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Senate | February 11, 2015 | Committee Room | Senate Finance Committee

Full MP3 Audio File

will take their seats, we will get things rolling. Welcome. That’s always in order to do that, and I would like to thank our Sergeant-At-Arms staff, of course. We have Terry Burnhart, Charles Morales and Andrew Melias. I don’t see Andrew, but he’s standing by, and there are no pages here today, so we will jump straight into the bill that we’re going to hear. I understand this is a PCS, and Senator Rucho… [SPEAKER CHANGES] I move that we adopt the PCS for discussion on Senate Bill 15. [SPEAKER CHANGES] Senate Bill 15 PCS, motion made by Senator Rucho. All those in favor, please say “aye”. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Opposed? Motion carried. Senator Rucho, you have the floor to explain your PCS. [SPEAKER CHANGES] Thank you Mr. Chairman and members of the committee. It’s good to be here again. Senate bill 15, which is a PCS encompassing 15, 16 band 17. For efficiency we chose to put it all together because of the fact that we want to get this moving. I’m going to explain the titles, pretty much, of the three, and then I ask staff, Mr. Chairman, if they’ll be kind enough to go through and explain in detail, but what the part one does is it enhances the program integrity, and ladies and gentlemen, what that really is looking for is the unemployment insurance system and DES has had a policy of making the payments and/or overpayments and then having to chase it down, and what we’re trying to do is say “Let’s be sure upfront that that is indeed an eligible person at a certain level and not have to waste all the money chasing it,” so that’s going to be something with the GDAC and we hope that that will improve the system. It’s doing well now; we expect it will do a lot better when this is implemented. Second part is dealing with the… would make the following changes, and in a sense, this is pretty much what we passed the last time, on 1069 is my recollection, and we’d all passed it out of here, agreed and sent it. It got lost with the Governor’s veto, but what it does is it does photo ID requirement, which is something we’re trying to get done; extending some deadlines – extending some deadlines on the rules portion, which my understanding from the Unemployment Insurance Oversight Committee, which again, this is where this bill originated from. We passed it unanimously out, and the DES is in the process of getting the rules approved in a very quick manner, and hopefully at some point we can get an update, Mr. Chairman, about what the status is on that. And the last part is part three, which is clarifying the appointment process. On one of the earlier bills, we actually put together a board of review, which is an independent board which is essence allows the beneficiary who feels that they were not treated properly as far as the decision process at ES to make a decision, and what this does as by the independence, it really allows them to have an independent review of their particular case. Hopefully by being independent, it reduces the likelihood that the cases will go on to court, which makes the system a lot simpler, and it also establishes staggered terms, Now you have a three-member commission, and under the circumstances, what we have is everyone goes off at the same time. Makes no sense. We want to make sure that you have at least one or two experienced people on the board as they rotate off. And the last part of that one is we’re going to ratify the unemployment appeals decisions of that commission so that there’ll be no misunderstandings that they’re not legal decisions. Mr. Chairman, I’d ask staff to go into more detail if possible. [SPEAKER CHANGES] Thank you, Senator Rucho. Staff, ?? [SPEAKER CHANGES] Mr. Chairman, I do. I’ve had some good medicine and I’m ready to go. As Senator Rucho said, this bill contains… most of this bill are the provisions that this body ratified last session in House Bill 1069 but that the Governor vetoed. I briefly was going to point out the three new items, and then if the Chair would like, we have staff that can go into detail some. The first part of this bill, as Senator Rucho noted, is new. The Unemployment Oversight Committee spent some time looking and talking with the Division of Employment Security about improper payments, and as you know, this body has

Devoted a lot of resources to trying to help agencies talk one with the other through GDAT, the Government Analytics Development Center. So what this, the first part of this bill does, is just to require the division to do certain things, to report on certain items, to try to make sure that these resources are being adequately used. And that is the reason that this bill has a sequential referral to the information technology committee. The second thing that this bill does, that 1069 did not address, was the extension of the deadline for the division to adopt its rules. The division has been operating without rules since December 31 of 2012. So the committee spent time at each meeting, talking to the division about this problem. Through the course of the interim, the division has been working closely with OSVM and with the rules review committee, and we are confident that they are on track to have permanent rules adopted by July. In fact, the rules will be in the register on March the second. So what this bill does that the 1069 did not do is to extend that deadline of December 31, 2012 to May 20th of 2015. That is a date that all parties know will be met. And lastly, with the board of review, the committee wanted to be sure that not only was the board of review an independent body, but that it had sufficient staff and so the changes in that part of the bill from House Bill 1069 just notes that not only the board of review but its staff must work independently, and it requires commerce and the board of review to give a written report to your appropriations committees by May 1st of this year, so if any budgetary concerns are there, those bodies will be able to know it as they put together their budgets for this ??. So Mr. Chairman, those are the new items in the bill and if you would like, we can give you a detailed explanation of each part. [SPEAKER CHANGES] Thank you Ms. Avery. I’ll turn it back over to Senator Rucho and that is at his disposal. [SPEAKER CHANGES] Mr. Chairman. I would trust that we could open up to the committee for questions, if there are any. [SPEAKER CHANGES] Thank you. Members of the committee, any questions or comments? Senator Ron Rabin, not to be confused with the chair or the vice-chair. [SPEAKER CHANGES] Thank you. I think this is a really good bill, well thought-out and put together. In a very sound way. But I did in the reading of the content, come up with three questions, probably for staff just to try to either, is there or ain’t there and if it ain’t there then there’s three things that might want to be there. The first one deals with, as we go through finding the waste, fraud and abuse, and I think the system is set the way it is in the law to do that, is there someplace that we address what’s the penalty for the offenders now that we’ve discovered who they are? [SPEAKER CHANGES] Ms. Avery. [SPEAKER CHANGES] Yes sir, that is in the statute. And if, I will locate it and answer that. [SPEAKER CHANGES] Okay, I just, it wasn’t apparent to me when I went through it. But if it’s there, then that covers that one. I was a little bit concerned in the photo ID world also, because I find that it’s very explicit with regard to what kinds of photo ID are valid. And then there’s a little clause, the last bullet or the last alphabet number that’s in there, sort of opens a loophole and I’m wondering if it would be a good idea to include the kinds of things that would not be accepted, so that it’s not up to someone’s discretion as we go through it. [SPEAKER CHANGES] Ms. Avery. [SPEAKER CHANGES] Greg Rooney can address that, and the division is here as well. [SPEAKER CHANGES] The Senator’s correct. The last item, there is a catch-all in the list that gives DES the authority to accept other types of government-issued ID. But it’s not any ID, it does have to be a government-issued ID. And so, it doesn’t give them the discretion I guess to take something that wasn’t issued by, I’d have to go to that place in the bill, but it lists like the United States, another state, a commonwealth of the United States, a territory of the United States, so there are some parameters on the discretion of DES but the idea was that rather than come up with a list of every possible type of identification because DES is currently accepting types of identification that are not on the

There are some oddball federal identification cards that are issued by the US government that are not on the list and so that catchall was to allow them to authorize the use of things that they're currently accepting now. [SPEAKER CHANGES] Follow up? [SPEAKER CHANGES] That's fine but I still think that somewhere in there there ought to be examples of stuff that would not be accepted because of the loophole in there and the last thing in the third part deals with the board, okay, it says in there that one person has to represent employees, one person has to represent employers and then there's someone who represents the general public and I'm wondering if it might be well to put some words in there to suggest we don't want to overload to either employee or employer like some sort of professional or academic body or something like that. I'm at a loss to figure out how to fix it but coming back to it so we don't get another [?? crosstalk] [SPEAKER CHANGES] Senator, good question, and I will say to you that the governor makes those appointments into those categories and he was able to manage that clearly. We've got some excellent people that are on that right now. I think it's enough where no one group will control it. It's all even and balanced and hopefully they can continue to do the job that they've done up to this point and there is actually, Mr. Chairman, three other resolutions that will actually be confirmations of each of those individuals at a separate, probably on another committee other than ours because they have not been able to be properly confirmed and so what we're doing is getting the structure in place with this bill and the confirmations will occur in another committee and that will pretty much validate the fact that they are indeed properly validated by the law and secondly setting those standard terms so that we can be sure as this commission moves forward there will be no loss of experience in one year. [SPEAKER CHANGES] Thank you, Senator Rucho. A brief note, we do have a page, Briana Yeoho, who's sponsored by Senator Brown. Welcome to the Senate this week. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Senator Tillman, you have a question? [SPEAKER CHANGES] Thank you, Mr. Chairman. I was interested in the first question that Senator Rabin had and I found that there are penalties and there are ways of collecting, but I did [??] there. [SPEAKER CHANGES] Thank you, sir. Senator Barringer, you have a question? [SPEAKER CHANGES] Thank you, Mr. Chair. I applaud this. This is good. Anytime we can cut out fraud it's great, but I am skeptical of government data systems. Will there be any delay in payments at all in implementing this protection. [SPEAKER CHANGES] [??] [SPEAKER CHANGES] There should not, no, ma'am. [SPEAKER CHANGES] Okay, Senator Blue, you have a question, sir? [SPEAKER CHANGES] Yes, thank you, Mr. Chairman. Is there any, and I'm referring to page three at the beginning of line, any definition as to what a job contact is? [SPEAKER CHANGES] There aren't and I didn't explicitly go into that because that's in previous, but you can either for staff or PGS, they have an answer to this question. [SPEAKER CHANGES] Yes, DES has talked about this at the oversight committee meetings and so a contact could be as minimal as applying for a job on the web, and so that was part of the policy argument in favor of moving towards five job contacts per week because someone could sit at a computer in the modern world and just send out a resume five times and that would be sufficient, so the thinking was the number of job contacts per week should be increased because it didn't really require somebody to go through any great effort to satisfy a job contact. [SPEAKER CHANGES] Follow up. And I understand that, of course, by the same token even in Wake County, there are people who don't have instant access to the web, but will do whatever is necessary to

[SPEAKER 1] Seek work, if it means catching a ride downtown once a week going place to place to get jobs then you're right the context within which I was trying to raise this question was with the requirement with five job context. And I just wanna make sure that we don't make it impossible for folk who aren't--aren't middle income people who don't have computers readily available, and people who don't quite frankly have the-the transportation. Let me follow up on one other thing though because what I'm interested in this, did you consider incorporating in to this bill some kind of trigger because at some point I'm assuming that we're going to stop the accelerated collection from employers? To make up the difference in the tax that was owed, the taxes that were owed. So I'm wondering what you're thinking, Senator Rucho, about triggering reduction? And if it's not in this or you're contemplating doing something pretty soon- [SENATOR RUCHO] You are talking about, question, you're talking about triggering the reduction in the-- [SPEAKER 1] In the rates- [SENATOR RUCHO] Unemployment and insurance payments from the employers ?? ? [SPEAKER 1] Yes sir. [SENATOR RUCHO] It's automatic, it's on the previous bill. And my understanding is as of May of this year we will have payed off the entire debt. And then that means an automatic reduction from where it is today to what is the normal 42 dollars per employee per year. So the businesses will start as of January of 16, because that's done on an annual basis. They will start to enjoy a lower rate so that they can potentially have more money and hire more employees and then secondly we will continue on the-the state portion and try to generate upwards of a billion dollars in revenue reserves for when the next recession comes into place. [SPEAKER 1] One last follow up on that, is the billion dollars the magic number? Or is it formulaic driven? [SENATOR RUCHO] This was part of the overall review when we put together the entire package, which you were aware of, and as we were building it and our payments that was one that we at the department felt was a number that we could live with. [SPEAKER 2] Senator Bryant? [SENATOR BRYANT] Thank you Chairman. I was wondering if the sponsor or somebody on staff, whichever is best, could just give me a brief review of the appeal process because I notice we're eliminating this reconsideration and I can't--and there looks like there might be a couple of other changes I noticed they talk about a superior case or something that came into play? Could somebody just review what it is now and what we're changing? ?? [SENATOR RUCHO] I-I will take on the first part of that in this and what the appeal process we're eliminating is. You have a decision made by the ?? staff and then the appeal says the same staff will make another decision, and what we've done is said why do you have the same group try to make a different decision? So we move that to the, to the independent commission, that they will have an independent review of that case that is not related, be it that it's independent of DES three judge group, by a three member group. And hopefully they'll know one way or another, different than the DES, if it's validated or it needs to be changed. It's just trying to streamline the system to make it simpler and it actually, with this commission place, the independent commission is probably fairer for those individual to get a fair hearing on their concerns. [SPEAKER 2] Thank you Senator Rucho, Senator ?? follow up your ?? [SENATOR BRYANT] Is there anything else involved in this process, this appeal to this board review. Do you have to pay anything or is it no cost? [SPEAKER 3] Thank you, Senator Clark? [SENATOR CLARK] ?? ?? a support of staff ?? [SPEAKER 3] Certainly. [SENATOR CLARK] Page 9 lines 8-16-- [SPEAKER 3] Repeat that line, please sir. [SENATOR CLARK] Page 9 lines 8-16, could you please read those--read from that section please? [SPEAKER 4] Yes sir Mr. Chairman, this is the process for confirmation of members of the review, that the governor appoints, confirmed by the general assembly. As you may recall there was--the governor was late in making his appointments and that was something that was frustrating to the unemployment insurance oversight committee. So what this bill attempts to do and what 10 69 attempted to do was to set up a more of a schedule, so that things could be followed and people

Appointments weren’t made in a certain time, that there was an avenue to make sure the process continued. Specifically on lines 8 through 16. This would require the Governor to submit the name of the person he would like, he or she would like to appoint to the board of review by May 1st of the year that that term would expire. The term would expire on June 30th. So the Governor would submit the name to the General Assembly by May 1st. The General Assembly would have until May 30th to confirm that person. If the General Assembly fails to act, fails to confirm the person then in essence it has not been confirmed and the Governor would need to resubmit another name. If the Governor fails to send a name to the General Assembly by May 1st, then it becomes the prerogative of the General Assembly to make that appointment and the bill would provide that in odd-numbered years it would, the president pro tempore would, it would be upon the recommendation of the president pro tempore and on the even-numbered years it would be upon the recommendation of the speaker of the house. [SPEAKER CHANGES] Thank you Senator ?? [SPEAKER CHANGES] Follow up Mr. Chair? Does this process effectively give the General Assembly veto power over the Governor’s nominees? [SPEAKER CHANGES] It gives them the confirmation process, so if they are not confirmed, then they are not duly appointed. [SPEAKER CHANGES] So if I understand this correctly, if the General Assembly decides not to act on the Governor’s nominee, then that, essentially that position becomes vacated. [SPEAKER CHANGES] That is correct, and the Governor would need to send a new name to the General Assembly for confirmation. [SPEAKER CHANGES] Not send the same name, even though it was the General Assembly that chose not to act on the name. [SPEAKER CHANGES] That would be correct. If the General Assembly [SPEAKER CHANGES] So effectively, the General Assembly would have veto power over the Governor’s nominee. [SPEAKER CHANGES] Senator Rucho. [SPEAKER CHANGES] Senator Clark, it’s not necessarily that. It’s, what it is, is that the General Assembly can have a no-confidence vote or a no confirmation vote. It’s basically allowing the Governor to recognize that the General Assembly was not happy with that confirmation and rather than putting any Governor in the position of being embarrassed, it’s basically saying, “Come back with another name.” So you can either have a no-confirmation vote or, and submit another person. So it’s not doing anything to take away the Governor’s power. The General Assembly, under the way this commission is, and it’s modeled after the utility commission, the banking commission, what am I missing? The industrial commission. They all go through the confirmation process, just like this will. So there’s no effort at all on anyone’s behalf, to take away that authority. [SPEAKER CHANGES] Thank you Senator Rucho. Senator McKissick, your question or comment? [SPEAKER CHANGES] This is a pretty straightforward one. I think most of my questions have been answered. But the provision here authorizing to disclose social security numbers to DES for purpose of verifying employment and claimant identity, I take it we do not have that authority at this time? Is that what I’m to understand by this provision being included in the bill and has it been, I mean is it going to be a problem with DMV? I don’t think they have all social security numbers for all licensed drivers, but I could be mistaken. [SPEAKER CHANGES] All I can say to you is that the department asked for this because they were having troubles identifying and validating that an individual is indeed the person. They’ve had a number of cases where there were fraudulent claims and part of it was that they really couldn’t prove that that was the individual. This will go take a giant step forward, to allowing them to have that, that opportunity to validate that that potential recipient is indeed who they are supposed to. And apparently from what I understood, even out of Washington, they are very comfortable with this effort, as far as the Department of Labor. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Follow up, sir. [SPEAKER CHANGES] So what I’m understanding is, Washington is encouraging us, or they’re comfortable with this provision, I should say. But more importantly, it’s to eliminate identity fraud. Is that what we’re getting to? Where somebody, maybe a claimant for benefits, using somebody else’s name and this will be a way to cross-reference it. [SPEAKER CHANGES] That’s correct. And Secretary Fallwell, during the commission, the oversight commissions meeting identified that there were some serious problems, and this is another step to make sure that it is properly run. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Thank you. Senator Stein. [SPEAKER CHANGES] Thank you Mr. Chairman. Given that the Governor vetoed this about, last session because of the affect on his appointees, does this address the Governor’s concern and have we heard

From his office, his likely reaction to this bill. [SPEAKER CHANGES] Please. [SPEAKER CHANGES] My understanding is that the fact is this is different. It's been smoothed out, it's been simplified so that there's no misunderstanding. Whether the Governor supports it or doesn't support it, well, I'm sure he'll have an opportunity to explain that for himself after we pass the bill. [SPEAKER CHANGES] Thank you. Members, that wraps up all the hands that I saw raised, so we will now entertain a motion, unfavorable to the original, favorable to the PCS by Senator Tillman. All those in favor of the motion, please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] Opposed, no. The motion carries. Thank you Senator, thank you, members and our page and our members of the sergeant at arms now. I remind the republicans that we have a caucus at 1:45 and with that, meeting adjourned.