HB520 HD1

HOUSE OF REPRESENTATIVES	H.B. NO.	520
TWENTY-FOURTH LEGISLATURE, 2007		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

SECTION 1. The Legislature finds that due to recent prosperous economic times in Hawaii, the unemployment rate is at its lowest in decades. In fact, Hawaii currently has the lowest unemployment rate in the country. This has caused reserves in the Unemployment Insurance Trust Fund (UI Trust Fund) to steadily increase with the amount in the fund currently standing at $532 million.

Currently, the "adequate reserve fund" is defined as one and a half times the highest twelve month cost rate occurring in the last ten years. Although this definition was eliminated when the tax system was revised due to the difficult economic times of the 1970s, it was reinstated in 1992 when a new financing mechanism for the UI Trust Fund was developed. At present, the "adequate reserve fund" stands at approximately $407 million.

With continued prosperous times predicted for the next few years, it appears that the time may be right to address the issue of an "adequate reserve fund" for the UI Trust Fund. Accordingly, the purpose of this bill is to require the Legislative Reference Bureau to conduct a cost benefit analysis of adjusting the formulas used to calculate the "adequate reserve fund".

SECTION 2. (a) The Legislative reference Bureau shall conduct a cost-benefit analysis of adjusting the formulas used to calculate the "adequate reserve fund". The study shall include but not be limited to:

(1) The amount of funds currently in the "adequate reserve fund";

(2) The amount of funds necessary to be maintained in the "adequate reserve fund" to maintain the solvency of the UI Trust Fund;

(3) Hawaii's economic outlook for the next six years;

(4) A cost-benefit analysis of reducing the current ten year statutory timeframe used to calculate the "adequate reserve fund" to a six year timeframe;

(5) A cost-benefit analysis of reducing the number of months multiplied by the cost rate during a particular time period to calculate the "adequate reserve fund"; and

(6) An analysis of the effect a dramatic downturn in the economy, such as experienced after the tragic events of September 11, would have on the "adequate reserve fund".

(b) The Legislative Reference Bureau shall submit its findings and recommendations, including any legislation to lessen the amount of the adequate reserve fund will maintaining the solvency of the unemployment insurance trust fund, to the Legislature no later than twenty-days prior to the convening of the Regular Session of 2008.

SECTION 2. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2007-2008 for the cost-benefit analysis of the "adequate reserve fund".

The sum appropriated shall be expended by the Legislative Reference Bureau for the purposes of this Act.

SECTION 3. This Act shall take effect on July 1, 2007.