For second straight year, Council saves members millions By prepaying $62 million in UI taxes last month, employers again cut their own taxes


Director of Communications

For the second consecutive year, The Business Council has helped New York's business community effectively reduce its own taxes by pre-paying unemployment insurance (UI) taxes.

Because businesses pre-paid more than $62 million in UI taxes in December, UI taxes on all employers in the state will be reduced by some $210 million in 1999, said Business Council President Daniel B. Walsh.

The new tax cut comes one year after the first such effort, which The Business Council conceived and dubbed "Operation Pre-Pay." That Business Council initiative resulted in a $420 million reduction in New York State employers' 1998 UI taxes.

In that campaign, The Council blitzed employers around the state with phone calls, letters, and faxes urging pre-payments.

The first Operation Pre-Pay campaign was mounted after Richard Schwarz, The Council's tax specialist, calculated that early payments of UI taxes in 1998 would push the state's UI trust fund above $930 million, automatically triggering a reduction in UI tax rates.

The December 1998 initiative resulted in UI pre-payments of $62 million, about $5 million more than was needed to trigger a tax rate reduction of up to 0.4 percent.

As a result, approximately 80 percent of all New York state employers will see 1999 rate reductions of 0.4 percent, saving them $34 per employee in 1999 compared to what they otherwise would have paid, Schwarz said.

All other employers-those with the three best experience ratings-will have their rates reduced by 0.3, 0.2, and 0.1 percent, saving $25.50, $17, and $8.50 per employee, Schwarz said.

However, these employers with the best experience ratings will save another $45.50 per employee as a result of the new financing law enacted in June 1998. That law, which The Business Council helped negotiate, was specifically intended to reward employers with good experience ratings. Employers' savings from that law have been estimated in the hundreds of millions of dollars.

In addition, employers saved as much as $63 per employee last year as a result of the initial Operation Pre-Pay effort.

As a result of that effort, employers pre-paid $171.2 million to 2,506 employer accounts over a six-week period.

In last month's pre-payment effort, 56 employers made pre-payments to 121 separate employer accounts after a hectic three-week period in December when employers that could make sufficient pre-payments were identified and urged to pre-pay, Schwarz said.

The state Department of Labor is expected to mail information on 1999 UI tax rates to employers between February 16 and March 9.

An employer's 1999 UI tax rate is determined by three factors: the balance of the Unemployment Compensation Trust Fund on December 31, 1998; the employer's own experience with employment in previous years; and the new financing law passed by the Legislature last June.