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Legislative Memo

518.465.7517

BILL:

S.4161 (Spano)

Support

SUBJECT:

UC Non-Charging First 8 Weeks

 

DATE:

June 17, 2002

 

Senate bill number 4161 would create three special exceptions to the requirement that the first eight weeks of a claimant's unemployment compensation benefit checks be charged to the separating (last) employer. [The remaining eighteen weeks of a claimant's benefit checks are charged against employers in proportion to the compensation paid by each employer in the base period.] The legislation's newly created special exceptions are where the separating employer is 1) the Federal government, 2) an out-of-State employer, or 3) a certain educational institution.

The main reason for the thrust of this legislation is that Federal Unemployment Compensation conformity requirements do not permit benefit charges against the Federal government nor out-of-state employers to be on a non-pro rata basis. The legislation creates the special exceptions and THEN charges the first eight weeks of benefit checks to the General Account.

It is charging of the excepted eight weeks of benefits to the General Account that The Business Council opposes. The General Account is funded by a Subsidiary Tax on private sector, for-profit employers; none of the three excepted employers pay the Subsidiary Tax that is the General Account's funding source. The legislation's scheme of charging the first eight weeks of benefits (where the separating employer is the Federal government, an out-of-State employer, or a certain educational institution) to the General Account is akin to ordering gifts for one person, but charging the cost of the gifts to another person's credit card.

Moreover, while the Subsidiary Tax is levied at its maximum set of rates, years of largesse in gratuitously charging benefits to the General Account has placed the General Account balance several billions dollars in the negative. That red ink has emasculated the several billions of dollars of positive balance in the aggregated private sector employer account balances resulting in a New York Unemployment Compensation Trust Fund balance of some $800 million currently. This $800 million is fully pledged and necessary to meet the UC benefit check payout projected through the end of 2002 and, in most economic scenarios, will fall short of meeting the payout projection. It runs counter to prudent public policy to further charge a fund awash in red ink whose funding is already levied at the maximum.

Rather than charging the excepted eight weeks to the General Account, it is respectively suggested that the excepted eight weeks be charged as the later eighteen weeks are, namely, in proportion to the amount of compensation paid by employers in the base period. Legislation drafted in this revised manner would enhance and assure, rather than diminish and jeopardize, the pool of funds available to fund the Unemployment Compensation benefit checks that are forthcoming to former workers in New York.

Accordingly, The Business Council of New York State, Inc. urges that Senate bill number 4161 be rejected in its current version and, instead, be amended to strengthen the funds available to pay the unemployed of our State.