STAFF SUMMARY OF MEETING
SENATE COMMITTEE ON BUSINESS, LABOR AND TECHNOLOGY
|Time:||01:37 PM to 02:34 PM|
|This Meeting was called to order by|
|This Report was prepared by|
X = Present, E = Excused, A = Absent, * = Present after roll call
|Bills Addressed: ||Action Taken:|
|Presentation on Unemployment Insurance||-|
01:38 PM -- Presentation on Unemployment Insurance
Mike Cullen, Director of the Unemployment Insurance Office within the Colorado Department of Labor and Employment, presented information about Colorado's Unemployment Insurance Program and distributed an outline of his discussion (Attachment A). He explained the background and purpose of the Unemployment Insurance Program. He stated that the Unemployment Insurance Program is a federal and state program that provides temporary income replacement for workers who have lost their job through no fault of their own. He discussed the federal basis for the program and stated that states must adhere to the federal guidelines of the Federal Unemployment Tax Act and the Social Security Act, but that generally these guidelines provide states with a lot of latitude. He spoke about the potential cost to businesses if Colorado failed to conform to federal guidelines.
Mr. Cullen discussed how the Unemployment Insurance Trust Fund is funded. He stated that the trust fund receives contributions from a tax paid by employers on the first $10,000 of wages paid to each employee in covered employment. He discussed how tax rates are calculated. He indicated that federal law requires that tax rates are experience-rated, and that employers who are more stable and for whom less benefits are paid will have a lower tax rate than an employer who is less stable and requires more benefits to be paid. Mr. Cullen responded to a question from Senator Veiga regarding whether seasonal businesses were subject to the same rules as non-seasonal businesses. Mr. Cullen stated that seasonal employers can apply for seasonal status and designate seasonal positions, and gave the ski industry as an example of a seasonal employer. Mr. Cullen explained that a seasonal employee who is laid off during the employer's season can receive unemployment insurance benefits, whereas an employee who is laid off in the off-season cannot.
Mr. Cullen continued his discussion on how the Unemployment Insurance Trust Fund is funded. He described the Ineffective Charging surcharge; its purpose is to pay for the socialized costs of the system. As an example, Mr. Cullen explained that military spouse benefits are charged across all employers rather than just one employer. Mr. Cullen also explained the Solvency Tax surcharge; its purpose is to replenish the Unemployment Insurance Trust Fund quickly when the fund has been depleted after paying out benefits. Mr. Cullen stated that the Solvency Tax surcharge did not go into effect in Colorado until 2003, and has now been in effect for six consecutive years. Mr. Cullen indicated that the Solvency Tax surcharge will probably be in effect until 2011. Mr. Cullen explained the operation and intent of the surcharge and the effect it has had on the trust fund.
Mr. Cullen stated that the Unemployment Insurance Trust Fund is solvent and discussed the differences between today's recession and the 2003 recession on the solvency of the fund, including whether employers enter at an advantageous or disadvantageous tax table and the impact of the Solvency Tax surcharge being in effect. Senator Foster asked Mr. Cullen to clarify whether the Solvency Tax surcharge was part of the employer's tax. Mr. Cullen indicated that it was, and discussed the components of each employer's individual account within the trust fund.
Mr. Cullen continued his discussion of the Unemployment Insurance Trust Fund, and described that Employment Support Fund, which augments federal administrative grants and pays for activities within the Division of Labor. Mr. Cullen stated that money in the Unemployment Insurance Trust Fund can only be used to pay unemployment insurance benefits, and that the trust fund is under the Taxpayers' Bill of Rights (TABOR). Mr. Cullen noted that REDAC distributions require the federal government to refund money to the states if money in the Unemployment Insurance Trust Fund accounts exceeds certain limits. However, Mr. Cullen indicated that the REDAC distributions were rarely used, and that the last time Colorado received a refund was in 2002. Senator Veiga asked if there had been any discussion in Washington, D.C. about getting some payments back. Mr. Cullen replied that there had been discussions but that the loan account was currently facing significant demands and that the extended benefits provided by the Emergency Unemployment Compensation Program also take significant amounts of money from the fund at this time.
Mr. Cullen discussed the process for claiming unemployment insurance benefits. He stated that 65 to 70 percent of claims are currently submitted on the internet because it is very difficult to get through on the phone. Mr. Cullen described the pressures on the phone system, and discussed the number of agents currently answering phones, and stated that they are in the process of hiring more agents. Senator Foster asked about the possibility of implementing a system used in the Social Security Administration that allows a person unable to get through on the phone to leave his or her name and phone number and an exact time that he or she wishes to be called back. Mr. Cullen stated that right now, claimants who are unable to get through to the Unemployment Insurance office get a busy signal, but claimants who are able to get through can provide their names. Senator Foster stated her belief about the importance of talking to a human being and asked if a system similar to the one used by the Social Security Administration would be one way to address the frustration caused by a busy signal. Mr. Cullen indicated that he would check into it and then described other steps that the Department of Labor and Employment had taken in addition to hiring other employees, including having staff work overtime, training additional staff to take over simple tasks involved in the claim process, bringing back retirees, and hiring temp workers. Mr. Cullen also said that the department was in the process of bringing back former adjudicators.
Senator Foster stated her belief that there should be different levels of people to handle different issues, and that some people may not be comfortable speaking to a temp worker. Mr. Cullen indicated that temp workers are only used in situations when a pure "template" or "script" is used, and that the department takes all steps to ensure that no wrong information is ever given.
Senator Heath spoke to Senator Foster regarding a trip he had taken to see the volume of business at the Unemployment Insurance office and asked Mr. Cullen if the current phone system at the office allowed for the system that Senator Foster suggested. Mr. Cullen stated that the system currently would not allow for the implementation of Senator Foster's system, but that the department is open to changing the system. Senator Foster described her experience with a call center used by the Department of Human Services and how the department's use of hourly workers in a contract-type system had relieved its intake burdens. Mr. Cullen indicated that the department had explored the use of companies that provide contract customer service, and that the options are still being considered, but that the department is extremely cautious due to the sensitive and confidential nature of the information they handle. Mr. Cullen stated that it would be important for a contract company to be able to meet the department's confidentiality and cost requirements.
Senator Harvey asked about the status of the department's efforts to improve its internet capabilities. Mr. Cullen stated that an e-mail system for unemployment insurance claims was shut off in January 2008 due to confidentiality concerns and due to the staff's inability to answer the amount of e-mail being received each day in an accurate manner. Mr. Cullen stated that e-mail will be offered again in some form later this summer as part of an internet self-service program that will allow a claimant to create an account for updating applications, to check on the status of his or her claim and the balance of his or her benefits, and to receive answers to other frequently asked questions. Senator Harvey questioned why it will take until the summer to get the program up and running. Mr. Cullen stated that information technology projects always seem to take longer than wanted, but that the department predicted that the program would be ready by late summer or early fall.
Mr. Cullen discussed the average call wait time for the Unemployment Insurance office. He stated that the average call wait time is 1 hour and 15 minutes and that such a wait is not unusual nationwide. Mr. Cullen noted that Colorado's call system--unlike the call systems of other states--has not collapsed, but that the program has been underfunded for the past 15 years and that additional money only comes from the federal government after it is needed. Mr. Cullen explained the process of handling a claim, including what information staff collects from employers and claimants to determine if the claimant is out of work through no fault of his or her own and if the claimant is monetarily eligible to receive benefits. Mr. Cullen described the base period calculation used by staff to determine whether a claimant is monetarily eligible to receive benefits. To be eligible, a claimant must have earned at least $2,500 in wages during the base period from the first four of the last five completed calendar quarters. Senator Foster asked if this calculation automatically disqualifies seasonal workers. Mr. Cullen stated that the staff looks at the full year, and therefore would account for seasonal work. He clarified that there is some time lag because Colorado is a wage-reporting state, and reports for each quarterly period are due a month after the quarter has ended and must then be entered. Mr. Cullen stated that such a reporting procedure means that the wage data available is generally about a quarter behind.
Mr. Cullen discussed some states' use of an Alternative Base Period. An Alternative Base Period is used for individuals who are not monetarily eligible to receive unemployment insurance benefits in a standard base period; low-wage earners, part-time employees, and individuals who are new to the work force are examples of individuals who may not be monetarily eligible under a standard base period. The use of an Alternate Base Period directs staff to look at the quarter for which wage data has not yet been reported. Mr. Cullen stated that under the current system, 97.9 percent of claimants are monetarily eligible to receive benefits. Mr. Cullen stated that Colorado does not have an Alternative Base Period, but that a portion of the President's stimulus package known as the Unemployment Insurance Modernization bill would provide incentives to fund Alternative Base Periods in states that do not currently have one. Mr. Cullen stated that the intent of unemployment insurance benefits is to provide a temporary income replacement of up to approximately one-half the average weekly wage, and defined the minimum and maximum weekly benefits allowed. Senator Veiga asked if any states had looked at extending the period for which claimants are able to receive benefits past 26 weeks. Mr. Cullen answered that the Emergency Unemployment Compensation (EUC) Program automatically allows for a 20-week extension. Mr. Cullen explained that the EUC Program was passed federally in early July to provide additional benefits to people who had already exhausted their limit; when the program was originally established, it allowed for a 13-week extension. In November, the federal government allowed for a 20-week extension. Mr. Cullen also said that a state is eligible for 13 additional weeks of "second-tier" federal extended benefits if the state's average three-month unemployment rate exceeds 6 percent. Mr. Cullen stated his opinion that Colorado's unemployment rate will exceed 6 percent in February. Senator Veiga asked if emergency benefits were calculated in the same way as original benefits, and Mr. Cullen said they were. Mr. Cullen also indicated that the EUC Program was scheduled to end in August, but that the President's stimulus package may extend that deadline and may also provide additional federal money to raise the maximum level of benefits.
Mr. Cullen described the appeals process for claims decisions. He then discussed administrative funding and the issues resulting from federal funding remaining the same for the past 15 years. Mr. Cullen said that because Colorado's economy had been doing better than those of other states recently, Colorado had received less federal funding compared to other states. He said that overall, the funding doesn't change much. Mr. Cullen described the Revenue Fund, which receives penalties and interest associated with overpaid benefits. Mr. Cullen stated that the Revenue Fund is used to staff integrity positions to look for fraud, and that the fund is a self-sustaining account.
Mr. Cullen provided statistics comparing benefit claim numbers from 2008 to benefit claim numbers from previous years and corrected some outdated numbers on his handout. Senator Mitchell asked if it was possible for Mr. Cullen to gather and provide information on the data provided, and also requested a schematic diagram showing where the money flows and also one on the appeals process. Mr. Cullen stated that he would be able to provide such material. Senator Foster asked if there was a separate phone line for employers to call the Unemployment Insurance office. Mr. Cullen indicated that there was and provided details on how the line was serviced and on the call wait time. Mr. Cullen stated that additional staff on the employer line had been moved to the claim line in order to handle the volume of claim calls, and that some duties at the department are not being performed at previous levels, such as adjudication. Senator Foster asked for a definition of adjudicators, and Mr. Cullen stated that they are Labor Employment specialists trained in adjudication and that they work for the Colorado Department of Labor and Employment. Senator Foster asked if such adjudicators are impartial and Mr. Cullen indicated that they are. Senator Foster asked what the time line is for receiving a benefit, and whether a benefit is received before or after adjudication. Mr. Cullen stated that a claimant applies every two weeks while information is being gathered but no benefit payment is made until after a decision has been made. Senator Foster asked if federal law sets a time standard for handling claims. Mr. Cullen indicated that the federal law does have a standard, and that handling 87 percent of claims within a certain period counts as meeting this standard, as some leeway is given due to potentially complicated claims. Mr. Cullen stated that the department has continued to meet the time line with the methods he described earlier, but that he has concerns about how long adjudicators will be able to sustain their current workload.
Senator Mitchell asked Mr. Cullen to discuss the use of contracting services once more and asked if there was an association for Unemployment Insurance programs that could provide a forum to seek solutions. Mr. Cullen indicated that the National Association of State Workforce Agencies is one such association, and that Unemployment Insurance directors communicate through the association. Mr. Cullen also stated that directors share information on the regional level at meetings consisting of representatives from 12 states and gave an example of solutions that had been shared in the past. Mr. Cullen stated that if their office found successes that other offices had tried, they would use them.
Senator Veiga made closing remarks. The committee adjourned.