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Panel endorses cuts to jobless premiums

Published November 16, 2011 7:31 pm

Unemployment insurance • Rate cut proposed to help employers stay competitive.
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Hoping to help Utah employers, lawmakers endorsed a proposal Wednesday that would cut the state's top unemployment-insurance premium rates starting in 2012.

A measure to slash the rate from 9 percent to 7 percent — or about $590 yearly per employee — passed in a state committee hearing Wednesday and will be considered when the Utah Legislature convenes in January.

The cut is being proposed in tandem with a cap on the minimum rate paid by all employers. Both come in reaction to premiums spiking earlier this year and a widespread outcry from private-sector business owners who saw their insurance costs surge just as a fragile economic recovery began to take hold.



The rate reduction ``is a big help for us,'' said Richard Thorn, president of the Association of General Contractors, representing nearly 500 Utah companies in the commercial construction sector. ``Is it a big deal? Yeah, we think it is.''

Thorn predicted the lowered costs could lead to additional hiring by small- and mid-sized construction companies and other industries particularly hard hit by the Great Recession. That view is shared by leaders from some of the state's largest labor unions as well.

Utah's jobless insurance system is among the nation's most aggressive in charging employers for unemployment benefits paid to workers they lay off. The rate reduction advanced Wednesday essentially eases back on that approach by spreading millions of dollars into higher bills for all employers instead of taxing only those who fired workers in the downturn.

Shifting the costs of top ratepayers is expected to push up what all business owners pay, so the plan endorsed Wednesday also would cap those pooled costs, at 0.4 percent.

Between the two rate changes, lawmakers would effectively be slashing up to $30 million annually from revenues coming into the Unemployment Trust Fund, at least through 2013. Only a year ago state managers were warning the fund was headed to bankruptcy under the pressure of record jobless claims.

``We feel much more solid about it now'' Utah Unemployment Insurance Director Bill Starks said Wednesday of the trust fund. ``We foresee very little danger of going insolvent, especially if the economy keeps chugging along at the pace it is now.''

Premiums shot up in 2011 through Utah's automatic formula for rebuilding the trust fund, which sustained heavy losses from historic unemployment starting in August 2008. The state-managed cash reserve fund fell from $855 million to below $310 million in less than two years, leading fund administrators to plan for it going broke, as similar funds have in 32 other states.

The trust fund now holds $388 million, replenished by revenues from higher premiums and a more positive economic picture. Senior fund managers and an advisory committee made up of labor, business and community representatives are both backing the rate caps, partly to make Utah more comparable with those in surrounding states and to remove incentives for employers to dodge the taxes.

The rate cut received unanimous backing by members of the Legislature's Workforce Services and Community and Economic Development Interim Committee on Wednesday. A draft bill enacting the cut also picked up a House sponsor, Rep. Jeremy Peterson, R-Ogden. —

Caps on Utah unemployment insurance

A plan now headed to the 2012 Utah Legislature will cut the state's maximum unemployment insurance rate from 9 percent to 7 percent, as well as cap the state's minimum rate at 0.4 percent. The two rate changes will slash $30 million in yearly revenues to the state's jobless trust fund through 2013.

 

 

 

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