It’s Your Money
September 23, 2019
When I first meet people
They always ask…
So… what do you do…
I respond…
We save companies money…
That normally gets a positive response…
People like to save money…
Now….
Do you have time for a quickie quiz…
How many of you have signed a contract…
Thought you got a good deal
Possibly a great deal and…
Never looked at the paperwork again
Can I see a show of hands…
You…
Yea…. you over there
Is your hand up or are you scratching your head…
It looks like you wanted to put your hand up
Come on…
Let’s be honest
We all have done it…
I believe that all of us have good intentions…
But let’s face it we just get busy
No matter how you planned your day
Something happens and you are once again
Putting out fires
The first thing we do with any potential client
Is validate what they are currently paying
Are you paying the exact rate you signed for…
Believe it or not…
This is not always the case
I have people tell me….
Yea… we signed a contract and I was told
We are paying well below market prices
That is always great to hear
But let’s see if that is their reality…
Do you mind if I see your contract…
And could we also get a copy of your latest bill…
I can’t tell you how many times
We find that people are being charged
The wrong rate
And most of the time it is for more than
What you signed for
We always direct them to call the provider
And clarify…
Why are we paying this higher rate…
Our contract states we should be paying xxxx amount
Guess what the response normally is…
Oh, we’re sorry
That was billed improperly
Let us correct that…
We can give you a credit
Or send you a refund
How nice of them….
If they were under charging you
I bet they would contact you and say
We have a problem
However, if they are over charging you
You don’t hear from them
This is your money…
Don’t be afraid to ask for it…
HBS clients have received thousands of dollars in refunds
Always be aware of what you are paying…
And if you are not sure…
Give us a call
HBS leaves no stone unturned in our search for savings
We find ways to save you money
Looks What’s New
June 27, 2016
|
 |
Here Ye
July 23, 2015
Hear ye…. Hear ye… Hear ye……
This is to serve as notice
To all businesses in the State of New Jersey…..
Your new unemployment rates have just been mailed
By the State of New Jersey
You should be receiving your new rate notice….. Any day
Note:
All business owners have 30 days to question the new rates
you have been assigned
This is as good a time as any to verify…….
Is our new Unemployment Rate correct?
Unemployment…
Is the 2nd highest Employer Mandated Tax
By the US Government
Yet, people know so little about it
It is the only employer tax that can be controlled
Did you know that each claim can be worth up to $16,000????
Unemployment…..
Is like having a checking account with the State
Each year, at this time, the state sends you a notice
In NJ, it is called the
Employer Contribution Report
This report tells you…
How much money you had in your account at the beginning of the plan year
How much money you paid out in claims during the year
How much money you deposited into your account during the year
How much money is left in your account now….
It then goes thru a calculation based on the numbers listed above
As to what your new rate will be for the next 12 months
This new rate determines the funding level needed
To meet future claims
What is your rate????
Is your rate high or low????
Did your rate go up????
If so…You got a tax increase……
How do you know if your rate is correct????
That last question is the one question
All business owners should be asking
Especially if you have over 100 Employees
When there is a mistake in unemployment
The mistake is not on just 1 employee
It is the all factor
A mistake effect all your employees
That means the State may be taking more money
Out of your account than they should be taking
Remember….This is like a checking account
Would you miss money…..
If it was taken out of your personal checking account????
Who is holding the State accountable????
We are
HBS works with many established clients
Who took the time to ask the question
Is our rate correct????
Boy were they surprised…..
When we found there was a mistake
We went back to the State
Corrected the error
And our client received a refund
We are always asked how did you do that????
That is what separates HBS from all others
We know where to look
Many of the cost we work with
Most businesses take for granted
As the cost of doing business
Did you know……..
The state has over a 12% error rate
In the payment of unemployment claims
Once again…..
They are taking money out of your account
And they are not being held
Accountable
That is reason enough to ask the question….
Do you think you can look at our
Unemployment rate????
Is it correct??????
To learn more
Give us a call
We offer a free consultation
Unemployment Insurance Cuts Come After Tax Cuts: Report
August 3, 2012
As reported in Huffington Post
WASHINGTON — In March, the commissioner of Georgia’s Department of Labor, Mark Butler, explained how the state’s unemployment insurance trust fund had gone broke.
“In an attempt to curry favor with Georgia businesses, Gov. Roy Barnes declared a ‘tax holiday’ before Barnes’ failed 2002 re-election campaign,” Butler wrote. “Businesses stopped paying into the trust fund. By the time we hit the Great Recession –- and many, many Georgians became unemployed through no fault of their own — the $2 billion Unemployment Insurance Trust Fund had been reduced by $1.3 billion.”
“Plainly speaking,” Butler added, “Georgia had not saved for that rainy day.”
Georgia lawmakers agreed to much of Butler’s plan to restore the trust fund to solvency — cutting the duration of benefits in an effort to save money. The legislature also modestly increased the amount of wages subject to the state payroll taxes that fund the unemployment system.
While the cuts to unemployment benefits were relatively drastic, the tax cutting that preceded them was typical. Most states failed to make prudent decisions about funding their unemployment trust funds over the years, according to a comprehensive report from the National Employment Law Project, a worker advocacy group.
States now owe $43 billion to the federal government, according to NELP policy analyst Mike Evangelist, and it’s likely lawmakers will rely more heavily on benefit cuts than tax hikes in order to get out of debt.
“Over the past 30 years, support for accepted norms in the UI program has been systematically eroded, with state lawmakers now more willing to go after long‐standing features of the program, such as the duration of state benefits or suitable work protections that were previously seen as untouchable,” Evangelist wrote in the report.
Businesses pay both state and federal unemployment taxes for each worker on payroll — state taxes fund the first 26 weeks of benefits for laid off workers, and federal taxes pay for extra benefits that Congress puts in place during recessions. When a state unemployment trust fund runs dry, the state can borrow from the federal government to pay benefits. If a state borrows for too long, federal payroll taxes go up.
When under pressure to refill trust funds, it used to be that state lawmakers would seek savings by tightening eligibility rules. But this year Georgia joined six other states states that had cut the standard 26 weeks duration of benefits for the first time ever. While each state differed in how they cut benefits, Georgia put benefits on a sliding scale that goes up and down with the state’s unemployment rate. When the rate goes down, the duration of benefits could be as low as 14 weeks. The upper limit is 20 weeks.
The states were strapped for cash because tens-of-millions of additional people filed claims, but also because of tax cuts.
According to Evangelist, 31 states cut unemployment taxes 20 percent or more between 1995 and 2005. And from 2000 to 2009, the overall percentage of wages subject to state unemployment taxes fell to the lowest level in the history of the federal-state unemployment system. In 2007, states were collectively $38 billion shy of recommended trust fund reserves.
Doug Holmes, an unemployment insurance expert who advocates for businesses, suggested states would be unwise to try and meet funding thresholds “because to do so would require dramatic increases in state unemployment taxes that would place these states in an uncompetitive position to attract and keep businesses in their states.”
It’s unlikely states will want to hike taxes to pay for unemployment, Evangelist wrote in his report. “Realistically, it is unreasonable to believe that states will close this gap without doing further harm to the UI program’s ability to sustain unemployed workers and their families through periods of temporary job loss.”
Why You Pay More
July 8, 2011
Each year at the end of July or in early August,
the State of New Jersey
mails to all NJ employers
the updated Employer
Contribution Reports.
This report notifies
employers of their new unemployment rate
For the next 12 months
This begins a yearly ritual.
The owner sends a copy to their accountant,
the account reviews it
and life goes on.
Unemployment is a necessary evil.
Did you know….
Unemployment is the 2nd highest employer mandated tax paid by a business?
It is the only tax that you have the opportunity to control
what you contribute?
Unemployment is similar to having a checking account with
the State.
With this report….
The State tells you how much is in your account (reserve
balance)
The State also show you how many dollars were paid out in
claims
(how much was taken
out of your checking account)
The State assigns a rate based on the reserves you are
carrying
As a percentage of the taxable wages you have paid over the
past 3 to 5 years
This rate determines how much you will contribute into the
unemployment fund
over the next 12 months.
Seems pretty simple….
You hear all the latest political buzz
Everyone is talking about the deficit….
What are we to do about the debt ceiling?
Reduce our cost…….
Don’t raise taxes……
My guess is that nobody wants to talk about
The unemployment
deficit!!!!!
Each month we get updated numbers on the job market
Unemployment is over 9%
How are we to support the growing number in unemployment?
Did anybody tell you
That you will be getting a tax increase
To help cover the shortfall?
In the NJ Unemployment Rate Table
There are 6 columns the State uses to determine employers’
rates
In 2009/2010.
NJ worked off column
B to establish employer rates
Because of the rise in unemployment claims
The reserves became depleted
In order to build up the reserves in 2010/2011,
There was talk in NJ of working off column D.
The State chose to buffer the increase passed onto employers
and work off column C instead
That meant
last year every employer in NJ saw their rates go up
automatically
And pay more into the unemployment fund.
Did the shift from column B to C help?
The state still has a shortfall
This year,
There is talk of using column
E
for 2011/2012
However, most feel again
this would be too much of an increase
Instead,
Governor Christie’s signed a bill last Friday (7/1/11)
to work from Column D
I must have missed
that phone call!!!!!
Wasn’t that the Friday
before the holiday weekend?
I think I was stuck in
a traffic jam…
Each year,
the state continues to increase taxes by
shifting the table
used to assign rates to each employer.
We are all supposed to sit back and accept this as
The cost of doing business???
Besides jumping around on the table charts
How does an employer
even know their rates are correct?
Well, the State sent
me this form and it said this is our new rate
If you are an employer
with over 100 employees,
you should be asking that question.
The new rate does
not affect just 1 employee
But all employees
Therefore businesses with a larger employee base
Are affected more
If you currently employ over 100 employees,
Take the time to question your new rate
when you receive your notice.
Did you know that NJ has close to a 10% error rate in the processing of claims?
Nationally the error rate is over 11%
If the State is paying too much out in claims…..
Are they taking too
much money out of your checking account?
Really, close to a 10%
error rate
Who is holding the
state accountable?
For the last 10 years
Hutchinson Business Solutions along with our strategic
partner DCR
Has been asking this question for our clients.
We are your public
advocate.
There have been multiple instances that we have found an
error
In the rate assigned by the State
This is just not a NJ issue,
We see this in all the states we currently service
unemployment
How do you know if your current unemployment rate is
correct?
We would like to validate your
New unemployment rate,
for no cost.
We currently service many of the major corporations in the
Tri State area
For over 20 years
HBS and DCR have been at the forefront of unemployment
Representing the clients interest
Now more than ever, employers need to be proactive
Take the time to contest claims
Verify that the amount paid out for claims are correct
As the cost of unemployment continues to rise
You must be diligent
And take the necessary steps to manage your reserves
There may be some instances you cannot control
The state switches columns and everyone is affected
However,
There are multiple rates within each column
That is something we can
manage.
Our goal is to keep the dollars in your account
And achieve the best rate possible for our clients
Notice that the state will always contact you
If you owe taxes
Unfortunately,
They do not contact you,
If you are overpaying
taxes
The onus is on you
Let us help you
All you need to do is ask.
Let us validate your unemployment rate?
Many clients have been surprised at what we have found.
To learn more about how unemployment rates affect your
business, email
george@hbsadvantage.com
or call 856-857-1230
Visit us on the web www.hutchinsonbusinesssolutions.com
Unemployment Benefits: More States Eye Cuts
May 20, 2011
Written by Arthur Delaney for Huffington Post
Add Pennsylvania and Wisconsin to the list of states considering cuts to unemployment insurance.
The Pennsylvania General Assembly needs to pass a law in order for the state to remain eligible for the federal Extended Benefits program for the rest of the year, which provides the final 20 weeks of checks in Pennsylvania for people who use up 73 weeks of combined state and federal aid. Within the past two months, lawmakers in Michigan, Missouri and Florida permanently slashed state unemployment aid in bills that preserve temporary federal aid.
Two Republican-sponsored measures moving through the GOP-controlled Pennsylvania statehouse would achieve similar results. And in Wisconsin, a proposal by Republican Gov. Scott Walker would restore the Extended Benefits program after local lawmakers let it lapse with virtually no public debate last month. But Walker’s bill would also permanently install a one-week waiting period for new claimants before any jobless claims are paid, relieving Wisconsin businesses of a $45.2 million tax burden. (Wisconsin is one of 13 states that had no waiting week in 2010.)
“Without knowing exactly how the state arrived at the $45.2 million figure, it is safe to say that a roughly equivalent amount will come out of workers’ pockets,” said Mike Evangelist of the National Employment Law Project, a worker advocacy group.
States pay for the first 26 weeks of unemployment benefits, and during recessions the federal government pays for extra weeks. While current federal unemployment benefits will only be around until January barring an unlikely congressional reauthorization, changes to state law will be permanent.
The bill in the Pennsylvania House of Representatives would save the state $632 million chiefly by cutting the average weekly payment from $324 to $277, according to Sharon Dietrich, an attorney with Community Legal Services, a nonprofit group that advocates for poor people in Pennsylvania. The bill in the Pennsylvania Senate — which Dietrich said she considers “way more innocuous” — would, like its counterpart in the House, tighten work-search requirements, but would only result in a net spending decrease of $50 million, Dietrich said. Each bill will reach the floor of its respective chamber early next week.
“On June 11, approximately 45,000 unemployed Pennsylvanians who currently qualify for federal extended benefits will be dropped from the unemployment rolls unless we slightly modify the state law,” State Sen. John Gordner (R) said in a statement. “It costs the state no money to qualify for these fully funded federal benefits through the end of the year, and results in an estimated $150 million in economic benefits.”
And in the U.S. Congress, Republican lawmakers are pushing a bill that would give states leeway to trim federal aid to the unemployed to use the money instead to repay federal unemployment government loans
States ignored warnings on unemployment insurance
April 28, 2011
As reported by Ebru News Feb 19,2011
WASHINGTON (AP) – State officials had plenty of warning. Over the past three decades, two national commissions and a series of government audits sounded alarms about the dwindling amount of money states were setting aside to pay unemployment insurance to laid-off workers.
“Trust Fund Reserves Inadequate,” federal auditors said in a 1988 report.
It’s clear now the warnings were pretty much ignored. Instead, states kept whittling away at the trust funds, mostly by cutting unemployment insurance taxes at the behest of the business community. The low balances hastened insolvency when the recession hit, leading about 30 states to borrow $41.5 billion from the federal government to pay unemployment benefits to their growing population of jobless.
The ramifications will be felt for years.
In the short term, states must find the money to pay interest on the loans. Generally, that involves a special tax on businesses until the loan is repaid. Some states could tap general revenues, making it harder to pay for schools, roads and other state services.
In the long term, state will have to replenish their unemployment insurance programs. That typically leads to higher payroll taxes, leaving companies with less money to invest.
Past recessions have resulted in insolvencies. Seven states borrowed money in the early 1990s; eight did so as a result of the 2001 recession.
But the numbers are much worse this time because of the recession was more severe and the funds already were low when it hit, said Wayne Vroman, an analyst at the Urban Institute, a liberal-leaning think tank based in Washington.
The Obama administration this month proposed giving states a waiver on the interest payments due this fall. Down the road, the administration would raise the amount of wages on which companies pay federal unemployment taxes. Many states probably would follow suit as a way of boosting depleted trust funds.
Businesses pay a federal and state payroll tax. The federal tax primarily covers administrative costs; the state tax pays for the regular benefits a worker gets when laid off. The Treasury Department manages the trust funds that hold each state’s taxes.
Each state decides whether its unemployment fund has enough money. In 2000, total reserves for states and territories came to about $54 billion. That dropped to $38 billion by the end of 2007, just as the recession began.
Over the next two years, reserves plummeted to $11.1 billion, lower than at any time in the program’s history when adjusted for inflation, the Government Accountability Office said in its most recent report on the issue. Yet benefits have stayed relatively flat, or declined when compared with average weekly wages.
“If you look at it from the employers’ standpoint, they’re not going to want reserves to build up excessively high because then there’s an increasing risk that advocates for benefit expansion would point to the high reserves and say, ‘We can afford to increase benefits,”‘ said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
A review of state unemployment insurance programs shows how states weakened their trust funds over the past two decades.
In Georgia, lawmakers gave employers a four-year tax holiday from 1999-2003. Employers saved more than $1 billion, but trust fund reserves fell about 40 percent, to $700 million. The state gradually has raised its unemployment insurance taxes since then, but not nearly enough to restore the trust fund to previous levels. The state began borrowing in December 2009. Now it owes Washington about $588 million.
Republican Mark Butler, Georgia’s labor commissioner, said his state had one of the lowest unemployment insurance tax rates in the nation when the tax holiday was enacted.
“The decision to do this was not really based upon any practical reasoIt was based on a political decision, which I think, by all accounts now, we can look back on and say it was the wrong decision,” Butler said. “Now we find ourselves in a situation where we’ve had to borrow money and that puts everyone in a tight situation.”
In New Jersey, lawmakers used a combination approach to deplete the trust fund. The Legislature expanded benefits and cut taxes, as well as spending $4.7 billion of trust fund revenue to reimburse hospitals for indigent health care. The money was diverted over a period of about 15 years and helps explain why the state’s trust fund dropped from $3.1 billion in 2000 to $35 million by the end of 2010. The state has had to borrow $1.75 billion from the federal government to keep the program afloat.
“It was a real abdication of responsibility and a complete misunderstanding of how you finance an unemployment insurance fund to make sure you have sufficient money in bad economic times,” said Phillip Kirschner, president of the New Jersey Business and Industry Association. “In good economic times you build up your bank account, but in New Jersey, they said, ‘Well, we have all this money, let’s spend it.”‘
California took its own road to trust fund insolvency. Lawmakers kept payroll tax rates the same, but gradually doubled the maximum weekly benefit paid to laid-off workers to $450. The average benefit now is about $300 and is paid for about 20 weeks.
Loree Levy, spokeswoman for the California Employment Development Department, said lawmakers were warned of the consequences.
“We testified at legislative hearings that the fund would eventually go broke and would become permanently insolvent if legislation wasn’t passed to increase revenue,” Levy said.
California has borrowed $9.8 billion to keep unemployment insurance payments flowing. It owes the federal government an interest payment of $362 million by the end of September.
In Michigan, unemployment insurance tax rates declined from 1994 through 2001. The trust fund prospered during those years because of the healthy economy and low unemployment rate. Then the recession arrived and reserves plunged. In response, Michigan lawmakers passed legislation that lowered the amount of wages subject to unemployment taxes from $9,500 to $9,000. They increased the maximum weekly benefit from $300 to $362. The trust fund dropped from $1.2 billion to $112 million over the next four years. In September 2006, Michigan was the first state to begin borrowing from the federal government.
Other states held their trust funds purposely low as part of an approach called “pay-as-you-go.” Texas is a nationally recognized leader of this effort. Its philosophy is that, in the long run, it’s better for the economy to keep the maximum level of dollars in the hands of businesses rather than government. Texas had to borrow $1.3 billion in 2009. State officials have no regrets about their policy.
“By keeping the minimum in the (trust fund), Texas is able to maximize funds circulating in the Texas economy, allowing for the creation of jobs and stimulation of economic growth,” said Lisa Givens, spokeswoman for the Texas Workforce Commission.
The pay-as-you-go approach goes against the findings of a presidential commission that looked into the issue of dwindling trust funds in the mid-1990s.
“It would be in the interest of the nation to begin to restore the forward-funding nature of the unemployment insurance system, resulting in a building up of reserves during good economic times and a drawing down of reserves during recessions,” said the Advisory Council on Unemployment Compensation, which President Bill Clinton appointed.
Hobbie, from the association representing state labor agencies, said there’s no way to tell which approach is better over the long haul. He acknowledged that keeping reserves at the minimum in good times goes against one of the original aims of the program – to act as an economic stabilizer in bad times. That’s because businesses are asked to pay more in taxes, which leaves them less money to invest in their company.
A survey from Hobbies’ organization found that 35 states raised their state unemployment taxes last year.
Hobbie said he suspects that some states allowed reserves to dwindle out of complacency.
“I think we just got overconfident and thought we wouldn’t experience the bad recessions we had in, say the mid ’70s, and then this big surprise hit,” he said.
Posted by: Mitchell Hirsch on Feb 17, 2011
As reported by Unemployedworkers.org
UPDATE: FEB. 17 – UNEMPLOYMENT INSURANCE SOLVENCY BILL INTRODUCED IN SENATE
Senator Richard Durbin (IL), with Senators Jack Reed (RI) and Sherrod Brown (OH), today introduced the Unemployment Insurance Solvency Act of 2011, which offers immediate tax relief to cash-strapped states and employers, preserves UI benefit levels, and creates strong incentives for states to restore their UI programs to solvency while also rewarding states that have managed their UI trust funds effectively.
In a statement, NELP Executive Director Christine Owens said, “Jobless workers, and we hope employers too, should be grateful for the leadership of Senator Richard Durbin and his colleagues Sherrod Brown and Jack Reed on the issue of unemployment insurance solvency. Following the President’s FY 2012 budget, the introduction of the Unemployment Insurance Solvency Act sets the stage for a serious conversation on how to make sure that the safety net tens of millions of Americans have counted on during the tough times of the last few years will be financially secure into the future.”
The new bill is similar to the plan outlined by President Obama in his remarks last week, but adds further protections for benefits and additional opportunities and incentives for states to return to solvency in the long run.
Original Post: Feb. 11
Unemployment insurance is just that — insurance — and it’s financed by premiums paid on workers’ paychecks and deposited into a trust fund. However, the unemployment insurance (UI) trust funds in many states are not only insolvent, but now face heavy debt burdens due to their increased need for federal borrowing during this prolonged period of high unemployment. Restoring them to financial health is essential to ensure that unemployment insurance benefits are there for workers when they’re needed, both today and in the future. The Administration has outlined a significant framework to address the problem, which would provide needed debt and tax relief to states and businesses.
A new plan from the National Employment Law Project (NELP) and the Center on Budget and Policy Priorities (CBPP) would build on that framework, further strengthening the long-term solvency of state UI systems while avoiding benefit cuts and employer tax increases. Workers need to pay attention to this issue. The last time UI trust funds got hit this hard, in the 1980s, 44 states cut back benefits for workers.
Many states UI trust funds have been hit in recent years by a double-engine freight train. First, for years many states have inadequately financed their UI funds, both by keeping their taxable wage base for UI too low relative to inflation-adjusted dollar values, and by taking a dangerous “pay-as-you-go” approach, which failed to build adequate reserves during periods of economic growth. The graph below shows the substantial erosion in the inflation-adjusted value of the wage base that is subject to the UI taxes that fund state systems. What does this mean? It means that the employer of a dishwasher pays the same unemployment premium as the employer of a banker. It does not take a degree in actuarial science to know that this is not going to work.
And oh yeah, second — well, then came the Great Recession with millions of workers’ jobs being lost and the vastly increased need for unemployment benefits to help sustain unemployed job-seekers and their families.
Now, 30 states have exhausted their UI trust funds and are borrowing from the federal government.
The lead editorial in The New York Times yesterday, titled ‘Relief for States and Businesses’, explained the need for the Obama administration’s approach. Here are some excerpts:
So many people now receive jobless benefits that 30 states have run out of their unemployment trust funds and are borrowing $42 billion from the federal government. Three of the hardest-hit states — Michigan, Indiana and South Carolina — have borrowed so much that they triggered automatic unemployment tax increases on employers, and the same thing is likely to happen to 20 more states this year.
….
On Tuesday, the Obama administration unveiled a smart proposal to delay those tax increases and provide some relief to both employers and state governments. Congressional Republicans reflexively objected to the idea, which could produce higher taxes in three years, but this plan provides relief that might stimulate hiring now when it is most needed.
….
Under the plan, which is subject to Congressional approval, there would be a two-year moratorium on the increased taxes that employers would otherwise have to pay to support the unemployment insurance system, which could save businesses as much as $7 billion. During those same two years, states would be forgiven from paying the $1.3 billion in interest they owe Washington on the money they have borrowed.
….
In 2014, when the economy will presumably have recovered somewhat, employers will have to make up for the moratorium by paying higher unemployment taxes to the states. Specifically, they will have to pay taxes on the first $15,000 of an employee’s income, instead of the current $7,000. But, even then, unemployment taxes will be at the same level, adjusted for inflation, as they were in 1983, when President Ronald Reagan raised them.
The administration is proposing to cut the federal unemployment tax rate in 2014 so that employers would pay the same amount to Washington as they do now. States, if they choose to do so, could collect more from each employer to repay the federal government and restock their own unemployment trust funds.
….
The full details of the plan’s costs and benefits will be available when President Obama submits his 2012 budget to Congress next week. When he does, both parties should take a close look at the numbers and seize the opportunity to keep this fundamental safety net solvent.
“It is a major step forward for the President’s FY 2012 budget to address the UI trust fund crisis,” said Andrew Stettner, deputy director of the National Employment Law Project and a co-author of the new joint NELP-CBPP policy proposal. “Our proposal rests on the same core principles — giving employers and states relief now while taking concrete steps to restore the long term solvency of the UI trust fund as the economy recovers. The plan endorses two key aspects of what the Administration’s proposal reportedly includes — raising the taxable wage base up from the inadequate, outdated level of $7,000 and endorsing a two-year moratorium on federal UI tax increases.”
The NELP-CBPP plan, detailed in a new report, would enable states to restore the solvency of their UI trust funds, avoid significant tax increases on employers during a weak economy, and prevent damaging cuts in UI eligibility and benefits for jobless workers, without increasing the deficit. The plan also suggests additional debt relief for states and positive incentives for employers, rewards states that have maintained sound financing packages, and builds on existing federal protections of state benefit levels.
In a statement, the groups provide a summary of the plan:
• The federal government would gradually raise the amount of a worker’s wages subject to the federal UI tax (i.e., the FUTA taxable wage base). This would automatically raise the floor for the taxable wage bases in the states which by law cannot be lower than the federal wage base, helping those states rebuild their trust funds. (The federal UI tax rate would fall, however, so that overall federal UI taxes did not go up.)
• The federal government would provide a moratorium, until 2013, on state interest payments on their UI loans.
• The federal government would also postpone, for two years, the FUTA tax increases required to recoup the loan principal in borrowing states.
• The federal government would offer immediate rewards and future incentives for states that currently have and continue to maintain adequate trust fund levels.
• The federal government would excuse a state from repaying part of its loan if the state (a) enters a flexible contractual agreement with the U.S. Labor Department to rebuild its trust fund to an appropriate level over a reasonable number of years, and (b) agrees to maintain UI eligibility, benefit levels, and an appropriate tax rate over the loan-reduction period.
This plan would produce the following benefits:
• Employers would not pay higher federal UI taxes until the beginning of 2014, saving them $5 billion to $7 billion while the economy remains weak and $10 billion to $18 billion over the next five years. Also, employers would pay no additional assessments to cover interest payments in 2011 or 2012, saving them $3.6 billion.
• In addition, partial loan forgiveness that comes from a state’s commitment to build adequate trust funds would save employers about $37 billion by the end of the decade. Counting the interest payments on this principal as well, employers could save as much as $50 billion.
• All or nearly all states would assume a path to permanent solvency.
• Employers in responsible states would receive concrete rewards and a more level playing field between the states.
• Adequate trust funds would stabilize UI tax rates over time, avoiding the roller-coaster tax rates common in many states — very low during healthy economic times, rising rapidly during recessions — that harm businesses and the economy.
• States would maintain current UI benefit and eligibility levels.
• The federal deficit would not rise as a result of these policies.
“States face a tremendously urgent crisis when it comes to their unemployment insurance trust funds,” said Michael Leachman, assistant director of the Center’s State Fiscal Project and co-author of the report. “If federal policymakers address this crisis using our plan, employers could save as much as $50 billion in taxes and states would maintain the critical benefits they provide to people who lose their jobs.”
KEVIN FREKING 02/19/11 08:42 PM 
As reported in Huffington Post
WASHINGTON — State officials had plenty of warning. Over the past three decades, two national commissions and a series of government audits sounded alarms about the dwindling amount of money states were setting aside to pay unemployment insurance to laid-off workers.
“Trust Fund Reserves Inadequate,” federal auditors said in a 1988 report.
It’s clear now the warnings were pretty much ignored. Instead, states kept whittling away at the trust funds, mostly by cutting unemployment insurance taxes at the behest of the business community. The low balances hastened insolvency when the recession hit, leading about 30 states to borrow $41.5 billion from the federal government to pay unemployment benefits to their growing population of jobless.
The ramifications will be felt for years.
In the short term, states must find the money to pay interest on the loans. Generally, that involves a special tax on businesses until the loan is repaid. Some states could tap general revenues, making it harder to pay for schools, roads and other state services.
In the long term, state will have to replenish their unemployment insurance programs. That typically leads to higher payroll taxes, leaving companies with less money to invest.
Past recessions have resulted in insolvencies. Seven states borrowed money in the early 1990s; eight did so as a result of the 2001 recession.
But the numbers are much worse this time because of the recession was more severe and the funds already were low when it hit, said Wayne Vroman, an analyst at the Urban Institute, a liberal-leaning think tank based in Washington.
The Obama administration this month proposed giving states a waiver on the interest payments due this fall. Down the road, the administration would raise the amount of wages on which companies pay federal unemployment taxes. Many states probably would follow suit as a way of boosting depleted trust funds.
Businesses pay a federal and state payroll tax. The federal tax primarily covers administrative costs; the state tax pays for the regular benefits a worker gets when laid off. The Treasury Department manages the trust funds that hold each state’s taxes.
Each state decides whether its unemployment fund has enough money. In 2000, total reserves for states and territories came to about $54 billion. That dropped to $38 billion by the end of 2007, just as the recession began.
Over the next two years, reserves plummeted to $11.1 billion, lower than at any time in the program’s history when adjusted for inflation, the Government Accountability Office said in its most recent report on the issue. Yet benefits have stayed relatively flat, or declined when compared with average weekly wages.
“If you look at it from the employers’ standpoint, they’re not going to want reserves to build up excessively high because then there’s an increasing risk that advocates for benefit expansion would point to the high reserves and say, ‘We can afford to increase benefits,'” said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
A review of state unemployment insurance programs shows how states weakened their trust funds over the past two decades.
In Georgia, lawmakers gave employers a four-year tax holiday from 1999-2003. Employers saved more than $1 billion, but trust fund reserves fell about 40 percent, to $700 million. The state gradually has raised its unemployment insurance taxes since then, but not nearly enough to restore the trust fund to previous levels. The state began borrowing in December 2009. Now it owes Washington about $588 million.
Republican Mark Butler, Georgia’s labor commissioner, said his state had one of the lowest unemployment insurance tax rates in the nation when the tax holiday was enacted.
“The decision to do this was not really based upon any practical reasoIt was based on a political decision, which I think, by all accounts now, we can look back on and say it was the wrong decision,” Butler said. “Now we find ourselves in a situation where we’ve had to borrow money and that puts everyone in a tight situation.”
In New Jersey, lawmakers used a combination approach to deplete the trust fund. The Legislature expanded benefits and cut taxes, as well as spending $4.7 billion of trust fund revenue to reimburse hospitals for indigent health care. The money was diverted over a period of about 15 years and helps explain why the state’s trust fund dropped from $3.1 billion in 2000 to $35 million by the end of 2010. The state has had to borrow $1.75 billion from the federal government to keep the program afloat.
“It was a real abdication of responsibility and a complete misunderstanding of how you finance an unemployment insurance fund – to make sure you have sufficient money in bad economic times,” said Phillip Kirschner, president of the New Jersey Business and Industry Association. “In good economic times you build up your bank account, but in New Jersey, they said, ‘Well, we have all this money, let’s spend it.'”
California took its own road to trust fund insolvency. Lawmakers kept payroll tax rates the same, but gradually doubled the maximum weekly benefit paid to laid-off workers to $450. The average benefit now is about $300 and is paid for about 20 weeks.
Loree Levy, spokeswoman for the California Employment Development Department, said lawmakers were warned of the consequences.
“We testified at legislative hearings that the fund would eventually go broke and would become permanently insolvent if legislation wasn’t passed to increase revenue,” Levy said.
California has borrowed $9.8 billion to keep unemployment insurance payments flowing. It owes the federal government an interest payment of $362 million by the end of September.
In Michigan, unemployment insurance tax rates declined from 1994 through 2001. The trust fund prospered during those years because of the healthy economy and low unemployment rate. Then the recession arrived and reserves plunged. In response, Michigan lawmakers passed legislation that lowered the amount of wages subject to unemployment taxes from $9,500 to $9,000. They increased the maximum weekly benefit from $300 to $362. The trust fund dropped from $1.2 billion to $112 million over the next four years. In September 2006, Michigan was the first state to begin borrowing from the federal government.
Other states held their trust funds purposely low as part of an approach called “pay-as-you-go.” Texas is a nationally recognized leader of this effort. Its philosophy is that, in the long run, it’s better for the economy to keep the maximum level of dollars in the hands of businesses rather than government. Texas had to borrow $1.3 billion in 2009. State officials have no regrets about their policy.
“By keeping the minimum in the (trust fund), Texas is able to maximize funds circulating in the Texas economy, allowing for the creation of jobs and stimulation of economic growth,” said Lisa Givens, spokeswoman for the Texas Workforce Commission.
The pay-as-you-go approach goes against the findings of a presidential commission that looked into the issue of dwindling trust funds in the mid-1990s.
“It would be in the interest of the nation to begin to restore the forward-funding nature of the unemployment insurance system, resulting in a building up of reserves during good economic times and a drawing down of reserves during recessions,” said the Advisory Council on Unemployment Compensation, which President Bill Clinton appointed.
Hobbie, from the association representing state labor agencies, said there’s no way to tell which approach is better over the long haul. He acknowledged that keeping reserves at the minimum in good times goes against one of the original aims of the program – to act as an economic stabilizer in bad times. That’s because businesses are asked to pay more in taxes, which leaves them less money to invest in their company.
A survey from Hobbies’ organization found that 35 states raised their state unemployment taxes last year.
Hobbie said he suspects that some states allowed reserves to dwindle out of complacency.
“I think we just got overconfident and thought we wouldn’t experience the bad recessions we had in, say the mid ’70s, and then this big surprise hit,” he said.
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