8033 Excelsior Dr.
Management: James Buchen, Earl Gustafson, Bob Oyler, Daniel Petersen and Ed Lump
Labor: Phillip Neuenfeldt, Dennis Penkalski, and Michael Bolton
Chair: Greg Frigo
Department staff present: Roberta Gassman, Jo Anna Richard, Hal Bergan, Andrea Reid, Lutfi Shahrani, Thomas K. Smith, Thomas E. Smith, Dick Tillema, Brian Bradley, Carla Breber and Terese Wojick
Others present: Robert Anderson of Wisconsin Council on Children and Families, Bruce Hagen and Paul Mara of ChoicePoint/DataStat Online Systems, Inc., John Metcalf of WMC and Larry Smith of UC Management.
Meeting opened with DWD Secretary Roberta Gassman addressing the Council on the state budget. Gassman acknowledged the Council and the help and assistance it has given her. Acknowledged the work done by Greg Frigo as Chair of the UIAC. Introduces Jo Anna Richard, Executive Assistant to Secretary Gassman, and Thomas K. Smith, Bureau Director of Budget and Strategic Planning. Wisconsin has a $1.6 billion deficit. Governor has asked all state agencies to make the hard decisions, to be as cost efficient as we can be, so that the people we serve with our important programs, such as Unemployment Insurance (UI), can still be served. Governor also asked that we take great strides to reduce our general purpose revenue (GPR) spending and make position cuts to try and make sure that the government can run as efficiently as possible. He asked that we cut positions by 10% in every single state department. As a cabinet secretary, Gassman felt responsible to the governor to do this even though most of UI is funded with federal monies.
Gassman put in a DWD budget that called for, over two years, a reduction in the UI Division of 55 positions, which represented the 10% cut. The governor looked at our budget, especially at UI knowing the important work that UI does and that federal monies are involved, and he put in his budget on February 8, 2005 a UI division trimmed by 47 positions. He gave us back 8 UI positions. He gave us the flexibility to deal with those 8 trimmed positions by the end of the biennium. Our goal and the goal of the governor is to use those 8 saved positions in the “line function” positions that really serve the employers and the claimants.
Gassman discussed Reed Act dollars. Reed Act funds are to be used to protect the UI Trust Fund. If we reemploy people more quickly, they are no longer drawing UI benefits and that will protect the Trust fund. Therefore, the governor put in his budget $1 million per year from Reed Act funds to provide intensive employment services, such as the pilots currently being conducted in Oshkosh and Milwaukee, to transition unemployed people more quickly into work. The second use of Reed Acts funds in the governor’s budget is funding the State Apprenticeship Program. Prior to this budget, this program has been completely funded by GPR. We looked at these Reed Act dollars to relieve the stress on the GPR spending under these last two billions of dollar deficits. Although Gassman had spoken with James Buchen and Phil Neuenfeldt about this use of Reed Act funds and had looked at various other options for funding the Apprenticeship Program, including methods used by other states, no other viable option presented itself. Therefore, $1.5 million of Reed Act monies will be used to fund the State Apprenticeship Program during each year of the biennium. Gassman remains open to any alternative strategies or funding methods for this program as the budget process goes forward. In the meantime, intensely working on monitoring the work search efforts of UI claimants and working harder on the prevention and collection of UI overpayments should more than offset this $1.5 million a year expenditure.
Buchen respectfully but firmly, fundamentally disagrees with what has been done with the Reed Act funds. It is troubling to have the Administration unilaterally appropriate UI funds without going through the Unemployment Insurance Advisory Council (UIAC). It presents a problem now and will be even a bigger problem in the future. Who else will look to do this, other governors, other legislatures? Or, ask for even more money? It is precedent setting and diverts monies from the UI fund into programs that are not really part of unemployment in this state. The argument that this is necessary to close the budget gap is somewhat weakened by the fact that some of the money is going to new programs that didn’t previously exist. The reemployment pilots are new and are not critical to balancing the budget. Lastly, the Council is concerned that Wisconsin employers are experiencing UI tax increases. They are being asked to pay higher taxes and yet the money is being diverted to purposes other than the UI program. For these reasons, the Council remains opposed to the decision that Gassman (and the governor) has made and hopes to persuade legislators to undo it.
Neuenfeldt suggests that, to prevent this in the future, given the changing nature of the legislative and budget process in which issues are discussed more and more, that the UIAC be engaged in those discussions. Buchen feels that the UIAC should have been and should be included in these budget discussions all along. The UIAC meets virtually year round, every month or so.
Petersen expresses concern that this (appropriating UI funds) will become customary and doesn’t want the governor or the secretary to count on it for the future. Urges Gassman to continue to look for other funding options. Also, echoes the sentiment that the UIAC should be included in the state’s budget discussions on an on-going basis.
Lump is also concerned with the precedent here. Employer UI taxes are up and the monies are being spent on other than UI programs; a very difficult sell to the employer community. …$2.5 million now …how soon before that becomes $50 million in the future? Asks Gassman to keep UI funds less political and more of an insurance fund.
Gassman thanks the Council for its comments and input; leaves the meeting along with Jo Anna Richard and Thomas K. Smith.
Bruce Hagen introduces Paul Mara of ChoicePoint/DataStat. Requests that the Council allow his company an interface with the UI wage database. Use would be limited to two purposes: credit granting and employment screening/verification. It would be used by credit approving entities, such as mortgage lenders. DataStat is marketing its program as offering benefits to: lenders, by reducing loan processing costs; loan applicants, by shortening the verification period from weeks to days; employers, who will not receive employment verification requests; the UI program by providing program income; and the economy in general by reducing bad debt expenses. The UI Division would, at no cost, receive a percentage of the amount DataStat charges its subscribers as a processing fee for each transaction. Wisconsin’s UI Division could receive approximately $300, 000 a year through such cooperation with DataStat. The Department of Labor (DOL) permits such data sharing for these purposes and allows the UI Division to keep the proceeds therefrom (reference TEUL of May 31, 1996). Presentation ends. Hagen and Mara leave the meeting.
Frigo changes the order of the agenda and proceeds with discussion of item #13, Temporary Help Issues- Review and Discussion of DWD 133 draft. Bergan explains that the rule will put in place the “7+7” concept which defines the ongoing employment relationship between Temporary Help employers and their employees. It represents work done by a subgroup created for this purpose which included James Buchen Dennis Penkalski and members of the industry, such as Ray Odia, among others. The rule would codify current policy but also address the work agreement/application the employees make with these employers. Employers must meet the requirements of the rule in order to be given the benefit of the “7+7” policy. Council is not prepared to vote on this at this time; will caucus on it later.
Bergan introduces Lutfi Shahrani as the new bureau director of the Benefit Operations Bureau. Shahrani offers the Council his best efforts to assist the members in whatever way he can.
Bergan updates the Council on his latest meeting with other states’ UI Benefit directors. Overall concerns centered on technology upgrades, administrative funding and program integrity. We are optimistic about our administrative funding because we feel we are doing a better job of reporting our expenses, which should reflect positively on us when run through the RJM methodology/formula.
DOL’s initiative on devolution was also discussed and it is basically going nowhere due in part to the fact that there is no consensus among states about it and its rather substantially negative budget impact in terms of billions of dollars added to the deficit if we were to follow that course.
There will more grant money available to fund reemployment services and identity theft issues; states will be encouraged to strengthen the penalty provisions in overpayment cases, to prohibit the non-charging of benefits where employer fault is involved.
Also a possibility of grant monies for the prevention of SUTA dumping practices (attempts by certain employers to manipulate their UI tax rates).
Bergan specifically asked at the UI Director’s meeting if DOL endorsed these ChoicePoint alternatives, such as the one that was presented earlier to the Council by Hagen and Mara. DOL was very outspoken and said it did not. Once that conversation was begun, the other state directors added they all thought it was very bad idea and they essentially have no enthusiasm for it. Bergan heartily concurs.
Use of payment cards for payment of UI benefits is encouraged nationwide. Based on the enthusiasm of the other states for this, Wisconsin will have to revisit this method of making benefit payments. Penkalski asks about the possibility of direct deposit. Wisconsin does this now and it would be our preference but there is little or no interest in it by our claimants (very few claimants have checking/savings accounts).
We also want to increase the filing of UI claims via the Internet.
We will also be looking into the amount of overpayments caused by employers failing to respond to requests for information at the adjudication level.
Michigan’s use of automated employer filing of initial claims (for mass lay-offs) was also discussed.
Oyler asks about PEOs being a major source of fraud (per a note on Bergan’s handout). Bergan responds that that came up in the conversations dealing with the SUTA dumping practices mentioned earlier today. This does not appear to be the case in Wisconsin, however.
Brian Bradley of the UI Bureau of Tax and Accounting presents Dept. law change proposal D05-35, Collective bad debt liability assessment for non-profit reimbursement employers (gray colored handout in packet). This change would require all non-profit employers who have elected reimbursement financing to pay an assessment to reimburse the Unemployment Reserve Fund for benefit reimbursements that have been determined to be uncollectible. This would not apply to Indian Tribes. There is no federal conformity issue with proposal. No action taken on this proposal; want time to consider it.
Dept. law change proposal D05-41, Change Levy Fee Statute to Make $5 Levy Fee an Addition to the Unpaid Debt and to Allow a $5 fee for Each Submission of Property During a Continuous Levy (first presented December 6, 2004). No presentation or discussion of this proposal. Some Council members wanted to speak with Bob Anderson of WWC before taking action. Will hold for a later meeting.
Carla Breber of UI Benefit Operations Bureau presents Dept. law change proposal D05-51, Amend LLC statute to correct effective date conflict for benefit claims (yellow colored handout in packet). In order to avoid retroactive benefit eligibility the statutory language of §. 108.068 allowed different effective dates to be used for tax and benefit purpose. The language raised issues that were neither desired nor intended by the department and this change is designed to eliminate some of the problems created by the original language in the statute. The effective date for the tax portion of this statue section is fine; it is the date the IRS treats the LLC as a corporation for tax purposes. For benefits, however, the effective date is the aforementioned IRS date or date we get a copy of the LLC’s approval from the IRS, whichever is later. A date specific does not work well on the benefit side. This change would make the application effective to entire benefit years in existence or commencing after the IRS date. This change would not affect LLPs.
Motion made to approve this law change. Unanimous approval by all voting members present.
Motion made, and seconded, to go into separate, closed caucuses for the purpose of deliberating on UI law changes. Unanimous vote by all members present. Authority for the caucus is Wis. Stats. § 19.85(1)(ee). Meeting will reconvene in public session after the closed caucuses. Petersen departs at 12:00 p.m.
Meeting reconvenes and begins with a motion to approve the Temporary Help Employer rule, DWD 133. Motion is made and seconded. Approved by unanimous vote by all members present. It will be put into process and will come back to the Council for review.
Tom Smith presents Dept. law change proposal D05-52, to clarify that a sole proprietor and a partner in a partnership are not employees of their own business for UI purposes (buff colored handout in packet). 2003 Wisconsin Act 197 created § 108.02(12)(dm) and (dn) to clarify that a sole proprietor was not an employee of his or her sole proprietor and that a partner was not an employee of his or her partnership. However, the language enacted suggests that sole proprietors and partners are never employees, even when working for an employer entirely owned by a third party. This change clarifies that the exclusion from the definition of an employee applies only to a sole proprietor in his/her service to the sole proprietor that s/he owns and to a partner only as to the services s/he provides to the partnership in which s/he is a partner Motion is made to approve this change and is seconded. Approved by unanimous vote by all members present.
Bergan discusses Dept. law change proposal D05-54, Allow UI benefits to claimants who volunteer to accept training with employers (no handout/write-up). Based on a state of Georgia program called “ Georgia Works”, Bergan gives a short overview of a reemployment services proposal we will make shortly to the Council. It is a program whereby UI claimants volunteer to accept vacant jobs available with WI employers for the purpose of obtaining on-the-job training with these employers. The end being, hopefully, a permanent position with the employer. The claimants would continue to receive UI benefits while they are in training status with the employer. Training consists of approximately 25 hours per week for a period of eight weeks. They would also be paid a training stipend in two phases; one of $120.00 at the beginning of the training and again at the halfway point of another $120.00. Aimed primarily at displaced workers, typically older workers. Georgia has had very good success rates in terms of placement with their program. The UI Division is working on the practical issues and law changes needed to implement this type of a program here in Wisconsin. This is a proposal we expect to present to the Council more fully at its next meeting.
Discussion ensues between Bergan and several members of the Council about the advantages and disadvantages of this program/proposal. Questions of law changes needed, Worker’s Compensation coverage, interaction with WI minimum wage law, impact on the economy in using volunteer UI claimants to perform work rather than employers hiring new employees at the trainee level immediately were among them. Discussion of this proposal will be continued at the next meeting with the Council.
Breber presents Dept. law change proposal D05-58, Repeal of §108.04(1)(e) requiring self-employed claimants to make weekly work searches in all cases (white handout). This change would allow the UI Division to impose or waive the work search requirement for self-employed claimants as it would for all other claimants. If the self-employed individual is not available for suitable work in his or her labor market area, a disqualification under the able and available provision of § 108.04(2)(a) would be imposed. If the individual were also required to look for work, the absence of a reasonable search for work would support this disqualification. This law change proposal is in concert with the changes proposed to DWD Rule 127: Work Search (pink colored handout/previously presented to the Council on December 6, 2004). Frigo interjects that Mike Mikalsen of Rep. Nass’s office called to ask why we would eliminate any reference to self-employed individuals when the law specifically requires us to define, by rule, self-employment. That led us to this law change proposal since we no longer need it given the changes to DWD 127. Discussion ensues among several Council members and Breber. Breber explains that this change ensures that self-employed claimants would be treated as would any other UI claimant, subject to all of the same work search and eligibility requirements. Motion is made to approve this law change, motion seconded. Approved by unanimous vote by all members present.
Breber also presents one additional change to DWD Rule 127, Work Search that was not previously presented at the December 6th meeting. It is a modification to DWD 127.03(4), the work search waiver that applies when the claimant’s most recent employer has failed to post the UI poster. It would clarify that the waiver would not apply after the Department notified the claimant of the work search requirement. Modification was prompted by a recent LIRC decision which found that the current language requires that the waiver continue even after notification is given to claimant of his or work search requirement. Discussion ensues among several Council members and Breber regarding the investigation of such waivers. Motion is made to approve this law change, motion seconded. Approved by unanimous vote by all members present.
Next Council meetings are scheduled for Thursday, March 31 and Thursday, April 28, 2005 at 10:00 a.m. at locations yet to be determined.
All members present approved the minutes, with revisions, from the December 6, 2004 meeting and from the January 18, 2005 meeting.
Frigo encourages the Council to get its law change proposals to the department as soon as possible, perhaps as early as March.