Massachusetts has extended by one month the deadline for employers to pay first-quarter Unemployment Insurance bills as lawmakers remain deadlocked over the best way to freeze UI rates and head off a $500 million tax increase that took effect January 1.
Both the state Senate and House of Representatives support a rate freeze for 2014, but disagree about how to wrap that freeze into a broader set of reforms to the state’s costly Unemployment Insurance system. House leaders were unable to vote last week on Speaker Robert DeLeo’s UI reform and minimum wage proposal because of a procedural maneuver by the Senate not to extend the time for reporting the bill from committee.
The vote Thursday by the Massachusetts Department of Unemployment Assistance Advisory Committee to postpone first-quarter UI payments until May 30 will give lawmakers additional time to avert a 33 percent rate increase before employers have to pay it.
AIM Executive Vice President of Government Affairs John Regan, who represents employers on the DUA Advisory Committee, said the delay is the only way to prevent hundreds of millions of dollars from being unnecessarily drawn out of the productive economy. The Unemployment Insurance Trust Fund used to pay jobless benefits in Massachusetts currently enjoys a healthy balance of approximately $800 million.
“AIM supports the delay but is disappointed that it is necessary at all. The UI rate freeze is an agreed upon policy choice that should have been done days, if not weeks ago. We are still hopeful that a freeze will be taken up sooner rather than later,” Regan said.
“The change in the regulations ensures that employers’ bills are processed in a timely manner and not at the last minute.”
Multiple media outlets reported last week that the House bill would raise the minimum wage to from $8 per hour to $10.50 per hour, freeze unemployment insurance rates for the next four years, and reward businesses with a record of low employee turnover.
The proposal, initially outlined two weeks ago by DeLeo, would:
- Raise the per-employee taxable wage base from $14,000 to $16,000. A separate UI reform bill passed by in February by the Senate raised the taxable wage base to $21,000.
- Introduce a new rate table with levels added at each end of the spectrum to decrease the financial burden on high-rated employers with low workforce turnover while penalizing negatively rated employers.
- Create a new employment fund to be capitalized by an increase in a per-employee tax on businesses and dedicated through grants to community-based job training organizations. The fees would be adjusted to generate $80 million for the fund, up from the existing $18 million cost to business.
Neither the House bill, nor the Senate UI reform passed on February 6, include provisions supported by AIM to reduce the maximum duration of benefit weeks from 30 to 26 or increase the time people must work before collecting benefits.
Regan urged lawmakers to prioritize the 2014 rate freeze and then hammer out their differences over long-term reform.
“Uncertainty is the enemy of economic growth and the impending UI rate increase represents a huge dose of uncertainty for Massachusetts employers,” he said.
AIM has opposed increasing the minimum wage at the state level. The House proposes to increase in the minimum wage to $10.50 by July 2016, and expand the earned income tax credit in Massachusetts from 15 percent of the federal credit to 20 percent, saving taxpayers an estimated $41.2 million to $45.5 million, according to documents prepared by the committee.