The Maryland Chamber of Commerce opposes the Administration’s proposal to modify Maryland’s unemployment insurance (UI) system to permanently expand eligibility and benefits in order to obtain one-time federal stimulus funds.
“We’re looking at more people collecting for longer periods of time with increased eligibility and perhaps higher benefit amounts. That’s not a recipe that’s sustainable,” said Ronald Adler, CEO of Laurdan Associates Inc. and the Maryland Chamber of Commerce’s representative on the Joint Committee on Unemployment Insurance Oversight.
The Administration’s plan would:
- Authorize the equivalent of a one-year shift from Table F to Table E.
- Adopt an Alternative Base Period, adjusting how the state determines a claimant’s monetary eligibility and employer charges.
- Provide 26 additional weeks of UI benefits to people enrolled in job training.
- Make adjustments to the existing law allowing benefits for part-time workers.
- Reduce the interest rate for late payments from an annualized interest rate of 18 percent to 12 percent.
The proposal would help make the state eligible for $126.8 million in federal stimulus funds, but the estimated cost of enacting the changes is nearly $20 million per year, at a time when the UI trust fund is paying out more in benefits than it is taking in.
“We appreciate Governor O’Malley’s attention to this important issue for Maryland employers, but the short-term relief is outweighed by the long-term liabilities,” Maryland Chamber President/CEO Kathy Snyder said.
The Governor’s plan would also establish payment plans to allow employers to spread out their payments over a longer time frame. The Chamber supports this element and applauds the administration and the Department of Labor, Licensing and Regulation for helping employers spread their UI cost increases over the course of the year. Unemployment insurance taxes are calculated based on the first $8,500 of taxable wages. Without this option, the weight of the UI tax increase will hit many businesses especially hard in the first quarter.
The Maryland Chamber encouraged the Joint Committee on Unemployment Insurance Oversight to consider other changes to the state’s unemployment insurance system to provide long-term cost savings, particularly if they move forward with the benefit increases outlined in the Governor’s proposal. Changes proposed included:
- Changing the calculation of benefit entitlement from a fraction of high quarter earnings to 1 percent of base period wages.
- Requiring a waiting week for all voluntary quits (only 14 states do not have waiting weeks).
- Eliminating sick claims.
- Changing Section 8-1004, Stoppage of work caused by labor dispute, by removing the “stoppage of work” provision.
Eliminating the dependents allowance (permitted in only 13 states).
About the UI Tax Increase
In Maryland, the first $8,500 an employee earns is taxable for unemployment insurance. State law requires the Department of Labor, Licensing and Regulation to review the Unemployment Insurance Trust Fund each September 30. The UI tax rate automatically increases if the balance of the fund falls below a certain level. Unemployment in Maryland is the highest it has been in several decades, although lower than many other states in the country.
There are six UI tax tables, ranging from the lowest (A) to the highest (F). Maryland’s UI Trust Fund has dropped from $774 million in January 2009 to below $219 million this month. Because the ratio of the balance in the trust fund to the total taxable wages in the state is below 3 percent, Maryland will move from tax rate table B to rate table F as of January 1, 2010.
For employers, this means UI tax rates will increase significantly next year. Minimum rated employers, those who have not laid off employees in the past three years, will see their rates increase from $51 per employee to $187 per employee. The Administration’s one-year shift to table E would result in minimum rated employers paying $153 per employee, a difference of only $34 per employee yet still a $102 per employee increase over 2009 rates. Fifty-five percent of all Maryland employers are in this minimal rating category.
The rate increase for employers that have laid off employees in recent years will be higher, up to the maximum rate, which increase from $765 per employee to $1,147.50 per employee. The proposed shift to table E would result in a maximum rated employer paying $1,096.50, a savings of only $ 51 per employee.
“The Maryland Chamber recognizes the burden on all employers that the recession has added,” Snyder said. “However, a short term fix with a long term cost is not the solution that we need. Creating and retaining jobs will help resolve this problem and we are committed to working with the Governor and the Legislature in doing so.”
In The News
- Md. business groups oppose O’Malley pitch for unemployment insurance tax relief
Baltimore Business Journal - Business groups oppose unemployment tax proposal
The Daily Record - O’Malley wants to use federal dollars for unemployment fund
Baltimore Sun - Md. employers brace for higher unemployment insurances costs
Washington Post
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