Wisconsin), John Metcalf (WI Manufacturers and Commerce), Larry Smith (UC Management Services).

MINUTES

Mr. LaRocque calls the meeting to order at 9:40 a.m. Mr. LaRocque welcomes Anthony Rainey as the newest member of the Advisory Council, President of Local 469 UAW. Mr. Rainey introduces himself to the Council. He has been with Master Lock for 21 years. He is a tool and die maker by trade and has been involved in union activities for many years.

1. Brief Remarks – DWD Secretary Roberta Gassman and Hal Bergan

Secretary Gassman welcomes Mr. Rainey to the Council. The Council is an important body, especially when our country and state are in difficult economic times. She thanks the Council for their work on unemployment insurance. The last bill was the result of hard work and was based on the best data we had at the time. We did not know that 2008 would see a crash in our national economy after September. The fourth quarter of 2008 was the most serious in terms of unemployment compared to other quarters in the history of the state.

She will address comments to the Council regarding recent UI data, the efforts made by department staff working long hours and weekends to meet the significant increased customer demand, the UI Trust Fund in the weeks ahead, the recent legislation to allow claimants to be eligible for federal unemployment insurance benefits and protect the fund at the same time, the Secretary’s reports to the Legislature on the activities of the Council and Financial Outlook Report, and the Recovery and Reinvestment Act in Congress.

The unemployment rate increased significantly at the end of 2008. The October rate was 4.4%, growing in November to 5.4%, and 5.8% in December. The increase from October to December was dramatic. The December report of the Department of Revenue projected that unemployment by the end of 2009 will be at 8% in Wisconsin. That is very significant. There are businesses announcing layoffs and job losses every day, e.g., Sprint, Starbucks, Caterpillar, etc., laying off thousands of workers. There are also people not showing up in the statistics who are having their hours or days of work cut. The department runs the dislocated worker program which has increased dramatically. In 2007, the number of notices under the mass layoff law was 87 (affecting 7,448 workers), the number in 2008 was 148 (affecting 17,633 workers), a 70% increase. This is reflected in a 59% increase in new claims year-to-date over the previous year, or 23,700+ more claims. Continued claims are higher also. If we do the math on the DOR employment projections with an 8% unemployment rate, we could see a 72% increase over last year. This is for regular initial and continued claims and does not include extended benefits. This gives you a sense of the workload and the effect on the fund.

You may have seen press accounts of people on hold for 45 minutes or that cannot get through the phone lines. We are not in the situation of some states where their UI systems have collapsed due to the overload of claims. We are responding and checks are going out the door, but the numbers have definitely stressed the system. We have taken many aggressive steps to respond to this. We have filled many positions in UI to handle claims. Vacant permanent positions have been filled. We also added 83 new LTE positions which were approved very quickly by DOA. Half of those 83 positions have been hired; some of them are retired employees we asked to come back because they do not need as much training. We are in the process of filling the other positions. We also reassigned staff to handle claims. We have asked employees in other divisions who have had some experience in UI to help with claims and they are working overtime in addition to their regular jobs to provide some relief in UI. They are working nights and Saturdays. We have extended the hours to get through on the phone lines and have looked at the process for flexibility. We are continuing to attack this. If DOR’s projections are right, the hard times are not behind us; 2009 will be a very challenging year.

This is affecting other areas of the department. We are filling Job Service positions in job centers, and debt counselors. They are also stressed by the workload. We are working with the Technical College Board to offer computing workshops for workers who do not have computer skills. We are finding unused state computers and moving them to job centers. We are working on many fronts.

The Council took action in the last bill to help the fund based on the information we had at the time. The Trust Fund now has about $70 million. We do anticipate borrowing from the federal government in February to get us through a few months. A handful of states are borrowing already. Some in Congress want to see interest not charged on money borrowed by states. We would welcome that. The fund is stressed in these extraordinary times. I made a policy recommendation that we need to act and look at both sides of the ledger. We will need to examine with great care the expenditures side. We will need to take the steps we can to strengthen the long-term solvency of the fund. I would like to see all unemployed workers register with www.jobcenterofwisconsin.com. Many employers are still hiring. If we have them register, we can get employers to connect with them. I also ask if it is the time to have a national discussion about the federal government taking over the unemployment system if there is greater stability that could be provided.

The action taken this week was to ensure our workers will be eligible for the federal benefits and that federal dollars will be used to pay the benefits rather than our state fund. That will help the fund by about $40 million.

President Obama has put forth the Recovery and Reinvestment Act. Congressman Obey played a lead role on this. The House passed the bill yesterday. The Senate version is similar. For UI, there is money for extended benefits and to increase benefits by $25 per week. There is money for training. The bill also will put many people to work on public works projects that will take them off unemployment and get our economy going. The Governor has set up a high level inter-departmental team to work on this. Every department has lent staff.

You are on the Council during a time when our state and country could not need you more. It will not be easy as you work on your next bill. Thank you.

Question (Neuenfeldt): What is the connection of laid off workers and their skills to the www.jobcenterofwisconsin.com? Isn’t this happening already?

Secretary Gassman responds that it is happening, but not every single person that is unemployed is registered with the site. When employers go on the site to look for workers, they are not necessarily seeing everyone that is out there.

Comment (Neuenfeldt): We have been analyzing the Recovery Act and it is apparent to us that the money that is coming back to the state is about $565-575 million. Organized labor has done some analysis of their industries and knows there are some skills we need. What we need to start is some kind of dialogue with industry so they have a sense of what projects are going to go through so we can figure out what kind of people are needed and strategize how to work people in. We have to establish some dialogue with the private sector to get the people and industry together. We want to make sure that the dollars coming in are for jobs that lead to careers. What we do not want to see are jobs for energy conservation projects and then people go back on unemployment. So we need discussion with industry and labor; the sooner we can do this the better. If the Secretary can carry that message, that would be helpful.

The second thing that has become apparent is that in addition to the dollars coming in through the stimulus bill, there are resources coming to the state through other acts. My sense is there is not a game plan how to coordinate these job opportunities and that needs to happen.

There will also be a larger amount of discretionary funds. We need a consortium to organize to get those funds. We have done some analyses on this. Our fear is that there is a 120-day window on the funds and everything will be “use it or lose it.”

Secretary Gassman responds that the department is on the same page on this. Some of this is fast action and some is going to take a while longer. The point of the Governor’s office on this is to move quickly. Labor and management will need to be at the table. We will need to map out what projects, what types of workers will be needed, how many, what can we do to be ready, and who is in the pipeline right now. We need to know who is out there that we could call back right away, or could be ready with a little training. We do not want employers to bring in all workers from outside Wisconsin.

Comment (Neuenfeldt): Every once in a while that may happen. With some projects, we work with the employers to ensure that they give Wisconsin workers priority. We would like to capture some of the work in Wisconsin for some of the green jobs, and need to focus on manufacturing here. The Manufacturers Extension Project (MEP) can be a player in this, along with the technical colleges.

Secretary Gassman responds that there is a lot of interest in this in Wisconsin.

Comment (Haine): MEP hired former technical college workers. There is tension there, but it does not need to be. MEP helps manufacturers, but questions whether it can expand its mission.

Question (Yunk): As we expand various programs, we need to ensure that there is administrative oversight and accountability. We want to make sure work is not outsourced to outside vendors who do not have a stake in the local economy. The state must look at it as a comprehensive process.

(Mr. Gustafson leaves the meeting for another commitment.)

2. Wisconsin Supplemental and Extended Benefits

Mr. Bergan indicates that we will get caught up in services and build additional capacity. We triggered on “Tier 2” EUC08 benefits this week. We are getting ready to pay those benefits.

There is language in the stimulus bill concerning UI. There is an extension of EUC08 through December 31, so we are monitoring that language and talking with DOL regarding their interpretation of how it is intended to work. There is also a provision to add $25 to each UI check. There are provisions called “UI Modernization,” that is essentially a Reed Act distribution that is tied to some changes in the benefit provisions of the law. How much we are eligible for depends on what provisions we have or adopt in our laws. So far as we can tell now, we are in a strong position to get some of the money quickly with the alternative base period. Until we see the guidance from DOL, we will not be sure if we meet any of the other requirements. We are monitoring it carefully. It may require us to legislate sooner rather than later. This year we may have to do things as we go because of the federal legislation. This suggests that we need to meet on a much more regular basis because we will need to be fast on our feet.

The UI program will begin borrowing in February. It is done in 3-month blocks. We made our first request which is for up to $400 million. In April we will have proceeds to pay off the loan. However, we will be solvent for just a few days and need to borrow again. Then we expect to be borrowing continuously for the rest of the year. We are set up to do that. We are looking at what other alternatives might be available through the private market; it is not clear we will have any other alternatives. If the bill forgives interest charges, outside borrowing would not be necessary. The current federal interest rate is 4.6%, which is basically the same rate they pay us on our balance.

Question (Penkalski): Do the Reed Act funds distributed under the bill need to be paid out before borrowing? If so, won’t the funds be paid out right away?

Mr. Bergan responds that we are looking at what will need to be done to set that money aside. There will be a lot of states in the same situation.

3. Biennial Reports to Governor and Legislature

Mr. Bergan reviews the Financial Outlook report. The first table on page 2 shows the fund balance and the surplus or deficit. The fund was reduced by $349 million from the end of 2007 to 2008. Table 2 on page 4 compares benefits paid in the last three months of the year over several years. Table 3 shows the initial claims over the last three months of the year over several years. In 2008, the initial claims in the last three months were higher than they were since 1980. In addition, we are paying EUC08 benefits. For EUC08, we are spending $8-10 million per week; for the regular benefit program, we are spending $5-6 million per day. In 2010, we will move to tax Schedule A and will stay there for the foreseeable future. It is possible, depending on what the Council does on the revenue side, that we could get out of Schedule A sooner, but otherwise we will be there for quite some time.

Question (Haine): What is the new employer rate for Schedule A?

Mr. Bergan indicates that the new employer rate does not change when we change schedules. It is set by the statute. The department was a little late getting the report out. The statute says “on or about February 15.” The department had to go back and do the numbers over after the DOR came out with its numbers and projections. Page 9 of the report shows the projected balances at year-end through 2013. These are estimates, but it gives an idea how profound the challenge is. The total taxes collected are less than the deficit amounts for several years. The receipts go up in 2010 with the change to Schedule A.

Question (Penkalski): Do you have an idea what the amount of the Reed Act distribution would be under the stimulus bill?

Mr. Bergan responds that if we qualify for all of it, it would be something like $133 million. Those numbers could change.

Question (Yunk): Table 3 on page 5 is very helpful showing the year-to-year comparisons of a 3-month period. It would be helpful to see something like this at every meeting on a 3-month revolving basis. We could see how we measure up as we go forward.

Mr. Bergan indicates that we have that data. These charts had a particular purpose in showing how dramatic the fall was in 2008. He will see about getting that information for the Council.

4. Minutes of Meetings June 5, July 25, September 9, and October 2, 2008

Motion (Lump), seconded (Yunk), to approve the Minutes of the June 5, July 25, September 9, and October 2, 2008, meetings. Minutes are approved unanimously.

5. UI Treasurer’s Financial Statements

6. Committee to review definition of “employee” (2007 Wis. Act 59)

Motion (Lump), seconded (Yunk), to appoint Lump, Penkalski, and LaRocque as the committee to review the definition of “employee” as required by 2007 Wis. Act 59. Motion passes unanimously.

7. Department proposals for law change

Mr. LaRocque indicates that the department has been working on policy proposals and has about 15 this year. We are presenting 5 proposals today, plus proposed changes to DWD 128.

8. Department proposal to revise DWD 128, Able to Work and Available for Work

Mr. LaRocque presents the proposed changes to DWD 128. We made changes to this rule last year, which took effect in April 2008. We have had an opportunity to see the rule in application to claims. In October we reviewed some of our experience with the Council. Our experience has shown us there is room for tuning up the rule. The rule is intended to be less rigid than the prior rule, which it is. We wanted to do something more like the other states are doing, applying certain factors to show attachment to the labor market.

What we have observed is that the rule is a little too loose in a couple of respects and a little too tight in one respect. The “plain language analysis” in the analysis document before the Council lays out the reasons for the changes. One thing that is too loose in the rule is that someone who is able to do “any” work is considered able to work. “Any” interpreted literally means even one job in the individual’s labor market area. That causes concerns that a person is not really attached to the labor market if they can only do one job. The other part of the rule that is too loose is that an individual can qualify if the person is able to do work with additional training. This is operating like an exception to whether someone is able to work and available for work. This is not approved training. There is already an exception to the able and available requirements for approved training. This language operates as an exception to being able to work if they can be trained to do any job with any open-ended training.

One provision is too tight in the rule. The rule states that to be available for work, someone must be available for “full-time” or 32 hours of work. We see individuals who have a limitation on their ability to work that limits the number of hours they can work, which in some cases is less than 32 hours. Yet they are considered able to work. The able to work requirement and the available for work requirement need to be reconciled if we want to provide benefits to individuals who are able to do only work that is less than full-time and yet are available for the work they are able to do. This was the situation under the old rule. What we propose to do about that is to say that the claimant has to be as available for work as they are able. We think there ought to be some minimal number of hours that someone is able to work in order to be considered attached to the labor market (rather than applying the 32-hour requirement in such cases). We selected 16 hours, one-half of “full-time” (32 hours) work. We have received a Commission decision saying that if someone is able to work 30 hours per week, they are not available for full-time work and are denied benefits.

Finally, the rule contains a provision that seems to say that people who are partially unemployed do not have to meet the able and available test. That is not the intent of the rule. All claimants must be able to work and available for work. We are proposing to delete the language in subsection (7).

Question (Lump): Is this expected to increase claims and what is the fiscal effect?

Mr. LaRocque indicates that the changes made last year had an overall fiscal effect of less $1,000,000. These proposed changes are to make the rule do what we think was originally intended. In that sense there is no significant fiscal effect expected. There will be some effects on both sides of the ledger, but not an overall significant fiscal effect.

Question (Neuenfeldt): What is the process of the rule if we do not agree to it?

Mr. LaRocque indicates that we would want to find out why they do not agree to it and address those concerns.

Question (Petersen): In Illinois they look at the normal number of hours for the job, not just a standard number of hours. He understands the department wanted to use a set amount, but we might want to consider the number of hours typical for the job.

Mr. LaRocque indicates that the rule as interpreted now requires that a claimant be available for 32 hours. The department is proposing to reduce that to 16 for those who are able to do less. The Council could adjust that number. There are ways to tighten words like “reasonable” and “substantial.”

D09-05 Clarify that Department is “adverse party” in Employers’ Circuit Court Actions to Review Tax Decisions

Mr. LaRocque presents the proposal. When an employer in a tax case has an adverse decision, they have a right to appeal to LIRC and to circuit court. They must name the correct party. The law says they must name the “adverse party” but does not say who the adverse party is. If they fail to name the department, the case can be dismissed. It is important that the department participate in these cases to protect the program. Court decisions have been inconsistent, some saying the failure to name the department is not consequential and allow the case to proceed without the department as a party. We are not sure how often it happens, but the consequences (dismissal) can be severe to the employer if the employer does not comply. The proposal would try to eliminate the confusion for employers.

D09-06 Correct Forfeiture Language to Reflect Final Penalties

Ms. Schwalbe presents the proposal. Section 108.04(11)(be) was created in 2007 Wis. Act 59 and involves the penalties to be imposed against claimants for fraud. When the department first proposed the penalties, the department proposed that the penalty for a first determination of concealment would be one times the person’s weekly benefit rate; the second level penalty would be three times the person’s weekly benefit rate; and the third level penalty would be a disqualification from benefits for 6 years. When the Council reached its agreement, it agreed that the third level penalty would be five times the person’s weekly benefit rate rather than the benefit disqualification. The introductory paragraph referenced the disqualification from receiving benefits, which was not removed when the third level penalty was changed. This has led to some confusion with administrative law judges that they should be disqualifying claimants from benefits in addition to the other penalties. We are proposing to delete the language referring to disqualification from receiving benefits to clarify this provision.

D09-09 Clarify Exceptions for Exclusions from Employment for Indian Tribes

Ms. Schwalbe presents the proposal. These changes are to clarify the options for tribes to exclude certain elected officials and policymakers and advisors from coverage if the election is made under tribal law, and to clarify that individuals receiving work relief or work training programs funded in whole by tribes are excluded from employment unless the tribe elects otherwise. These are changes that we think are necessary to clarify the proper status of tribes as separate governments and not political subdivisions of the state. The language we are proposing to add is in the federal law language and was likely inadvertently missed when the language was drafted to extend these provisions to tribes in 2001. Ms. Schwalbe did review the proposed changes with the department’s tribal liaison, who has agreed with the changes. The department will take into account a suggested change by Bob Andersen to clarify that the person must be a member of the tribe’s legislative or judicial body, not just a member of a tribe. The terms “major,” “nontenured,” “policymaking,” and “advisory” are defined by the DOL in its publications, and the department relies on those, but it may be helpful to put the definitions in a rule to make the information more accessible to them.

D09-08 Amend Exception to Quit Disqualification for Domestic Abuse

Ms. Schwalbe presents the proposal. When an individual quits employment, there is a disqualification from UI benefits, unless the individual satisfies one of the statutory exceptions to the quit disqualification. One of the exceptions under Wisconsin law is the exception for domestic abuse. Under the current law, if someone is a victim of domestic abuse as defined in the statute and needs to quit their job to protect their safety or the safety of an immediate family member, the person may be eligible for benefits if the person obtains a temporary restraining order or TRO before quitting and shows that the order is reasonably likely to be violated. This is a very strict test. We have had cases where this strict rule operates to deny benefits in the most severe cases of abuse. One case is described in the analysis where the woman had someone at her door threatening to kill her on Friday and on Monday she talked with her employer, quit her job and moved out of state. Because she did not stay and get a temporary restraining order, she was ultimately denied benefits.

The department proposes to broaden this exception and allow claimants to be eligible for benefits if they can show proof of the abuse, other than just a TRO, such as a police report, medical documentation, or other evidence of abuse from a counselor, etc. This is the information generally used to get a TRO. Minnesota and Illinois have language with the broader exceptions. We also propose to expand the language to include dating relationships, using the similar language from the TRO statute. There were only 7 cases that allowed benefits under this provision in 2007. We do not think there will be a significant fiscal effect.

Comment (Yunk): Suggests that there may be other changes to the section regarding domestic abuse by juveniles and this should be looked at; it should not be changed in a piecemeal fashion. Questions why “consanguinity” is being removed.

Ms. Schwalbe responds that abuse by juveniles is handled under the juvenile code and has not been a part of the quit exception since it was adopted. The change proposed by the department was intended to be limited, however, the Council can broaden it further if they choose to do so in their negotiations. “Consanguinity” means related by blood from a common ancestor and it has been removed and changed in most statutes. This may be the only one left in the statutes to use the term.

Comment (Haine): Indicates that the expansion of the language to include dating relationships is appropriate. She understands not wanting to legislate in a piecemeal fashion, but she would hate not to fix something simple and put off making the change and taking a substantial amount of time to look at everything.

Question (Neuenfeldt): Is this something that is required in the stimulus bill for UI modernization? If so, it does not make sense to debate over something you have no control over.

Ms. Schwalbe responds that having a domestic abuse quit exception is one of the requirements for the UI modernization incentive payments. The detail of what may be required may involve more direction from DOL. If our current exception meets the requirement in the stimulus bill, we are still proposing the change to broaden the exception.

Mr. Bergan indicates that we can give the Council a list of what the requirements are for UI modernization.

D09-04 Protect Employees and Witnesses in UI Cases from Retaliation

Mr. LaRocque presents the proposal. We have a statute now that has provisions to penalize employers with penalties of a fine of $500 and 90 days in prison. He is not aware of prosecutions on this, but the department receives calls from employees claiming that they are told they are going to lose their job if they make a claim or testify at a hearing. We had one case a couple of years ago where an assistant attorney general contacted us about a witness claiming she had been fired for participating in a hearing. The law provides a penalty for threatening to fire someone, but does not provide a penalty for firing a person for testifying or claiming benefits. We have no protection for witnesses in the law; only employees are protected. The department is proposing language to protect witnesses and employees from retaliation by employers. We also are proposing to increase the penalty, which has not been changed in 25 years, from $500 to $2,000.

Question (Penkalski): Is this penalty per incident?

Mr. LaRocque is not sure how the criminal courts would apply the penalty to “each act”. Each act is a separate offense.

Question (Yunk): Do ALJs have subpoena power now?

Mr. LaRocque indicates that they do. The hearing office arranges for subpoenas for witnesses.

9. Letters to the Council (white)

The next Council meeting will be Thursday, February 26, 2009, at 9:30 a.m., at the Dane County Job Center Ballroom. The Council agreed to schedule meetings through 2009 for the fourth Thursday of every month at 9:30 a.m.

Meeting adjourned at 12:15 p.m.

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