Division directors outline healthy UI trust fund and $7.1 million STEP grants budget for FY26

Paloma Harbor, director of the Division of Employment and Training Services, told the Department of Labor Finance Subcommittee on March 10 that the Alaska unemployment insurance (UI) trust fund was above the statutory solvency target as of the September 2024 tax‑setting date and, per federal rules, the trust fund cannot be used for purposes other than paying unemployment benefits.

Harbor said employers in every state pay Federal Unemployment Tax Act (FUTA) taxes on the first $7,000 of wages and that maintaining a federally compliant state UI system preserves a significant FUTA reduction for employers. She told the committee the state received $24.6 million in federal administrative funding in federal fiscal year 2024 and $17.3 million in interest payments tied to quarterly trust fund balances. Harbor said last fiscal year the trust fund took in about $165.9 million in revenue (interest, taxes, penalties and other receipts) while paying about $45.3 million in benefits.

Harbor described how Alaska’s UI funding differs from most states: Alaska is one of three states where employees also contribute to the unemployment trust fund. She explained the statutory employee contribution minimum is 0.5% of taxable wages (taxable wages are updated annually and represent 75% of the prior year average wage). Of that 0.5% employee contribution, Harbor said 0.1% goes to the State Training and Employment Program (STEP), 0.25% to the technical and vocational education program (DBAB), and 0.35% to the UI trust fund; those diversions occur before funds touch the trust fund and are established by statute.

On solvency, Harbor reported the trust fund balance was approximately $726 million as of September 2024, representing a reserve ratio of about 4.44% of total wages compared with the statutory target of 3.3%. Harbor said that the current balance exceeded the statutory solvency target by roughly $186.2 million. She emphasized that because of federal compliance requirements the trust fund’s balance cannot be reallocated for other purposes.

Harbor also described the State Training and Employment Program budget. Workforce Services operates 14 job centers statewide and received about $1,952,300 in STEP funds in the current budget. Harbor said that STEP funds served 398 Alaskans last fiscal year and, after a one‑time multi‑year operating appropriation enacted during the prior legislative session, the program has served 462 Alaskans year‑to‑date in FY25.

Dirk Craft, executive director of the Alaska Workforce Investment Board (AWIB), described AWIB’s role in awarding STEP grants and proposed FY26 funding of $7.1 million for grantees. Craft said AWIB trained 3,348 Alaskans in FY24 and had trained 2,289 so far in FY25. He told the committee AWIB received roughly $11 million in application requests against approximately $7.1 million available for distribution and currently funds 31 grantees. Craft said AWIB prioritizes applications that address industry workforce shortages, show organizational capacity, produce industry‑recognized credentials and demonstrate measurable placement and wage outcomes.

Craft said the common cost‑per‑participant limit is $10,000 and that the maximum award per applicant is $400,000; applications that exceed the $10,000 per‑participant threshold are commonly denied. He said eligible applicants include private employers, nonprofit organizations, regional training centers, adult education sponsors, and registered apprenticeship programs.

Committee members asked clarifying questions during the presentation but no formal appropriation or grant awards were decided during the session; Harbor and Craft presented information for the committee’s review.