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Legislative Memo

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

BILL:

S.8423 (Onorato)/A.11607 (John)

Support

SUBJECT:

Unemployment Insurance System Reform

 

DATE:

June 30, 2010

 

The Business Council of New York State opposes this legislation which increases unemployment insurance taxes on the State’s most stable employers – regardless of size -- as a means to fund the increased benefits provided for in the bill. 

This bill achieves its definition of “fiscal stability” to the Unemployment Insurance Trust Fund through imposing on more than one-third of New York’s employers new, higher tax rates. The elimination of the six lowest tax rates on the UI tax table impacts only those employers who are the most stable and have not engaged in significant reductions in force – those with the best experience rating.  It then compounds the tax rate increase with a simultaneous increase in the taxable wage base from its current level of $8,500 to $9,500 in 2011 increased over a period of years to $14,000 in 2018.    These two increases in 2011 alone will represent a minimum 27% increase per employee for the state’s most stable employers.

The Unemployment Insurance Trust Fund’s revenues come solely from employer-paid taxes.  The insolvency of the Fund, driven by the breadth and scope of this economic recession, is an issue of primary concern to all of New York’s employers as employer unemployment insurance taxes are the sole revenue source to repay those monies borrowed from the Federal Unemployment Trust Account.  The loss of the FUTA credit to repay the federal borrowing will mean all tax-rated employer’s will face a $378 per employee federal tax (an increase from $56 per employee with the FUTA credit), in addition to interest expense due for that borrowing. 

Finally, this bill, as with others advanced in the Legislature, indexes both the benefits and the taxable wage base thus eliminating in the future any need for discussions among the stakeholders (employers, organized labor, and the Legislature) on appropriate reforms to the system.  Both the Legislature and the Executive have indicated that indexing of benefits is a non-negotiable item, essentially turning their back on New York’s businesses as a vested stakeholder in the unemployment insurance system.  Business’ most recent history with indexing benefits  as part of the 2007 workers’ compensation reforms provides ample evidence to oppose indexing.The handshake agreement among the stakeholders as part of those reforms was not honored: significant benefit increases have occurred but the systemic reforms which included savings to support the benefit increases have yet to be implemented. Indexing removes the need for any party to be at the negotiating table.

This bill does not represent reform to the state’s unemployment insurance system. Rather it represents changes to the tax tables to achieve the real goal: increasing benefits at a time the Trust Fund is insolvent.  New York’s businesses are not insensitive to the fact that UI benefits have not increased in over ten years. To provide for a benefit increase, however, at the same time the Trust Fund is insolvent is inconsistent with sound fiscal policy.  

For these reasons, The Business Council opposes this bill.