Seasonal workers will once again be allowed to get unemployment compensation when their jobs end thanks to legislation signed into law on Nov. 3 by Gov. Tom Wolf.
“This is going to help ensure seasonal workers – those who need unemployment insurance – will have better and more efficient access to those funds. While there are many people who need unemployment insurance to get them through periods of unemployment or underemployment, our seasonal workers, in such industries as construction, use these funds to make it through the winter months … this is important to all of us,” said Gov. Wolf at the signing.
Proponents of Act 144 of 2016, formerly House Bill 319, say it’s intended to fix an unemployment compensation (UC) unintended consequence created by Act 60 of 2012.
Gov. Wolf, Rep. John Galloway, D-Bucks, and Sen. Lisa Baker, R-Luzerne, all praised the bi-partisan effort to accomplish the changes. Galloway and Baker, along with Reps. Lee James, R-Venango, Mauree Gingrich, R-Lebanon, Seth Grove, R-York, Marc Gergely, D-Allegheny, and Sens. Tina Tartaglione, D-Philadelphia, and John Gordner, R-Columbia, were credited with helping making Act 144 a reality.
Noting the difficulties of getting Act 60 passed, Baker said initially, “There was not much enthusiasm for going right back into it [Act 60] to tackle the unintended consequences and to jeopardize what had been accomplished to set the [UC] Fund to solvency.”
But she said “those who committed to finding this answer today” were to be credited for developing a “responsible remedy” that doesn’t disrupt Act 60’s path to UC Fund solvency but still ensures seasonal workers, who she said she likes to refer to as “cyclical workers,” are treated properly.
“I’m proud of our partnership on this issue, and on many issues; we’ve got some important things done – I don’t think there’s anything we’ve gotten done, working together, that’s more important than this,” said Gov. Wolf.
Act 60 implemented measures to reduce approximately $4 billion in debt to the federal government and address the long-term solvency of Pennsylvania’s unemployment compensation system. Post-Act 60, approximately 44,000 seasonal workers were disqualified from collecting unemployment compensation. Seasonal workers who earned 50.5 percent of their annual income or more in one quarter of the year have been ineligible for benefits since the enactment of Act 60. Prior to Act 60, the limit was 63 percent.
“Act 60 really had unintended consequences, particularly for the construction industry, the pipeline industry, the nuclear industry, the power suppliers and even the highway industry,” said Frank Sirianni, president of the Pennsylvania State Building and Construction Trades Council, following the bill signing. “What you had is employees with a bulk of hours in one [employment] quarter, and you can’t get 50 percent of that in follow-up quarters.”
“This kinda levels that all off and neutralizes that problem so that the people that are doing are infrastructure, who are sometimes mandated by law – especially in the highway industry – that they’re not allowed to work at certain times of the year, that they will now be covered by benefits,” said Sirianni.
In addition to reducing from 49.5 percent to 37 percent the percentage of base-year wages earned by an employee outside their highest quarter of earnings (thereby restoring the percentage that existed prior to Act 60), the new act also:
- Increases the reserve ratio factor for certain employers, increasing UC premiums for a limited number of employers with the very worst records of laying-off employees;
- Adds anti-fraud and amnesty provisions to, according to bill supporters, ensure additional equity and fairness exists in the UC system;
- Reduces benefits and caps the increase in benefits for employees at the upper end of the income/benefits scale; and
- Implements triggers which would compare projected UC Fund solvency dates with actual solvency dates, and then institute cost-saving measures – reductions of unemployment benefits – if solvency was not being met as required by the Act 60 timetable.
Opponents of the legislation caution that Act 60’s path to solvency for the UC Fund (to occur by 2026 prior to Act 144) could be negatively affected by the addition of tens of thousands of seasonal workers, since they will add to the already higher-than-projected state unemployment rate.
Rep. Gordner, Act 60’s author, prior to the bill’s approval by the state Senate, noted Act 60’s solvency provisions assumed state unemployment rates closer to 5 percent, but Pennsylvania’s rate is currently 5.7 percent, and has been above 5 percent now for six-straight months.
While he noted concerns in the short term, Gordner acknowledged if the state can avoid another unemployment spike – similar to what occurred following the 2008-09 recession – during the next three or so years, Act 144‘s cost-saving measures to be implemented in 2020 will be beneficial to the UC Fund.
When asked about potential concerns about exposing the state to greater UC Fund insolvency risk in the short term, Gov. Wolf said the act contains “so many conditional elements that those possibilities, however remote they are, that the solvency of the fund is in good shape.”
“I think they have done a remarkable job of trying to take all the contingencies into account,” said Wolf of Act 144’s authors.
Sen. Lisa Baker, R-Luzerne, said the act includes several solvency “triggers” – which she said were “key to Senate passage” of the legislation – that “in the event that we hit one of those triggers, we will have savings and [benefit] reductions, beginning as early as 2017.”
In fact, Act 144 supporters claim those savings provisions will help to, potentially, bring the UC Fund to solvency, earlier than originally planned by Act 60 – maybe 2024 or 2025, instead of 2026.
To accomplish that, benefits will be reduced by 2 percent across the board starting next year, with the maximum weekly benefit declining from $573 to $561, and it would stay there through 2019. From 2020 through 2023, the growth of that maximum benefit would be capped at 2 percent, with that cap increased to 4 percent for 2024 and thereafter. The across-the-board 2-percent benefit reduction is expected to produce $44 million in annual savings, while the post-2024 4-percent cap is projected to deliver at least $400 million of savings annually, which is expected to grow each year thereafter.
Before Act 144, Act 60 reduced the rate of growth of the maximum weekly benefit, first freezing it at $573 through 2019, and then capping its growth at 8 percent from 2020 through 2023. After 2023, the pre-Act 60 environment would have returned with the maximum benefit being two-thirds of the average weekly wage.
In addition to three new solvency triggers – which reduce unemployment benefits for claimants if the UC Fund balance isn’t where it’s supposed to be – and the anti-fraud and “bad-actor” penalties for beneficiaries and employers, the changes are projected to save the UC Fund as much as $1.5 billion over six years while making more seasonal workers eligible for benefits, according to proponents.
The Senate voted 39-8 and the House voted 161-30 to send HB319 to Gov. Wolf’s desk for his signature.
That wasn’t the only UC bill to come up in discussions during and after the bill signing