On Friday, February 11, the Governor signed SB 5135 and ESHB 1091, lowering unemployment insurance tax rates for 80% of all small businesses. Touted as part of the Governor’s jobs package, the legislation represents a significant positive step forward for the business community. The legislation contains five distinct components: 1) caps the social tax component of unemployment taxes; 2) adjusts the proportion of taxes paid in each rate class; 3) expands the UI training benefits program; 4) aligns state law to ensure unemployed individuals can take advantage of federally extended benefits fully funded by the federal government; and 5) includes a short-term temporary increase in weekly benefits.
Within the next 45 days, most businesses will receive a revised tax statement from the Employment Security Department identifying that they will pay lower taxes in 2011 than originally notified in December. No business will pay more than identified on the December 2010 tax statement but some will see no change in their payments. This reflects a business’ direct experience with layoffs over the past three years. The tax reductions represent $300 million that will remain in the hands of businesses in 2011 instead of being paid in UI taxes.
Although this legislation was passed within the first five weeks of session, it represents a hard-fought battle by the business community. Whenever word of a tax adjustment moves forward, representatives of the labor community bring forward costly benefit increases that negate the positive aspects of the tax reductions, and this year was no exception. Early in the discussion over this legislation the labor community brought forward a permanent benefit increase that would have given unemployed individuals an additional $15 per week per dependent. This type of benefit increase would have significantly increased employer tax rates. The business community fought hard against the dependent allowance and was ultimately successful.
Legislators however, brought forward an option to temporarily increase recipient weekly benefits that would not impact individual employer UI tax rates. The expansion of the existing training benefit program enables the state to receive $98 million in additional federal UI funds. Rather than permanently expanding benefits and increasing employer tax rates, a portion of the federal funds, $68 million, will be used to fund the temporary benefit increase. This strategy will increase UI benefits by $25 per week per UI recipient through November 2011. None of the dollars attributed to the temporary benefit increase will be charged against an individual employer.
Actions of many of you were instrumental in our ultimate success with this legislation as well. Thank you to those who were willing to share their tax statements with me so they could be used to demonstrate not only the outrageous tax increases of the past two years, but to also help model what could happen if additional benefits were charged to employers. Your willingness to assist us with this information allows legislators to see the true impact on employers in their communities and is very much appreciated. Special thanks also to Judy Coovert of PrintCom and Lisa Harris of TrueBlue who were willing to provide testimony before the legislature on SB 5135 and its potential to assist employers during our continued struggling economy.
