The Senate Ways and Means Committee today approved legislation freezing Unemployment Insurance rates, a move that could head off a devastating 40 percent average UI tax increase facing employers next month.
The full Senate is expected to debate the measure on Thursday. House Speaker Robert DeLeo indicated that his chamber would move quickly on the bill and a spokesman for Governor Deval Patrick told Statehouse News Service tonight that "The Patrick-Murray administration supports the rate freeze, and believes that additional reforms are necessary in the future."
A UI rate freeze would still leave Massachusetts employers paying approximately 10 percent more in unemployment taxes in 2011 than they did last year because of weakened experience ratings. But the jump is far less than the $258 per-employee increase that employers would suffer if the automatic move in UI rates to Schedule G that took effect on January 1 were allowed to stand.
Many lawmakers believe that a large and sudden increase in UI rates would cripple the fragile economic recovery and is not needed to maintain the solvency of the fund used to pay benefits to jobless workers.
AIM, which has lead efforts by employers to secure a rate freeze, commended Senate leaders and members of the Ways and Means Committee for a vote that will strengthen the state economy and accelerate job growth. The association looks forward to working with legislative leaders and Governor Patrick to finding long-term solutions to the unemployment insurance situation.
“Senate President Therese Murray, Ways and Means Chair Stephen Brewer and Vice Chair Steven Baddour have sent an unmistakable message that the commonwealth is committed to putting people back to work,” said Richard C. Lord, President and Chief Executive Officer of AIM.
Lord said a rate increase is unnecessary and excessive now that the financial position of the UI Trust Fund is improving after two years of heavy demand caused by more than 8 percent unemployment. A significant decrease in the number of claims for unemployment prompted state officials in December to revise their estimate of the Trust Fund balance from a negative $302 million to a positive $12.7 million.
“If Massachusetts continues to see a decline in benefit payments, even on the current schedule, the fund could be solvent at the end of 2011. And even if the fund is insolvent at the end of 2011, President Obama is expected to recommend allowing states to continue to borrow from the federal government – interest free – through the end of 2012,” Lord said.
The freeze would spare employers from a move to Schedule G that would raise average annual Unemployment Insurance rates from $646 to $904 per employee. Schedule G would have increased overall UI contributions from Massachusetts employers from $1.576 billion to $2.235 billion.
All of those increases would come on top of a 50 percent jump in the assessment on employers for a fund that provides medical insurance to unemployed people. The Unemployment Health Insurance Rate Review Board voted in December to raise the employer contribution rate for the Medical Security Trust Fund from $33.60 to $50.40 per employee in an attempt to close a deficit that is projected to reach $95 million by midyear.
Lord said AIM will continue to push for structural reforms to the UI system, including reducing the maximum duration of benefits to 26 weeks and increasing from 15 to 20 weeks the period that employees must work to qualify for benefits.