Biz Again Facing Big Unemployment Comp Tax Hike

By: David Royse, The News Service of Florida
By: David Royse, The News Service of Florida

THE CAPITAL, TALLAHASSEE, Dec. 7, 2010 --

A year after dodging a massive unemployment tax increase, employers are again facing a larger-than-expected jump in what they pay to the state for jobless benefits, including interest coming due on money borrowed from Washington to pay claims as unemployment spiked in the state.

Lawmakers earlier this year responded to pleas from employers – who were facing an enormous increase that could have seen the minimum rate go from about $8 per worker to $100 per worker – and passed emergency legislation on the first day of the 2010 session to address it. The minimum rate still went up, but from about $8 per employee to $25.20 per employee, and kept the maximum rate the same, at $378 per worker.

Avoiding the big increase was done primarily by delaying a planned 2009 increase in the tax base until 2012 and continuing to borrow money from the federal government, which the state has had to do to pay claims since the trust fund from which the state pays benefits went into the negative in August, 2009. The legislation also removed a link between the amount of money in the state’s trust fund and the setting of tax rates.

But with unemployment in Florida remaining determinedly high – it’s been at 11.9 percent the last two months – the rate is now expected to jump again, and the increase is expected to be higher than previously thought, in part because of certain laid-off workers who are drawing more in benefits than their employers paid in because their employers had already paid the statutory maximum into the system.

Initially, employers thought they would see an increase in the minimum from $25 to around $44, but found out last month that the new 2011 rate will actually be $72.10, nearly tripling their tax bill. On top of that rate, comes a payment due in June of an additional $9.51 per employee to pay $61.4 million in interest to Washington, which has been loaning the state money to pay the benefits.

“We were able to create a taxable rate for 2010 that was manageable and we were looking at around $44,” for next year, said Randy Miller of the Florida Retail Federation. “And that was manageable.”

But now, with the rate plus interest pushing the minimum per-worker charge over $80, “that is not manageable,” Miller said. “That is a job killer.”

The Senate Finance and Tax Committee heard about the issue on Tuesday, but Chairwoman Ellyn Bogdanoff said she’s already been hearing from employers – but none have suggested a good way to fix it as the state looks at what was projected on Tuesday to be a more than $3 billion shortfall.

“Unemployment compensation is going to be a difficult issue this year,” said Bogdanoff, R-Fort Lauderdale. “Nobody has any great ideas.

“Well, putting people back to work is obviously the best way to do it … but we have an immediate problem,” Bogdanoff said.

Miller said some in the business community do have ideas, and he gave the committee several on Tuesday. Among those IS issuing bonds to take care of the interest part of the increase, suspending a 2012 increase in the wage base, and maybe even looking at increasing the maximum rate.

Miller said the interest payment could also be paid for from unallocated state general revenue, or from reserves, and repaid down the road.

Some businesses would be amenable to considering an increase in the maximum rate of 5.4 percent – because businesses already paying that maximum are laying off additional workers without having to pay more into the system as a temporary fix.

“That’s increasing the rate in order to reallocate the (cost) to those companies that are causing the problem,” Miller said.

That likely wouldn’t sit well with the construction industry and others who are seeing their workers drawing more in benefits than the industry is paying in, and could split the business community on the issue.

Still, “it’s something we’d like you to look at,” Miller told Bogdanoff.

Some advocates for the unemployed might also support raising the maximum.

“That’s something worthy of looking at,” said Arthur Rosenberg, an attorney with Florida Legal Services.

Rates in Florida are among the lowest in the nation.

The committee would likely have to approve any changes, and so far, no legislation has been filed in either the Senate or House.


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