Unemployment Insurance Committee Update June 29, 2010
The Governor presented this afternoon as part of a press release his "comprehensive legislation to reform the unemployment insurance system", which more properly should be characterized as a comprehensive UI tax bill. The draft legislation contains no system reforms, but, as the memo makes clear, is aimed at providing the funding to support increased UI benefits over the next eight years.
Specifically the bill:
- eliminates the six lowest tax rates for employers with a positive employer account percentage. (Note: more than one-third of New York's employers fall in these lowest tax brackets, so the impact for solvency and benefit increases will fall heaviest on the most stable employers.)
- increases over each of the next eight years the taxable wage base from the current level of $8,500 to $14,000; commencing in 2019 the taxable wage base will be set at 18% of the average annual wage.
- increases the maximum weekly UI benefit starting in 2011 from $405 to $475; and then sets the rate starting in 2012 to a percent of the state's average weekly wage increasing in each year by 2 percentage points annual until 2018, when the benefit rate will be set at 50% of the average weekly wage.
- includes provisions to increase the taxable wage base if the UI Trust Fund falls below 1.25% of aggregate taxable wages on December 31 of the prior year.
- makes very minor "reforms" to UI eligibility standards and lowers the number of employees a firm must have to participate in the Shared Work program.
The bill has not yet been introduced in either house of the Legislature and with the clock running on the legislative session, it is unclear whether the Legislature will consider this or their proposal (S.2245-B/A. 4921-B).
The Business Council, along with others, have been clear with the Legislature and Governor that Trust Fund solvency is a serious issue we are interested in discussing, and ought not be tied to a benefit increase. This rationale has not been supported in either branch. Both bills will have a serious tax impact on New York's businesses. The Legislature's bill gives more latitude to the Department of Labor in terms of setting taxable wage bases to sufficiently fund the benefit increases and to maintain solvency. The Governor's bill addresses solvency over time through the elimination of the lowest tax rates. Tying the UI benefit to 50% of the state's average weekly wage also has a disproportionate impact on many busiensses across New York State. While the state's average weekly wage is approximately $1,200, average weekly wages in 48 counties are at or near 50% of the current maximum UI benefit of $405. The state's average weekly wage is driven by wages from Manhattan and Westchester.
We will continue to lobby for a sensible approach to Trust Fund solvency but urge all to make their views known to their legislators and to me, if there are other concerns you would like us to advance.