Jobless insurance tax rising

Nebraska employers figured that they might pay higher unemployment insurance taxes next year, but now they're getting the specifics: Rates will more than double for most companies.

Although the increases can vary widely among employers, most rates will increase about 165 percent. The average annual payment per employee will increase to $300 from $113, beginning in April.

The State Labor Department mailed notices this week to 47,000 Nebraska employers with the specific payment rates, from zero to a maximum of $780 per employee. The previous maximum amount was $486.

For example, Blue Cross Blue Shield of Nebraska, which employs 1,430 people, said it will pay about $295,000 more in 2010 because its rate increases from 1.38 percent to 3.67 percent, applied to the first $9,000 of each employee's income.

Nebraska is far from alone.

The National Association of State Workforce Agencies said 34 other states, including Iowa, also have increased unemployment insurance taxes on employers for 2010. The U.S. Labor Department said Nebraska's 2008 rate was lower than that in 38 other states, and Nebraska Labor Commissioner Catherine D. Lang said the 2010 rate probably remains below average.

Even so, said David Brown, president and chief executive of the Greater Omaha Chamber of Commerce, “The timing couldn't have been worse to have this kind of an increase. This is really a burden on all businesses and particularly small businesses. They're already trying to figure out how to maintain cash flow.”

Brown said the Legislature could change the way the tax rate is determined, so it could be adjusted to allow for unusual economic conditions. But it's too late to halt the 2010 increases.

The stiff increase revives a debate about whether the state should have gone after $43.6 million in federal stimulus funds designed to soften the recession's impact on state unemployment insurance trust funds.

This is the fifth year that Nebraska has determined the rates under a 2005 state law that sets a mathematical formula to keep the employer-funded unemployment insurance trust fund solvent.

Between Oct. 1, 2008, and Sept. 30, 2009, the trust fund paid out $189 million in unemployment benefits, more than double the $90 million paid out in the previous fiscal year. To replenish the fund, the formula raised the rates that employers will pay in 2010.

Employers' rates vary according to the number of employees, past unemployment claims and other factors. Companies that pay no unemployment tax have few past claims and enough money built up in the trust fund to cover potential future claims. Those with high rates have had significant layoffs and are replacing unemployment benefits paid to their former employees.

Nebraska officials earlier this year turned down federal economic stimulus money that could have lessened the rate increase, although Brown said the difference would not be substantial. Some states, including South Dakota, accepted stimulus funds to help offset unemployment insurance claims.

The Nebraska Chamber of Commerce & Industry said throughout the spring and summer that it was studying whether the short-term gain of taking the federal money outweighed the long-term impact of including more people under unemployment insurance, which is required by the federal government to qualify for the money.

Ron Sedlacek, an attorney for the state chamber, said the deadline to seek the money is 2011.

“We continue to raise the issue with members. That certainly is an alternative to consider,” he said.

State Sen. Steve Lathrop of Omaha, chairman of the Legislature's Business and Labor Committee, said accepting the stimulus money would have softened the rate increase “during a very difficult time for Nebraska businesses.”

No bills were introduced last spring to accept the stimulus money.

Lathrop said it is his understanding that even if a bill is passed, Gov. Dave Heineman has indicated that he will not request the stimulus money.

“There's no point” in passing a bill, Lathrop said, “if he's unwilling to ask for it.”

Heineman, through a spokeswoman, repeated his view Wednesday that accepting stimulus funds would cause “long-term pain” for Nebraska businesses. He said he opposed the permanent changes in the state's unemployment insurance program required to qualify for the stimulus funds.

The so-called “Unemployment Insurance Modernization Act” was among the most controversial aspects of President Barack Obama's $787 billion stimulus package and was criticized by some prominent Republican governors.

Brown, the Omaha chamber's CEO, said the Legislature may want to consider changing the method for setting the rates, given the negative impact of the 2010 rate increase. He said state officials should be able to consider a wide range of factors, such as the impact of a rate increase during a recession, when they set the tax rate.

“We really don't have any kind of appeal process now,” Brown said. “I personally think there should be some subjectivity in this,” and business leaders should be able to present information that could keep the rate down.

“You can't even have that discussion right now.”

Lang, the labor commissioner, said Nebraska's unemployment insurance tax rates are below average because the state's unemployment rate is low. Nebraska's jobless rate in October, the latest available, was 4.9 percent, the second-lowest in the country.

Lang said the 2005 state law is intended to make the annual rate decision automatic and based on a definite formula, not based on subjective judgments. The law requires the unemployment insurance trust fund to hold between 0.85 and 1 percent of the total payroll in the state and specifies how to set rates each year to meet that goal. The fund has slipped to 0.684 percent.

Contact the writer:

444-1080, steve.jordon@owh.com

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