Unemployment insurance taxes are rising dramatically this year for many Washington businesses -- as high as 1,300 percent for some.
It's a painful but logical symptom of the severe economic recession that's just showing signs of abating. As businesses struggled to survive in 2009, many were forced to layoff workers.
The layoffs led to a huge increase in payouts from the state's unemployment trust fund -- about $4 billion in 2009, up from $1.2 billion in 2008.
That's one reason why it's critical that lawmakers carefully consider the consequences of adding to the state's already generous unemployment insurance benefits, Donna Steward, AWB government affairs director, told the House Commerce & Labor Committee on Wednesday.
Steward joined representatives from the Washington Roundtable and National Federation of Independent Businesses in opposing a pair of bills that would expand unemployment benefits to some part-time workers and some workers who voluntarily quit their jobs.
Although it's far from clear how much either HB 2553 or HB 2647 would cost employers, there is no doubt either would make the system more expensive.
"Yes, there are some costs that will go up because of this bill," said Karen Lee, Employment Security Department commissioner, in response to questioning from Rep. Cary Condotta, R-East Wenatchee.
HB 2553 would cost the state an estimated $43 million in 2011 and $73 million in future two-year budgets, Lee told committee members. HB 2647 would cost a little more than $13 million next year and roughly $37 million in future two-year budgets, she said.
However, officials admitted that it's difficult to predict how much additional cost would come from expanding unemployment benefits to part-time workers.
AWB believes the costs will be dramatically higher than the state's projections, Steward said.
The bills represent two slightly different ways in which the state could become eligible to receive approximately $93 million in federal funding for workforce training.
But there are other options for making the state eligible to receive the funding -- options that don't drive up costs for businesses, Steward said.
Even without one of these bills, employers are facing huge cost increases.
AWB polled its members and found that many will see their unemployment insurance tax rates go up more than 1,000 percent, Steward told the committee. And that's just for the "experience-rated" part of the rate that looks at the employer's experience with layoffs.
The other part -- the social tax -- varies by the overall level of unemployment and will go up at least 80 percent for all employers; some will see the maximum 150 percent increase.
Some examples from the AWB poll:
- A Monroe business said its unemployment insurance tax will rise 1,420 percent this year.
- A Seattle carpet company will see an 1,100 percent increase.
- A Port Angeles marine company will see a 1,000 percent increase.
- A Seattle restaurant will see a 980 percent increase.
- A Walla Walla concrete, sand and gravel company will see a 185 percent increase.
"The increase is phenomenal," Steward said, adding: "As you consider adding benefits into the system, you have to consider what the impact would be."
Lawmakers must also consider the health of the state's unemployment trust fund, which went from about $4 billion in 2008 to $2.6 billion by the end of the December.
Officials project it will continue falling to below $2 billion -- and about 10 months of benefits remaining -- before the unemployment rate begins to fall and the fund stabilizes. They do not believe the state is in danger of joining the many states with insolvent trust funds.
But Nancy Hiteshue of the Washington Roundtable cautioned lawmakers about adding more benefits to the system.
"We have significant concerns about its solvency," Hiteshue said, noting the rapid draw down of the fund in response to steep job losses.
Since the start of the recession, Washington has lost 1 of every 18 jobs, Hiteshue said: 1 of 14 lost from the private sector and 1 of 38 in state government.
"Both of these measures will lead to an unknown greater payout from the fund, creating more pressure to raise rates to keep the fund solvent," she said, "which will only hinder job creation."
