HOUSE BILL REPORT

HB 1836

BYRepresentatives Hargrove, Wineberry, Schoon, Vekich, Braddock, Brekke, Sanders, Winsley, Lewis and Todd

Encouraging economic self-sufficiency through self-employment of families receiving aid to families with dependent children.

House Committe on Trade & Economic Development

Majority Report:  Do pass.  (17)

      Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Amondson, Beck, Braddock, Cantwell, Doty, Fox, Hargrove, Heavey, Holm, Kremen, McLean, Moyer, Rasmussen, Schoon and B. Williams.

House Staff:Steve Hodes (786-7092)

AS PASSED HOUSE FEBRUARY 10, 1988

BACKGROUND:

Interest in permitting individuals receiving unemployment compensation or welfare to utilize this financial assistance to initiate small businesses has grown with the success of the United Kingdom's Enterprise Allowance Scheme, established in 1983, and France's Chomeurs Createurs D'Enterprise, established in 1980.  These European programs provide methods for recipients of social insurance to utilize their grants and additional training and assistance to become self-employed.  The current federal budget reconciliation act authorizes the Department of Labor to operate a demonstration project under which states may continue to pay unemployment compensation to unemployed persons attempting to establish their own businesses.  The project provides dislocated workers with lump sum payments equivalent to their unemployment insurance entitlement to use as seed capital for small businesses. The Washington State Employment Security Department is a participant in the demonstration project, with the Department of Labor providing funds for lump sum grants, program costs, and state research costs.

A similar multi-state self-employment demonstration project is being initiated to establish whether self-employment can provide a route to self-sufficiency for a significant number of welfare recipients, and whether effective support systems for such self-employment can be established in the states.  The project currently includes Iowa, Michigan, Minnesota, Mississippi, New York, New Jersey and Wisconsin.  Program participation requires waivers under the Social Security Act. Key elements include the maintenance of Medicaid and Food Stamps for participants for one year.

SUMMARY:

The Secretary of Social and Health Services is directed to seek a waiver by October 1, 1988 under federal law to permit recipients of Aid to Families with Dependent Children to become self-employed.  If the waivers are obtained, the Department is directed to adopt rules to allow recipients to separate business assets from personal assets during a start-up period.  The rules are also to provide for evaluation of business progress during this period.  In the event the Department concludes that sufficient business income exists to replace the welfare grant prior to the expiration of this period, the burden of proof is on the recipient to establish that aid should continue through the startup period. The program is to be operated in cooperation with any self-entrepreneurship demonstration project operated by the Employment Security Department.

EFFECT OF SENATE AMENDMENT(S):  Senate amendments provide that in the rules adopted by the Department of Social and Health Services if federal waivers are obtained, deductions from income for business expenses shall be provided for.  Such deductions shall include but not be limited to capital expenditures, payments on the principal of loans to the business, and reasonable amounts for cash reserves.

Fiscal Note:      Available.

House Committee ‑ Testified For:    None Presented.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    None Presented.

House Committee - Testimony Against:      None Presented.

VOTE ON FINAL PASSAGE:

      Yeas 96; Excused 2

Excused:    Representatives Bristow, Taylor