AIM Disappointed by Administration's Unemployment Insurance Bill
Governor Deval Patrick's bill to address unemployment insurance funding has positive elements, including a recently approved rate freeze and a provision to wall off the Work Force Training Fund from annual budget debates.
But AIM is seriously disappointed in the lack of substantive reform contained in the governor's proposal. We testified on the bill today at a Legislative hearing.
In the cover letter that accompanied the filing of this bill, the governor states that this legislation reduces business costs by:
- freezing unemployment insurance rates for all Massachusetts businesses; and
- proposing essential long-term reforms of our unemployment insurance system.
In fact, the bill proposes minor reforms while expanding benefits. The governor also proposes to increase the effective UI tax rate by nearly 50 percent through a taxable wage base jump from the current level of $14,000 to $21,900 per employee with an indexing provision going forward.
While we understand that the administration has expressed an intention to reduce UI rate tables to make the expanded wage base on which the rates apply "revenue neutral", the bill as filed does not include those provisions. We look forward to working with the committee and the administration to resolve this omission. Relative to indexing the wage base, AIM is opposed.
On the issue of significant UI reform, AIM has testified repeatedly and consistently for the reform proposals listed below:
- Reforming the statutory rates for UI by lowering rates for those companies who do not lay-off employees and providing much needed relief for those companies;
- Increasing the number of weeks of work for eligibility to collect UI benefits from 15 weeks to 20, as well as requiring earnings for eligibility over two quarters, bringing Massachusetts into line with the majority of other states and saving the UI system an estimated $30 million;
- Changing the statutory trigger mechanism, reducing the maximum duration of benefit weeks to 26 when the state's economy is performing well, from 5.1 percent unemployment in each of the 10 local labor market areas in the state to a straight 5.1 percent unemployment rate statewide. (Reducing the maximum duration of benefits from 30 to 26 weeks saves the UI trust fund between $50 and $90 million per year and would bring Massachusetts into sync with all other states);
- Requiring the UI contribution rate of new employers to be set at the so-called zero positive rate, more accurately reflecting their actual contribution status;
- Computation of Taxes, Massachusetts is one of only 3 states, which determine UI taxes based upon only the prior 12 months of payroll. Forty-seven states use payroll paid for the past 3 to 5 years. The current Massachusetts system is simply poor tax policy since it creates an incentive to decrease, not to increase payroll. The Massachusetts UI tax system represents economic stimulus in reverse.