STAND. COM. REP. NO.  568

Honolulu, Hawaii

                , 2007

RE:   H.B. No. 520

      H.D. 1

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Sir:

     Your Committee on Labor & Public Employment, to which was referred H.B. No. 520 entitled:

"A BILL FOR AN ACT RELATING TO EMPLOYMENT SECURITY,"

begs leave to report as follows:

     The purpose of this bill is to amend the formula used for calculating the "adequate reserve fund" of the Unemployment Insurance Trust Fund (UI Trust Fund) by:

     (1)  Eliminating the one and a half times multiplier used to        determine the benefit cost rate; and

     (2)  Reducing the number of years used to determine the             benefit cost rate.

     The Chamber of Commerce of Hawaii testified in support of this bill.  The Department of Labor and Industrial Relations supported the intent of this measure.  ILWU Local 142 opposed this bill.  The National Federation of Independent Business submitted comments.

     Current economic prosperity has caused the UI Trust Fund to grow and maintain a balance that far exceeds the "adequate reserve fund."  However, your Committee notes that a cautious approach needs to be taken when attempting to adjust the calculations used

in determining the "adequate reserve fund" in case the State experiences severe economic difficulties, such as those faced in the 1970s when the UI Trust Fund was depleted.

     Accordingly, your Committee has amended this measure by deleting its contents and replacing it with language the requires the Legislative Reference Bureau to conduct a cost-benefit analysis of adjusting the formulas used to calculate the "adequate reserve fund".

     Your Committee has also amended this bill by changing its effective date to July 1, 2007.

     As affirmed by the record of votes of the members of your Committee on Labor & Public Employment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 520, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 520, H.D. 1, and be referred to the Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Labor & Public Employment,

____________________________

ALEX M. SONSON, Chair