BILL ANALYSIS
AB 23 X3
Page 1
Date of Hearing: March 4, 2009
ASSEMBLY COMMITTEE ON INSURANCE
Joe Coto, Chair
AB 23 X3 (Coto and Arambula) - As Amended: March 2, 2009
SUBJECT : Unemployment Insurance (UI).
SUMMARY : Establishes an alternative base period to determine
when and if unemployed individuals have earned sufficient wages
to qualify for UI benefits, and establishes eligibility for an
additional 20 weeks of federally-funded extended UI benefits.
Specifically, this bill :
1)Specifies that if a person has not been paid sufficient wages
in the first four of the last five completed calendar quarters
to entitle the person to establish a benefit year for purposes
of UI benefits, then the "base period" shall be as follows:
a) For benefit years beginning in January, February or
March, the four calendar quarters ended in the next
preceding month of December;
b) For benefit years beginning in April, May or June, the
four calendar quarters ended in the next preceding month of
March;
c) For benefit years beginning in July, August or
September, the four calendar quarters ended in the next
preceding month of June; and,
d) For benefit years beginning in October, November or
December, the four calendar quarters ended in the next
preceding month of September.
2)Specifies that the alternative base period provision becomes
operative if Congress and the President enact legislation in
2009 that authorizes additional federal funding to implement
an alternative base period. (See also Comment 8.)
3)Provides that in determining UI benefits under the alternative
base period:
a) EDD shall, when using the last four completed calendar
AB 23 X3
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quarters, base computations on available wage information
processed as of the close of business on the day preceding
the date of application;
b) If the wage information is not already in EDD's system,
the employer shall, within 10 days after the mailing of the
request from that department, transmit to the department
the information on the employee's wages and any other
information relevant to the request. The 10-day period may
be extended for good cause;
c) If the requested wage and other relevant information are
not received by EDD, that department shall accept an
affidavit of wages and other relevant information from the
claimant in accordance with EDD regulations. These
regulations will be adopted as emergency regulations;
d) Requires EDD to adjust a claimant's UI benefits when the
quarterly report from the employer is received if that
information causes a change in the determination; and,
e) Provides that, except in the event of fraud, if it is
determined that information provided by the claimant on an
affidavit is erroneous, no penalty or refund of benefits
shall be imposed on the claimant for the period prior to
the calendar week in which the employer provides subsequent
wage information.
4)Specifies that "federal-state extended benefits" includes the
payment of emergency unemployment compensation benefits
payable under federal legislation enacted in 2008 and the
recently enacted federal stimulus legislation, the American
Recovery and Reinvestment Act (ARRA) of 2009 (H.R. 1).
5)Establishes criteria, conforming to the federal ARRA law,
which establishes when the federal-state extended benefits
apply to unemployed workers in California. Specifies, that
these benefits are available until June 30, 2010, if any of
the following conditions exist:
a) The rate of unemployment for 13 weeks equals or exceeds
120% of the average of those rates for the corresponding
13-week period in each of the preceding calendar years, and
equaled or exceeded 5%;
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b) The rate of insured unemployment for 13 weeks equals or
exceeds 6%, regardless of the rate of insured unemployment
during the previous two calendar years;
c) With respect to UI benefits beginning on or after
January 1, 2009, both of the following apply:
i) The average rate of unemployment, for the most
recent three months for which data are available, equals
or exceeds 6.5%;
ii) The average rate of unemployment, for the most
recent three months for which data are available, equals
or exceeds 110% of that average for either of the
corresponding three-month periods ending in the two
preceding calendar years; or,
d) The average rate of unemployment in the state for a
13-week period equals or exceeds 8%.
6)Establishes this act as an urgency statute necessary to
address the weakened state economy.
EXISTING LAW :
1)Provides that unemployment insurance benefits shall be based
on wages paid in four calendar quarters during the "base
period" as follows:
a) For persons applying in January, February, or March. the
base period is the four calendar quarters ended in the next
preceding month of September;
b) For persons applying in April, May, or June, the base
period is the four calendar quarters ended in the next
preceding month of December;
c) For persons applying in July, August, or September, the
base period is the four calendar quarters in the next
preceding month of March; and
d) For persons applying in October, November, or December,
the base period is the four calendar quarters ended in the
next preceding month of June.
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1)Provides that an unemployed person is eligible for
unemployment insurance benefits if the person makes a proper
claim, registers for work at a public employment office, the
person is able and available for work, conducts a search for
suitable work, and the person has participated in reemployment
activities such as orientation and assessment if the person is
identified as likely to exhaust regular unemployment benefits.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Background. The UI Program is administered by the California
Employment Development Department (EDD) as part of a
federal-state system to provide unemployment compensation to
workers who lose their job through no fault of their own. The
benefits range from $40 to $450 per week in California
depending upon earnings during a 12-month base period. The
regular UI Program is financed by employers who pay
unemployment taxes on the first $7,000 of earnings by each
worker. Federal extended benefits are fully paid by the
federal government.
In the most recent period in which data are available, January
2009, there were 1,863,000 people unemployed in California and
the unemployment rate was 10.1%. In January 2009, 717,525
people received regular UI benefits during the survey week.
Another 259,903 people were certified for federal emergency UI
benefits in California in January 2009. Thus, only 52% of
unemployed workers in California receive UI benefits.
2)Alternative Base Period. This bill proposes to establish an
"alternative base period" to determine if unemployed workers
have sufficient earnings to qualify for UI benefits.
California's existing base period excludes earnings in the
last 3 to 6 months of employment. This bill specifies that
unemployed persons who fail to qualify for benefits under the
existing base period would then have their eligibility
determined under the alternative base period in which earnings
as recent as 1 to 3 months may be counted. This can establish
UI eligibility for some workers such as seasonal or low-wage
workers.
3)Federal Legislation Regarding Alternative Base Period. A new
federal law, titled the American Recovery and Reinvestment Act
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(ARRA) (H.R. 1), provides monetary incentives to states that
modernize their unemployment insurance programs. That federal
law is commonly referred to as the "federal stimulus
legislation." The federal law would provide California with
$839 million in federal funds (one-time) to support the UI
Program if California adopts the alternative base period
method for calculating UI benefits. California already meets
the other federal ARRA criteria including UI eligibility for
part-time employment, retraining instruction, and unemployment
due to recognized family situations.
4)UI Benefits to the Unemployed Under Alternative Base Period.
Adoption of the alternative base period would provide UI
benefits to an estimated 64,500 workers annually in California
who are now falling through the cracks of the unemployment
program. This is estimated to provide $152 million in UI
benefits each year.
5)Example of Benefit Under the Alternative Base Period Method .
An employee who was unemployed for one year, then works and
earns $3,600 in a three-month period, and is subsequently laid
off of work, would not be eligible for UI under the existing
base period method until 6 months had elapsed, but could
promptly qualify for $115 in weekly UI benefits under the
alternative base period method.
6)Federal Legislation Regarding Extended Benefits. The federal
ARRA legislation also provides authority for states with high
rates of unemployment to enact state legislation which permits
long-term unemployed people to access up to an additional 20
weeks of extended benefits under the UI Program that are 100%
payable by the federal government. This bill proposes to
accomplish this for California.
The maximum duration of regular UI benefits is 26 weeks and
the maximum duration of federal emergency unemployment
benefits is 33 weeks. Thus, the maximum duration of UI
benefits in California is 59 weeks. The enactment of the
federal ARRA and this bill will make it possible for long-term
unemployed Californians, who meet specific criteria, to obtain
up to 79 weeks of unemployment benefits (26+33+20 weeks).
These 20 weeks of extended benefits would not affect
employers' reserve accounts.
1)Individuals Who May Qualify Under Federal Extended Benefits.
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In order to qualify for federal extended benefits, an
unemployed individual must have previously been found eligible
for regular UI, have exhausted their regular UI benefits, must
continue to seek work, and have had earnings exceeding 40
times the weekly UI benefit during a one-year base period, or
earnings exceeding 1.5 times the highest calendar quarter of
earnings (Section 4552 of UI Code). The eligibility standards
for extended UI benefits are greater than for regular UI. In
January 2009, there were 259,903 people certified for
emergency UI benefits in California. If all 259,903 people
who were certified for emergency UI benefits become eligible
for the new extended UI benefits for the maximum 20 weeks,
then the UI benefits could total $1.5 billion in federal
stimulus funds. The actual amount will depend on the
condition of the state and nation's economy.
2)Technical or Corrective Amendments Recommended. The following
changes are recommended in this bill:
a) Treat wages earned during the "alternative base period"
in the same manner as during the regular base period. The
existing Section 1275 of the Unemployment Insurance Code
requires that wages used in the determination of benefits
payable to an individual during any benefit year may not be
used in determining that individual's benefits in any
subsequent benefit year. However, this bill proposes to
require that wages used in the determination of benefits
payable to an individual during any benefit year [based on
the alternative base year] shall not be used in determining
that individual's benefits in any subsequent benefit year.
The bill should be amended to read in the same manner as
existing law. On page 5, line 25, replace the word "shall"
with the word "may".
b) Remove the provision that makes "alternative base
period" dependent on federal passage. The bill specifies
that the alternative base period provision will take effect
if Congress and the President approve federal funding to
implement the alternative base period. However, since
Congress approved this law in February and the President
signed it on February 17, 2009. it is recommended that this
clause be removed from the bill (on page 5 of bill, delete
lines 27 - 33); and,
c) Correct a code reference in the bill. Section 3 of the
bill references a nonexistent Section 1227.1 of the
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Unemployment Insurance Code. The bill should be amended to
contain the correct code reference, Section 1277.1, on page
7, line 4 of the bill.
3)Conforming Changes Recommended. The following changes are
recommended to conform to the federal laws regarding the UI
Program:
a) Provide EDD an estimated nine months to implement the
alternative base period. The federal stimulus legislation
allows states up to one year to implement the alternative
base period (ABP). Since the EDD computer systems and wage
collection systems are not currently capable of
implementing the ABP in the short term, it is recommended
that it be implemented by January 1, 2010. This will be
approximately 9 months from the projected enactment of this
bill, and within one year of the federal law (signed on
February 17, 2009). On page 5, line 11 of the bill,
replace "July 1, 2009" with "January 1, 2010."
b) Rewrite the state's authority to implement the federal
extended UI benefits by deleting Section 5 of the bill
(delete page 8, lines 6 -39, and page 9, lines 1 - 10), and
replacing this section with amendments to existing Sections
4003 and 4004 of the Unemployment Insurance Code, as noted
in Appendix 1. The key changes contained in Appendix 1
are:
i) Modify the commencement and ending dates of the
federal extended benefits. The bill provides that the
federal extended benefits will remain in effect in
California until June 30, 2010. While this date is
patterned on the recently enacted ARRA, there is the
possibility that another federal law will be enacted to
extend that date. Thus, it is recommended that this
provision of the bill be re-written to state: "This
section shall take effect as of February 2, 2009 and
remain in effect until December 6, 2009, or until the
expiration of the federal sharing authorized by Section
2005(a) of Public Law 111-5 (the American Recovery and
Reinvestment Act), whichever is later;"
ii) Establishes the total extended compensation amount
that an eligible individual may receive ; and,
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iii) Provides that individuals who continue to meet all
other requirements may not be required to re-apply for
federal extended UI benefits.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation, AFL-CIO
California-Nevada Conference of Operating Engineers
American Federation of State, County and Municipal Employees,
AFL-CIO
California Rural Legal Assistance Foundation
Opposition
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Analysis Prepared by : Manny Hernnandez /INS. / (916)
319-2086
AB 23 X3
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Appendix 1
SEC 5. Section 4003 of the Unemployment Insurance Code is
amended to read:
4003. (a) The provisions and definitions of terms in the
"Federal-State Extended Unemployment Compensation Act of 1970,"
as
amended by the federal Omnibus Budget Reconciliation Act of 1981
(Public Law 97-35), apply to this part. "Federal-state extended
benefits" means benefits payable under this part.
(b) There is an "on" indicator for purposes of federal-state
extended benefits for a week in which the rate of insured
unemployment for that week and the immediately preceding 12
weeks
equals or exceeds either any of the following:
(1) One hundred twenty percent of the average of the rates
for the
corresponding 13-week period ending in each of the preceding two
calendar years, and equals or exceeds 5 percent.
(2) Six percent.
(3) With respect to benefits for weeks of unemployment
beginning after February 2, 2009,
(A) The average rate of total unemployment,
seasonally adjusted, as determined by the United
States Secretary of Labor, for the period consisting
of the most recent three months for which data for all
states are published before the close of such week
equals or exceeds 6.5 percent; and
(B) The average rate of total unemployment in the
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state, seasonally adjusted, as determined by the
United States Secretary of Labor, for the three month
period referred to in subparagraph (A) equals or
exceeds 110 percent of that average for either or both
of the corresponding three month periods ending in the
two preceding calendar years.
(c) Subdivision (b)(3) of this section shall take effect on
February 2, 2009 and remain in effect until December 6, 2009, or
until the expiration of the federal sharing authorized by
Section 2005(a) of Public Law 111-5, whichever is later.
(c) (d) There is an "off" indicator for a week in which the
rate of
insured unemployment for that week and the immediately preceding
12
weeks is less than 6 percent and also less than either of the
following:
(1) One hundred twenty percent of the average of the rates
for the
corresponding 13-week period ending in each of the preceding two
calendar years.
(2) Five percent. if, for the period consisting of such week
and the immediately preceding twelve weeks, none of the options
specified in (b) result in an "on" indicator.
(d) (e) For purposes of this section, the rate of insured
unemployment
for a 13-week period shall be determined by reference to the
average
monthly covered employment for the first four of the most recent
six
calendar quarters ending before the close of the period. This
section shall be effective with respect to compensation for
weeks of
unemployment after September 25, 1982. The provisions of this
section in effect prior to that date shall continue to apply to
weeks
after March 30, 1977, but prior to September 25, 1982.
(e) (f) The indicators specified in subdivisions (b) and (c)
(d) shall be
operative only if mandated or permitted by federal law. Any
amendments to the Federal-State Extended Unemployment
Compensation
Act of 1970, enacted before January 1, 1983, which mandate or
permit
any reduction in the insured unemployment rate indicator
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described in
this section shall be operative on the effective date of the
amendment.
(f) (g) Notwithstanding any other provision of this part, the
Governor
may, if permitted by federal law, suspend the payment of
extended
duration benefits under this part, to the extent necessary to
ensure
that otherwise eligible individuals are not denied, in whole or
in
part, the receipt of emergency unemployment compensation
benefits
authorized by the federal Emergency Unemployment Compensation
Act of
1991 (P.L. 102-164) or any extension of that act including, but
not
limited to, Public Law 102-244, and that the state receives
maximum
reimbursement from the federal government for the payment of
those
emergency benefits.
SEC 6. Section 4004 of the Unemployment Insurance Code is
amended to read:
4004. (a) The department shall establish, for each eligible
individual who files an application therefor, an extended
compensation account with respect to such individual's benefit
year.
The amount established in such account, subject to subdivision
(b)
of this section, shall be not less than whichever of the
following is
the least:
(1) Fifty percent of the total amount of regular compensation
payable to him during such benefit year under this division.
(2) Thirteen times his average weekly benefit amount.
(3) Thirty-nine times his average weekly benefit amount,
reduced
by the regular compensation paid to him during such benefit year
under this division.
(b) The amount determined under subdivision (a) of this
section
shall be reduced by the aggregate amount of additional
compensation
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paid to the individual under Part 3 (commencing with Section
3501) of
this division for prior weeks of unemployment in such benefit
year
which did not begin in an extended benefit period.
(c) For purposes of subdivision (a) of this section, an
individual'
s weekly benefit amount for a week is the amount of regular
compensation under Part 1 (commencing with Section 100) of this
division payable to such individual for such week of total
unemployment.
(d) Effective with respect to weeks beginning in a
high-unemployment period, the total extended compensation amount
payable to an eligible individual with respect to the applicable
benefit year shall be not less than whichever of the following
is the least:
(1) Eighty percent of the total amount of regular
compensation payable to him or her during such benefit
year under this division.
(2) Twenty times his or her average weekly benefit
amount.
(3) Forty-six times his or her average weekly benefit
amount, reduced by the regular compensation paid to him
or her during such benefit year under this division.
(e) For purposes of this Section, "high-unemployment period"
means a period during which an extended benefit period would be
in effect if subdivision (a) (3) of Section 4003 were applied by
substituting 8 percent for 6.5 percent.
(f) To the extent permitted by federal law, if individuals
continue to meet all other applicable eligibility requirements,
the Department shall not require such individuals to re-apply
for benefits to which those individuals are entitled under this
Part.
(g) Subdivisions (d), (e), and (f) of this section shall take
effect on February 2, 2009 and remain in effect until December
6, 2009, or until the expiration of the federal sharing
authorized by Section 2005(a) of Public Law 111-5, whichever is
later.
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