Employment and Training Fund

Repeals the employment and training fund and payroll tax.

SB SMO 99-017
THE SENATE                              S.B. NO.           504
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Hawaii's poor business climate has been the
 2 subject of many newspaper and magazine articles printed across
 3 the country.  This negative publicity works against the State's
 4 efforts to attract capital and new economic activity to the
 5 islands.  The Legislature must begin to search our laws to
 6 correct past decisions that add unnecessarily to the cost of
 7 doing business in the State.
 8      Payroll taxes and insurance protection for workers add up to
 9 a heavy burden on employers.  Hawaii's workers' compensation,
10 temporary disability, and prepaid health care coverages, taken
11 together, are the most broad based and expensive employee
12 benefits in the nation for employers.  The broad scope of these
13 benefits work against fulltime employment;  many employers are
14 forced by the expense of the system to turn to part-time workers
15 who don't work enough hours to earn benefits.  This adds to the
16 problem of workers forced into taking two or three jobs just to
17 survive.
19      In 1991, the Legislature added an additional .05% assessment
20 on wages subject to unemployment taxes to fund an Employment and
21 Training Fund.  This law was to sunset at the end of 1996.  Many 
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 1 employers felt it would be allowed to die because the training
 2 programs had affected employment only marginally.  Unfortunately,
 3 instead of repealing the provision, the Legislature expanded the
 4 purposes for which the funds could be used to include grants and
 5 subsidies to agencies who provide services for the School to Work
 6 Program.  As laudable as this program might seem, it should not
 7 be funded by a tax on employers who are already doing a service
 8 by providing jobs and training.  The Legislature intends to
 9 reverse this decision and repeal the assessment as a first step
10 toward reducing employers' costs.
11      SECTION 2.  Section HRS 383-128, Hawaii Revised Statutes, is
12 repealed.
13      ["83-128  Employment and training fund established.(a)
14 Effective January 1, 1992, there is established in the state
15 treasury, apart from all other funds in this State, a special
16 fund to be known as the employment and training fund.  All
17 assessments collected pursuant to section 383-129 and all other
18 moneys received by the fund from any other source shall be
19 deposited into the employment and training fund.
20      (b)  The moneys in the employment and training fund may be
21 used for funding:
22      (1)  The operation of the state employment service for which
23           no federal funds have been allocated;

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 1      (2)  Business-specific training programs to create a more
 2           diversified job base and to carry out the purposes of
 3           the new industry training program pursuant to section
 4           394-8;
 5      (3)  Industry or employer-specific training programs where
 6           there are critical skill shortages in high growth
 7           occupational or industry areas;
 8      (4)  Training and retraining programs to assist workers who
 9           have become recently unemployed or likely to be
10           unemployed;
11      (5)  Programs to assist residents who do not otherwise
12           qualify for federal or state job training programs to
13           overcome employment barriers; and
14      (6)  Training programs to provide job-specific skills for
15           individuals in need of assistance to improve career
16           employment prospects.
17      (c)  The director may require employers assisted by any of
18 these programs to contribute up to fifty per cent of the cost of
19 such assistance in cash or in-kind contributions.
20      (d)  The department is authorized to provide grants and
21 subsidies to contract for employment, education, and training
22 services from public and private agencies and nonprofit

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 1 corporations.  Grants and subsidies for these services shall be
 2 exempt from chapter 42F so funds for these services may be
 3 expended in a timely manner to effectuate the purposes of this
 4 section.  All other disbursements shall be in accordance with
 5 chapter 103D.
 6      (e)  For purposes of grants and subsidies awarded under
 7 subsection (d), any organization requesting a grant or subsidy
 8 shall:
 9      (1)  Be licensed and accredited, as applicable, under the
10           laws of the State;
11      (2)  Have at least one year's experience with the project or
12           in the program area for which the request or proposal
13           is being made; except that the director may grant an
14           exception where the project or program area deals with
15           new industry training; and
16      (3)  Be, employ, or have under contract persons who are
17           qualified to engage in the program or activity to be
18           funded by the State.
19      (f)  Recipients of grants or subsidies shall be subject to
20 the following conditions:
21      (1)  Any organization requesting a grant or subsidy shall
22           submit its request together with all the information
23           required by the director on an application form
24           provided by the department;

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 1      (2)  The recipient of a grant or subsidy shall not use
 2           public funds for purposes of entertainment or
 3           perquisites;
 4      (3)  The recipient of a grant or subsidy shall comply with
 5           applicable federal, state, and county laws;
 6      (4)  The recipient of a grant or subsidy shall comply with
 7           any other requirements the director may prescribe;
 8      (5)  The recipient of a grant or subsidy shall allow the
 9           director, the legislative bodies, and the legislative
10           auditor full access to records, reports, files, and
11           other related documents so that the program,
12           management, and fiscal practices of the grant recipient
13           may be monitored and evaluated to assure the proper and
14           effective expenditure of public funds;
15      (6)  Every grant or subsidy shall be monitored according to
16           rules established by the director to ensure compliance
17           with this section; and
18      (7)  Any recipient of a grant or subsidy under this section
19           who withholds or omits any material fact or
20           deliberately misrepresents facts to the director or who
21           violates the terms of the recipient's contract shall be
22           in violation of this section and, in addition to any
23           other penalties provided by law, shall be prohibited

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 1           from applying for a grant or subsidy under this section
 2           for a period of five years from the date of
 3           termination.
 4      (g)  The director shall submit a report to the legislature
 5 on the status of the employment and training fund, including
 6 expenditures and program results, at least twenty days prior to
 7 the convening of each regular legislative session.
 8      (h)  The director of finance shall act as the treasurer and
 9 custodian of the employment and training fund, invest those
10 moneys in accordance with applicable laws and rules, and disburse
11 the moneys in the employment and training fund in accordance with
12 directions by the director of labor and industrial relations.
13 All interest earned from investment of moneys in the employment
14 and training fund shall be deposited in the fund.  The director
15 of finance shall be liable on the director's official bond for
16 the faithful performance of all duties in connection with the
17 employment and training fund.  All sums recovered on the surety
18 bond for losses sustained by the employment and training fund
19 shall be deposited in the fund.
20      (i)  Administrative costs for the collection of employment
21 and training fund contributions and for costs related to the
22 establishment and maintenance of the employment and training fund
23 shall be borne by the fund beginning with fiscal year 1992-1993
24 and thereafter.

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 1      (j)  The director may establish positions and hire necessary
 2 personnel to establish and administer the employment and training
 3 fund without regard to chapters 76 and 77."]
 6      SECTION 3.  Section HRS 383-129, Hawaii Revised Statutes, is
 7 repealed.
 8      "[383-129  Employment and training assessment.(a)
 9 Effective January 1, 1992, through June 30, 1997, and from
10 January 1, 1999 through December 31, 2000, in addition to
11 contributions determined by section 383-68, every employer,
12 except an employer who has selected an alternative method of
13 financing liability for unemployment compensation benefits
14 pursuant to section 383-62 or an employer who has been assigned a
15 minimum rate of zero per cent or the maximum rate of five and
16 four-tenths per cent in accordance with section 383-68, shall be
17 subject to an employment and training fund assessment at a rate
18 of .05 per cent of taxable wages as specified in section 383-61.
19      (b)  Collections from the employment and training assessment
20 shall be made in the same manner and at the same time as any
21 contributions required under section 383-61, and shall not be
22 deducted, in whole or in part, from the wages of individuals in
23 an employer's employ.
24      (c)  Any assessments collected pursuant to this section
25 shall remain separate and shall not be included in any manner in
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 1 computing unemployment contribution rates assigned to employers
 2 in accordance with sections 383-63 to 383-68.
 3      (d)  The director may impose penalty and interest on
 4 delinquent employment and training assessments in the same manner
 5 as provided for contributions to the unemployment compensation
 6 fund in section 383-73.  For purposes of computation of penalty
 7 and interest under this subsection, employment and training
 8 assessments shall be considered part of the employer's
 9 contributions to the unemployment compensation fund.
10      (e)  Collection of money from an employer delinquent in
11 paying employment and training assessments or contributions to
12 the unemployment compensation fund pursuant to this chapter shall
13 first be applied to interest and penalty, then applied to
14 delinquent unemployment compensation contributions, and finally
15 to delinquent employment and training assessments."]
17      SECTION 4.  Statutory material to be repealed is bracketed.
18      SECTION 5.  This Act shall take effect upon its approval.
20                           INTRODUCED BY:  _______________________

SB SMO 99-017