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Legislative Memo

Lev Ginsburg
Director of Government Afairs
T 518.465.7511 x207
www.bcnys.org

BILL:

S.2245-B (Onorato) / A.4921-B (John)

Support

SUBJECT:

Increases unemployment benefit rates; increases unemployment insurance taxable wage base

 

DATE:

March 16, 2010

 

The Business Council opposes this bill which increases the maximum weekly unemployment benefit rate in each of the next three years to a maximum of $650 in 2013; and increases the taxable wage base from a current level of $8,500 to a maximum level of $13,500 in 2013.  Additionally, starting in 2014, this bill proposes to index the taxable wage base and the maximum weekly benefit, sufficient to a level to support both Unemployment Insurance Trust Fund solvency and to assure benefits are adjusted to equal one-half the state's average weekly wage.

The legislation would increase the maximum benefit rate by 60% and increase the taxable wage base by 58% through 2013, with unknown rate increases in subsequent years.  New York's approximately 500,000 tax rated employers paid over $2.3 billion in unemployment insurance taxes in 2008 on a taxable wage base of approximately $62.6 billion.  If this bill were enacted, employer taxes for unemployment insurance would increase 14.7% in year one alone.

The solvency of the state's Unemployment Insurance Trust Fund does need to be addressed and The Business Council stands ready to meet with all interested parties to negotiate reforms to the tax system to achieve trust fund solvency. Trust Fund solvency will likely require tax increases to be borne by all tax-rated employers in New York.  The sponsors' memo accompanying this bill acknowledges that the economic downturn and its impact on the solvency of the Trust Fund will have significant cost implications for all New York's employers and the burden will fall disproportionately on stable employers.  

It is incongruent to propose Trust Fund solvency while at the same time proposing increases to the maximum benefit levels.  While it is acknowledged that benefit levels have not increased since 1998, the Business Council believes the solvency issues must be negotiated first to ensure any negotiated benefit rate increase can be sustained without prolonging insolvency issues and that any solutions are equitable in their outcome.

Additionally, permanently indexing the maximum benefit to the state's average weekly wage places a disparate tax burden on many of New York's employers.  The U.S. Department of Labor's data shows that New York State's average weekly wage is driven by wages primarily earned in two of New York's 62 counties.  More than forty counties in New York State have average weekly wages for which the current maximum unemployment insurance benefit of $405 approximately equals one-half the average weekly wage in that county.  Thus, many employers under this proposal will be forced to pay an unemployment tax on a wage base for which their employees would never be able to access the proposed maximum benefit. 

The Business Council believes a system fully funded by employers, benefits from stakeholder input into the means to achieve Trust Fund solvency and to achieve other reforms to the unemployment insurance system, including any benefit level increase.  This legislation seeks to impose legislatively-desired solutions without regard to the long term fiscal implications on employers across New York State to achieve the goals advanced. 

For these reasons, The Business Council opposes S. 2245-B/A.4921-B.