BILL ANALYSIS �
AB 152
Page 1
Date of Hearing: March 20, 2013
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
AB 152 (Yamada) - As Introduced February 21, 2013
SUBJECT : Unemployment Insurance Compensation: Self Employment
Assistance
SUMMARY : Implements a federal option for Unemployment
Insurance Compensation benefits (UIC) that permits claimants to
collect benefits while starting a new business. Specifically,
this bill :
1)Makes numerous findings and declarations regarding the current
job market and recent federal enactments relating to
Self-Employment Assistance (SEA) programs.
2)Expresses the intent of the Legislature that this bill
establishes, in statute, an SEA program for the purposes of
seeking federal grant funding to establish, implement and
promote the SEA program.
3)Defines "full-time basis" to have the meaning assigned in
regulations adopted by the director of the Employment
Development Department (EDD).
4)Defines "self-employment assistance activities" to include
entrepreneurial training, business counseling, and receiving
technical assistance for the purpose of becoming
self-employed.
5)Provides that the benefit amount provided to participants in
the SEA program is the same as that provided to UIC claimants.
6)Provides that SEA benefits will be paid on the same terms as
UIC benefits except that:
a) SEA participants do not have to be available for and
seeking work to receive benefits.
b) SEA participants will not have their benefits
reduced or eliminated because of income generated from
self-employment activities.
AB 152
Page 2
7)Prohibits paying SEA benefits to individuals who do not engage
in self-employment assistance activities in a given week.
8)Requires the following to be eligible for participating in the
SEA program:
a) Otherwise eligible for UIC benefits.
b) Identified by profiling system as likely to exhaust
UIC benefits.
c) Approved for SEA by the director of the EDD.
d) Full-time participation in self-employment
assistance activities.
9)Limits the number of participants in the SEA program to no
more than 5% of those who are receiving UIC benefits, and
require the EDD Director to adopt regulations implementing
this requirement.
10)Requires that employer UIC accounts be charged for the cost
of benefits paid for SEA participants in the same manner that
regular UIC benefits are charged.
11)Requires that the cost of SEA administration be paid from the
proceeds of a federal grant of approximately $5.3 million.
12)Specifies that the bill shall become effective immediately
and specifies that the SEA program becomes operative the later
of two-weeks following the effective date or two-weeks
following the approval of the United States Department of
Labor.
EXISTING LAW :
1)Provides for the provision of unemployment insurance benefits
by the EDD through the UIC program.
2)Provides for the provision of employment and self-employment
services through the EDD.
3)Finds and declares that UIC benefits are temporary and that
tools other than UIC benefits are needed to provide a path to
re-employment including self-employment.
AB 152
Page 3
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose . According to the author, while overall unemployment
in California has decreased in recent years, continuing high
levels of unemployment point to a labor market with fewer
available jobs. The most basic policy response state
governments and the federal government to unemployment in
general is the Unemployment Insurance Program. As the U.S.
labor market continues to evolve, it is increasingly important
to provide an array of services to the unemployed. SEA is one
component of a broader workforce strategy to promote
entrepreneurship and microbusiness development, both as a
reemployment strategy and to support economic development
through job creation. This small but effective program
complements and does not significantly alter the state UIC
program, and could help approximately 12,000 unemployed
workers avoid poverty. We have a unique opportunity to receive
assistance from the federal government to establish this
program in the exact economic environment it was designed for.
2)History of SEA in California . Federal law gives states the
option of operating SEA programs. SEA programs allow
participants to receive UIC benefits while they work towards
establishing a business and becoming self-employed.
Individuals do not have to meet the usual UIC eligibility
requirements relating to availability for work, active search
for work, and refusal to accept work. SEA programs target
individuals who are likely to exhaust their UI benefits and
participants must engage in self-employment assistance
activities.
California operated an SEA program from November 1996 through
June 1998. The program was not successful. In that time, EDD
referred 710 UIC claimants to voluntary SEA orientations but
only 26 attended the orientations. Of those 26 attendees, 13
subsequently submitted an application to participate in the
SEA program and only three completed the SEA program. Of
those three, two accepted employment elsewhere and one
enrolled in additional training. The statute authorizing the
SEA program was allowed to sunset in 1998.
3)National Context . The Congressional Research Service (CRS)
AB 152
Page 4
recently issued a report on SEA programs. The report notes
that only five states currently have active programs
(Delaware, Maine, New Jersey, New York, and Oregon) and that
New York's program expires on December 7, 2013. In 2012 the
five states operating SEA programs had 1,386 participants
nationwide. The CRS report also notes that a 2001 study
evaluating the impact of SEA programs that found that SEA
participants in Maine, New Jersey, and New York were more
likely to become self-employed and/or gain any other
employment. However, the CRS report notes that the study did
use a randomized, experimental design so the findings could
well be the result of selection bias or other unknown factors.
Furthermore, CRS points out that the study period was
characterized by low unemployment in the target states and it
is unknown how SEA participants would fare in different
economic conditions or other state contexts.
4)Federal Grants . The Middle Class Tax Relief and Job Creation
Act of 2012 (PL112-96) made grant funding available to states
to develop, enhance, and promote SEA programs. Under that law
approximately $5.3 million is available for California ($4.6
million for establishment and/or administration, $770,000 for
promotion and enrollment). In order to receive that funding,
EDD would have to apply to the United States Department of
Labor (USDOL) by June 30, 2013.
Opponents note that the bill requires paying the cost of
administering SEA benefits out of normal UI revenues when the
federal grant is exhausted. Those costs of administration
would be paid by shifting already scarce administration
dollars away from regular UI claims. The Committee heard
extensive testimony on the impact of recent reductions in
federal funding for UIC administrative costs at its March 6,
2013 hearing. Opponents also question the prudence of
diverting resources away from the UI administrative budget to
fund a program that has already proven unsuccessful when EDD
is struggling to deliver UIC benefits on a timely basis. The
CRS report referenced above also noted that federal budgetary
and participation restrictions likely discourage many states
from establishing SEA programs.
5)Previous Legislation . In 2010, AB 2030 (Yamada) passed this
committee but was held on the Assembly Appropriations
Committee suspense file. That bill also sought to
re-establish an SEA program in California.
AB 152
Page 5
6)Spending Authority . Assuming the author is successful in
having this bill enacted and the EDD files the application for
grant funding prior to June 30, 2013, the USDOL would have to
act on that application within 30 days. If that application
is successful, grant funding is likely to be available after
the California budget bill is enacted (assuming the timely
passage). Without spending authority in the budget bill, EDD
would not be able to spend grant funds, and the next routine
opportunity to obtain that spending authority would be in the
2014-15 budget bill. Thus EDD would have the statutory
responsibility to implement the program immediately (the bill
contains an urgency clause) but would not have access to the
federal grant funds until July 1, 2014, at the earliest.
7)Suggested Amendments . The author may wish to consider the
following amendments to the bill:
a) Page 7, line 1, change "relating" to "related."
b) Page 5 lines 7-8, delete the language addressing the
worker profiling system. Language regarding the worker
profiling system is appropriately included elsewhere in
the bill.
c) Page 6, line 4 delete "or who fails to actively
engage". This amendment clarifies the requirement for
full-time participation in SEA activities.
d) Page 6, line 5 delete "in activities" and delete the
comma after "training".
e) On page 6, line 23 after "benefits" add "in the same
week".
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Micro-Enterprise Opportunity (sponsor)
California Reinvestment Coalition
American Federation of State, County and Municipal Employees
Opposition
California Chamber of Commerce
Air Conditioning Contractors' National Association
California Association of Sheet Metal
California Automotive Business Coalition
AB 152
Page 6
California Chapter of the American Fence Association
California Construction and Industrial Materials Association
California Farm bureau Federation
California Fence Contractors' Association
California Grocers Association
California League of Food Processors
California Manufacturers and Technology Association
California Restaurant Association
California Retailers Association
Engineering Contractors' Association
Flasher Barricade Association
Marin Builders' Association
National Federation of Independent Business
Western electrical Contractors Association
California Society of CPAs
Analysis Prepared by : Paul Riches / INS. / (916) 319-2086