Government Affairs Albany Update - September 29, 2006
- Final Procurement Lobby Guidance
- Power Commission Testimony
- Business Council Announces Unemployment Compensation Tax Decreases
While not addressing every concern raised by The Business Council, this final guidance provides some important clarifications as to how the Act will be implemented and enforced by the Commission. Among other things, the final guidance:
- clarified that the registration threshold is $5000 per year, rather than per biennial registration period;
- adopted (with slight modifications) a provision stating that contacts between vendors and public officials intended to generate interest in a vendor's products or services, which occurs prior to an agency making a "determination of need" do not constitute procurement lobbying. Further, they established a "safe harbor" provision which states that a limited inquiry as to whether a determination of need has been made is not considered a lobbying contact. [It was noted, however, that this provision will still leave some ambiguity regarding compliance, since the "determination of need" concept, established in State Finance Law, does not apply to municipal entities that are subject to procurement lobbying restrictions.)
- finalized language further defining the exemption for commissioned salespersons. This guidance states that to qualify for the exemption, a person would have to receive a "significant portion" [undefined term] of his or her compensation in the form of commission income, and that the commission rate for governmental procurements in New York State does not their commission rate for private sector sales by more than 10 percent.
- The Commission has determined that a discretionary bonus which is based on factors that include success in meeting sales targets, but which is not calculated as a percentage of sales, does not constitute commission income, and that such a bonus is not an illegal contingent retainer for procurement lobbyists. Likewise, they confirmed that the commission portion of income earned by of those who meet the definition of a commission salesperson also do not constitute a contingent contract.
Commission Chairman Paul Schectman stated that they would consider additional amendments to the final guidance at future meetings. The next Commission meeting was scheduled for Tuesday, November 21.
Staff Contact: Ken
Among our key recommendations were:
- adoption of a long term mechanism to provide low costs power through the Economic Development Power, MDA and High Load Factor programs, and a long term replacement for the Power for Jobs program.
- focus these programs on the retention of existing in-state business and employment, and on businesses for which the cost of energy is a critical competitive issue
- adoption of program criteria including reinvestment in capital facilities; investment in new technology and energy efficient equipment and facilities; and retention of existing in-state employment.
The Council also testified that the state should consider redeploying a portion of NYPA hydro-power currently dedicated by statute to residential uses for economic development purposes once it becomes contractually available in mid-2007. The state could use other mechanisms, such as tax credits, to help offset any adverse impact on residential ratepayers.
The Council also stressed that the state also begin to address systemic issues related to electric power supply and costs, including the need to site new, low-cost base-load generation with the help of a re-established Article X siting law; promotion of fuel diversity through coal gasification and carbon sequestration projects in addition to, rather than instead of, “cleaner coal” combustion technology; consider additional nuclear generation capacity; and adoption of broadly applicable energy efficiency investment tax credits that would be available to all commercial and industrial employers.
The Commission is charged with making recommendations on the future of state economic development power programs. Its intent is to issue a final report by December 1, 2006. The Commission was established by a provision adopted as part of the FY 2007 budget language.
Business Council Announces UC Tax Decreases
2007 Federal UC Tax Decrease $42/EMPLOYEE
2007 State UC Tax Decrease $17/EMPLOYEE
The Business Council of New York State, Inc. is pleased to announce – as it correctly projected in 2004 – that 2007 will see Unemployment Compensation Tax decreases for New York employers in both the Federal and New York Unemployment Compensation Taxes without having to raise/bond additional New York UC taxes of some one billion dollars.
The Federal Unemployment Compensation Tax (commonly known as the FUTA tax) will decrease from $98/employee [1.4% X $7000 wage base] to $56/employee [0.8% X $7000 wage base] due on January 31, 2007 (2006 annual return). Also, employers with employees in only one state may return to using form 940--EZ.
New York's experience-rated Unemployment Compensation Tax (also known as the “normal” tax) will shift from column 1 (the highest-rate tax column that has been in effect since January 1, 2003) to column 2 – a decrease of two-tenths of a percentage point in each of the column's corresponding tax rates, thus reducing the NY experience-rated tax by $17/employee [0.2% X $8500 wage base].
Both the Federal and State 2007 UC Tax decreases were projected in 2004 to occur by The Business Council based upon a reading of 2003 and 2004 (partial) numbers that the New York UC Trust Fund would finish repaying all outstanding Federal advancements in the first week of May, 2006, that the Trust Fund would retain a positive balance throughout the remainder of 2006 and show a positive close-of-year balance on December 31, 2006 – the first close-of-year positive balance since 2001.
Confirmation of this good news for employers was posted by the United States Department of Labor this past week when it stated: “Since New York repaid its loan balance with the Federal Unemployment Account before September 30, it will not be charged interest on those borrowed funds provided it does not take additional loans before December 31, 2006. New York has informed Employment and Training Administration that it does not intend to request any loans before the end of 2006.”
By statute, the Federal UC tax rate decreases from 1.4% to 0.8% on New York employers' Annual Federal Unemployment (FUTA) Tax Return due January 31, 2007 so long as New York's UC Trust Fund balance on November 11, 2006 is positive (it already is), and it remains positive through December 31, 2006 (it will so remain).
Following are Appendix A – the Issues in Brief paper entitled: “Support of the Most Cost-Effective Repayment of the Federal UC Trust Fund Advances” that The Business Council wrote in 2004, and Appendix B – “Bullets of Note on the Most Cost-Effective Manner re UC taxes for Employers” written in January 2006.
ISSUES IN BRIEF
Support of the Most Cost-Effective Repayment of the Federal UC Trust Fund Advances
Private sector, for-profit employers in New York pay both a Federal UC Tax and a (New York) State UC Tax to support the Unemployment Compensation system. Private sector employer UC taxes are the sole funding for New York's Unemployment Compensation Trust Fund. The rate of State UC Tax paid is set by a series of tax rates triggered by the level of the UC Trust Fund.
Since 2003 New York private sector, for-profit employers have been paying the State UC Tax under the maximum set of tax rates – as the UC Trust Fund level has plummeted to a negative level due to the prolonged economic recession since 2001 exacerbated by the negative economic impact of the 9/11 terrorist attacks.
Notwithstanding the negative UC Trust Fund balance, there is no risk to payment of UC claimant benefit checks as the dual Federal/State system automatically advances Federal UC Tax funds to those states whose Trust Funds have fallen below zero. Federal law increases the Federal UC Tax for private sector, for-profit employers in those states whose Trust Funds are negative at the end of two consecutive calendar years. In New York -- whose UC Trust Fund balance was negative on 12/31/2 and 12/31/3 -- these employers had their Federal UC Tax raised by $21 per employee for calendar year 2004, payable in January 2005. The $133 million raised by the January 2005 tax is applied by the Federal government to reduce New York's outstanding Federal loan balance.
In January 2006, Federal law will increase the Federal UC Tax for private sector, for-profit employers in New York by $42 per employee for calendar year 2005. The estimated $275 million of the January 2006 tax, also, will be applied by the Federal government to reduce New York's outstanding Federal loan balance.
Moreover, New York's economic picture has been improving and continues to improve. UC Trust Fund revenues totaled $2,815,476,000 in the twelve months ending September 30, 2004 while the corresponding benefit payout was $2,554,487,000. The $261 million gain in the UC Trust Fund was a dramatic ($738 million) improvement over the $477 million loss in the UC Trust Fund in the twelve months ending September 30, 2003.
Preliminary economic data since September 30,2004 shows continuing strength and projections are that New York's UC Trust Fund level will be some $1 billion higher on September 30, 2006 than two years previously through a combination of two positive years of growth and the January 2005 and January 2006 Federal tax increases; accordingly, the Federal advance to New York's UC Trust Fund -- which stood just shy of $700 million on 12/31/4 -- will have been repaid.
Business Council Priority
The Business Council supports the above-related scenario as the most cost-effective method for employers to pay off the Federal advancement of UC funds.
Bullets of Note on the Most Cost-Effective Manner re UC Taxes for Employers
The UC Trust Fund -- and its debt -- are the responsibility of PRIVATE SECTOR employers SOLELY.
Private sector employers in NY pay a STATE UC tax to Albany and they pay a FEDERAL UC tax to the Feds.
NY -- as well as the other 49 states -- collect their state UC taxes and ship to Washington to be held in trust by the Feds for each of the states to cover their UC claimant checks.
Whenever a state's UC Trust Fund has insufficient monies to cover its UC claimant checks, the Feds advance to that state the necessary monies from its own Federal tax collections.
If a state's UC Trust Fund is negative on two consecutive December 31s, then Federal law will require a PARTIAL payback of the arrears with a small automatic increase of 3/10ths of 1% in the FEDERAL tax on private sector employers in the affected state for the upcoming year; but the law does not require actual payment until January 31 of the year after the upcoming year.
This FEDERAL UC tax due 13 months after the second consecutive negative December 31 can be avoided if the state -- in this case, NY -- were to increase its own State UC tax to wipe out the ENTIRE amount of arrears by 11/11.
THIS IS THE IMPORTANT FACT: IT IS THE VERY SAME GROUP THAT PAYS BOTH THE FEDERAL
UC AND THE STATE UC TAXES -- namely, PRIVATE SECTOR EMPLOYERS IN NEW YORK.
It would have taken a State UC tax increase of some $1B on NY private sector employers payable by 11/11/4 to have avoided the Federal UC tax increase of $133 M on NY private sector employers payable on 1/31/5.
It would have taken a State UC tax increase of some $600 M on NY private sector employers payable by 11/11/5 to have avoided the Federal UC tax increase of some $275 M on NY private sector employers payable on 1/31/6.
In both years, it made economical sense to pay the LOWER Federal UC tax increase LATER, rather than the HIGHER State UC tax increase SOONER.
Remember, in both cases it is the SAME entity paying the tax: a private sector employer in New York, in one case, the employer pays out of her/his left pocket marked "Federal", and, in the other case, the employer pays out of her/his right pocket marked "New York".