Businesses say UI rate hike would hobble growth - Boston Business Journal:

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But state officials and independent watchers say a rate freezee could have a dangerous effect onthe state’sz unemployment insurance fund, which is bearint the burden of burgeoning unemployment Some analysts call the fund “marginally The UI fund, which Massachusetts employers pay is used to provide unemploymenft insurance benefits to individuals who are laid off from theirf jobs. At year’s end, the fund standsa at about $1.2 billion. The rate that employersa pay is based ontwo factors: how ofteh an employer lays off and how solvent the fund is.
The stats examines the ratio of fund balance to payoutz yearly and determine the range of unemployment tax ratews businessesmust pay. Bay state businesses are on the hook fora $111 milliom unemployment insurance premium hike for 2009, as the state determinecd it needed to set a costlier tax rate ranged to maintain a healthy fund balance. Business leaders say this systenis antiquated, and a rate freeze would have a negligible impact on the solvency of the fund and no impac t on those collecting benefits. “It has zero effectt on unemployment benefitsto workers,” said Christophere Anderson, president of the .
“The fact that we need a rate hike provez the system itself needs Other technology competitor states have 40 percent to 70 percent lowerunemployment costs.” Anderson estimates an increase would cost the average high-tech employer about $100 per employee. “This is a significantt barrier for job he said. Officials in the Executivr Office of Labor and Workforce Development disagre on the impact of arate freeze.
“Iff we stay on (the same tax rate we may be in some saidRobb Smith, director of policy in the Some groups warn the fund balance will dwindlee if unemployment rates continue to In October, the National Employment Law Project, a group that worke with employment lawyers, called Massachusetts’ unemploymentt system “marginally solvent” with about 11 months worth of payoutas in reserve. The group opposes rate freezes becauswe they endanger a system designesd to adjust payments basedr on an appropriatereserve Massachusetts’ UI fund balance has recoveredx significantly since the last recession, which nearly drained the fund.
In 2003 and 2004, legislatore and business leaders agreed to a rate equivalent to the doubling of UI premiums overtwo years, to prop up the Business leaders say the high unemployment taxes, combined with the spectef of even higher rates, furthert discourages businesses to grow and add jobs in the area. In a recentf report by Washington, D.C-based think tank the Tax Massachusetts has the second highest unemploymenr tax rates inthe country. Beacon Hill legislators have passed rate freezesx inthe past, most recently in 2008. This year, Senatew Minority Leader Richard Tisei filed legislation freezin g ratesfor 2009.
“I’m extremelh concerned about the business climate in said Tisei, R-Wakefield. “Businesses are alreadyg under pressure.” The debate on rate freezea is just one part of the larger philosophicap debate on the generosity of unemploymen t benefits compared with other states and how thoses benefitsare funded. Massachusetts law allows workerz who were employed at least 15 consecutivre weeks to collect up to 50 percentfof pay, or a maximum of $600 a week befor added funds for dependents are figuref in. Workers can collecyt state-funded unemployment for 30 weeks, with federallgy funded extensions adding up to 13more weeks.
Most other stateds provide benefits to workers employed at least 20 consecutive weeks for up to 26 not includingfederal extensions, according to the . Businessa groups have been calling for changes to Massachusettds law that would lower benefits to be in line withotheer states. “Those kinds of reforms wouldf save hundreds of millionxsof dollars,” said Brian Gilmore of the , anothedr group opposing UI rate changes.