Unemployment Insurance Advisory Council Meeting Minutes

Wednesday April 15, 2009 – 10:00 A.M.

Wisconsin Department of Commerce
WHEDA Conference Room, First Floor
201 West Washington Avenue
Madison, Wisconsin

Members Present

Management: James Buchen, Dan Petersen, Susan Haine, and Earl Gustafson

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

Chair: Daniel LaRocque

Department staff present: Hal Bergan, Andrea Reid, Tom McHugh, Troy Sterr, John Zwickey, Ben Peirce, Tracey Schwalbe, Dick Tillema, Mary Pronschinske.

Others present: Representative Mark Honadel, Bob Andersen (Legal Action of Wisconsin), John Metcalf (WI Manufacturers and Commerce).

MINUTES

Mr. LaRocque calls the meeting to order at 10:15 a.m.

1. Unemployment Insurance Modernization, Extended Benefits (Wis. Stat. §108.141) and Related Changes to the Unemployment Insurance Law, Wis. Stat. Chapter 108, and Wis. Stat. Chapter 20

Mr. Bergan indicates that there is some urgency to address these issues. Legislators are anxious to move this forward, and the Governor is strongly supporting the legislation. If the Council acts on this today, there is a reasonable prospect of getting legislation enacted quickly. It would be helpful to get this to the Legislature before they turn their full attention to the budget. The department provided materials to the Council summarizing the issues and can respond to any questions.

Question (Haine): The materials were very clear. She is interested in whether the department has recommendations on which provisions to adopt. She appreciates that some provisions may be more difficult to administer than others.

Mr. Bergan indicates that it is true that some are more costly administratively than others. In general, they are all manageable. He prefers that the Council make its judgment on the merits and then see if there are still administrative questions.

Question (Gustafson): Are there limiters on the $89 million that we receive from the federal government as to how we can use the money? Has the department decided how it would use the money specifically?

Mr. Bergan indicates that there are limiters. For Wisconsin, since we are borrowing money, the short answer is that it would be used to pay down the debt. We could use it for other purposes; it is harder to accomplish that when we are borrowing. It is essentially like a Reed Act distribution. We can use it for benefit payments or reemployment services.

Question (Petersen): Could you review where we are with claims and debt at this time?

Mr. Bergan indicates that claims are very high. For last week compared to the same week in 2008, the claims are up over 100%. Year-to-date we are up about 70% which includes only regular UI benefits. We continue to pay federal benefits to over 51,000 people. Over the course of the year, for regular and federal benefits, we will be paying out over $2 billion. Of this, about $1.5 billion will be paid out of the trust fund. The remaining $500 million is federal benefits. For the extra $25 per week, that is an extra $170 million for the year. That is money that goes directly to recipients to spend. As far as the reserve fund is concerned, the Recovery Act provides that the federal government will pay the state’s share of extended benefits of about $100 million, and interest is forgiven for 2009 and 2010 for about another $60-70 million. We will get $44 million for having the alternate base period. It is important to look at this in the big picture. The expectation of the federal government is that they are interested in having the modernization provisions enacted.

Question (Haine): For option 3, enrollment in a state approved training program, during the time the federal government has these higher benefits, is the 26 weeks after the federal benefits? This will be funded with state money once the $89 million is exhausted.

Mr. Bergan responds that the approved training benefits would be paid after the federal benefits. We have had specific guidance from DOL on this. Mr. LaRocque indicates that a person does not have to have been in approved training for the whole time. They may decide to get training later.

Comment (Neuenfeldt): The bigger issue is what is approved training. The person has to be in a state-approved training program. There is a list of specific programs that are approved. A lot of the training programs are built around enhancement of skills. It is not just someone saying they want to go to college. The training could be less than 26 weeks.

Mr. Bergan indicates that many people will not go the full 26 weeks.

Question (Buchen): Where or when would people find out about their eligibility for this?

Mr. Bergan indicates that the department would take the initiative to let people know about the program. There are separate administrative funds. Among the stated purposes for that are activities to notify people about benefit eligibility for these provisions.

Comment/Question (Haine): If we can find two provisions that already have a foundation or model in our current practice, that is more appealing than taking something brand new like dependent allowances and putting that in because it requires the development of new processes, etc. The more you have to spend on developing administrative processes, the less you have for other things. All other things being equal, it would be nice if there is already some administrative framework there. Is the list of approved training narrow?

Comment (Neuenfeldt): Generally, if you are in manufacturing, there is a certain part of the list that applies. If you are in health care, it would be different. A lot depends on what the case manager figures out is appropriate training given the person’s background.

Mr. Bergan indicates that the standard for the additional approved training benefits provision is a little more conservative because the person must be leaving a declining occupation and trained for a high demand occupation. For a lot of people, the counselors direct them pretty carefully so it would not make much difference. The federal law is more conservative and that may limit some people, but it would not have a huge practical effect.

Comment (Neuenfeldt): By providing the training, it greatly enhances the likelihood that the person will not be on unemployment again. Their skills will be more appropriate to the job market.

Mr. Bergan indicates that in speaking with his colleagues in other states, this provision of the four seems to be the one that most seem comfortable with from philosophical and fiscal perspectives.

Comment (Neuenfeldt): With TRA and TAA, they would need the unemployment benefits. That is another way to view the impact. So many of the dislocations and layoffs come from foreign trade and foreign market pressures. The number of people on TRA and TAA in this state is on the rise. It actually gives people 2 years to get training and benefits. It is federally funded and got an increase in funding as part of the Stimulus Bill.

Question (Penkalski): For the reason to follow a spouse to another job, is there a mileage limit? The person would have to move with the spouse, correct?

Mr. Bergan indicates that there is not a mileage amount specified in the law. In practice, we would probably administer it the way we do our existing laws for able and available. The person would have to move with the spouse. Mr. Peirce indicates that the department looks at what is standard for the labor market. What is standard for Madison will be different than what is standard for Hayward (it would likely be longer in Hayward).

Question (Buchen): It is a good point. Can we put a number limit in there? It seems like there is a logical minimum amount.

Comment (Yunk): In certain locations mass transit is nonexistent. In Milwaukee, there are 20,000 jobs but no transportation to get there if you do not have a car.

Question (Haines): For the part-time provision, is there any federal requirement on the amount of hours the person must seek work for part-time?

Mr. Bergan indicates that the federal law permits states to set a standard of 20 hours or less, and also permits a process where you would look back to the employment during the base period and if they worked part-time then it could be a condition for getting benefits. If you choose to do the look back, we would want to have a simple standard for looking back.

Mr. LaRocque indicates that the second proposal from the department is for the high extended benefits trigger. Extended benefits come to a claimant after they have exhausted regular UI benefits (up to 26 weeks), and then after they exhaust EUC08 (+ up to 33 weeks). Then comes extended benefits or EB (+ up to 13 weeks). Under the EB program, the cost of benefits is shared 50/50 with the federal government. Because of the Recovery Act provisions, we have 100% federal funding for 2009 and during a period of wind up in 2010. The full federal funding of EB is of limited duration. The proposal is to make available up to an additional 7 weeks of federally funded EB. That is permitted under federal law. It is an option for states to adopt a trigger. The additional 7 weeks would be fully federally funded in 2009 and may be for some claimants during the period of wind up in 2010. We have proposed the trigger adoption to be coextensive with full federal funding. It will sunset when the full federal funding period ends. If the full federal funding is extended, the state law would be drafted so that it would automatically extend the benefits. The high EB would be triggered on by an 8% 3-month average total unemployment rate seasonally adjusted. It appears very likely that if this law is in place in Wisconsin, these benefits would begin to be paid the week of June 7.

We also have some technical corrections that need to be made in the EB law. The law was adopted in 1970. A different result could come from the way the law was drafted than the original intent of the law. The law may not allow EB to trigger off which would leave the state fund exposed to pay benefits when it was not intended to be. The word “or” should be in the statute where the word “and” is. As the insured unemployment rate lowers, the program should trigger off. We want to technically correct that. The Recovery Act also allows us to qualify people for EB after the end of their benefit year when they are receiving EUC. We started doing that but we think the state law should make that clear that they qualify for those benefits.

Mr. Bergan indicates that our best estimate is that for 2009, the high EB additional benefits would add another $60-80 million to the Wisconsin economy.

Discussion regarding the legislative calendar.

Motion (Neuenfeldt), seconded (Buchen), is passed unanimously to go into closed session to discuss the unemployment insurance modernization provisions and the department’s proposal to create a high unemployment rate trigger feature to the Extended Benefit program, pursuant to section 19.85(1)(ee) of the Wisconsin Statutes. Closed sessions by the management and labor members of the Council, respectively, begin at 10:55 p.m.

Open session resumes at 12:15 p.m. Discussion regarding the Council meeting schedule. The Council will not meet on April 23. The next meeting will be May 28.

Comment (Neuenfeldt): On the 28th, we have the department proposals we want to try to act on as much as possible. We still have the independent contractor group that is still out there and we still have to look at the solvency fund.

Comment (Buchen): His view on the fund is that it is a bad time to raise taxes again. Schedule A will kick in as well as the higher taxable wage base. The other issue is how to pay the interest on the loan. It is not pressing because there is a grace period now. In 2011 we will have to pay interest. We would not be looking at a bill again until 2011. We have to have some mechanism to pay the interest by that year.

Comment (Neuenfeldt): We need an agreed upon vision of where we are going with this. There is a lot of interest in this. The question will be how do we get out of this, and we need to be able to answer that in a way that makes sense to people.

Comment (Buchen): He agrees. It is hard to look at projections because no one knows where the economy is headed. In another 6 months, we may be able to make projections.

Comment (Penkalski): We need to look at the calendar. The Council does not want to make a decision too soon because we want enough information to make the right decision.

Comment (Haine): In early fall, we may have a little better idea of the direction of the economy.

Question (Buchen): Will the fund be in the black at any time this year?

Mr. Bergan responds that even with first quarter contributions, the fund will not be in the black.

Comment (Neuenfeldt): Until we have a better idea of what is going on in the economy, it makes sense to wait and see what direction it goes rather than make decisions too early.

Comment (Buchen): Based on this, he would not see a new UI bill until early 2010.

Mr. LaRocque indicates that assuming the Council takes care of the department proposals on May 28, the next order of business would be the employee definition and related misclassification issues and the solvency issue when the Council is ready to do that. At the May 28 meeting, we will discuss the summer schedule.

Motion (Buchen), seconded (Neuenfeldt), to recommend the changes outlined in the department paper on UI modernization: #2 compelling family reasons and #3 additional benefits for approved training for the additional funds from the federal government under the Recovery Act.

Comment (Gustafson): He cannot vote today on this item. He will abstain. The department did an excellent job getting the analysis to the Council. He was not able to receive it until Monday afternoon. Because of the timing, he was not able to provide that to the paper council’s unemployment insurance committee until yesterday morning. It was not reasonable to expect them to review it and respond within 6 hours. He does not have their feedback. He feels it is important for that committee to perform its due diligence. If this were a year or so ago and we were not aware of the investment bankers and mortgage community not doing due diligence, he may have been able to vote. However, there is an even higher standard now for people to take care. He does not fault the Council for voting, but he has not had a time to get adequate feedback so he will abstain.

Motion passes 7-0-1 (Gustafson).

Motion (Neuenfeldt), seconded (Buchen), to recommend passage to the Legislature of the department proposal to enact a high unemployment benefit as a feature of our EB program.

Question (Rainey): Does this fix the technical corrections as well?

Comment (Neuenfeldt): Yes, the motion should include the adoption of the proposal for the 7 weeks of EB to include the technical corrections as identified by the department.

Comment (Buchen): Yes, the second was understood to be based on that.

Motion passes unanimously. Meeting adjourned at 12:34 p.m.

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