Business groups want unemployment benefits cut 

Posted: 7:41 pm Tue, January 26, 2010
By Nicholas Sohr
Daily Record Business Writer

ANNAPOLIS — Business leaders panned Gov. Martin O’Malley’s proposal for the state’s unemployment insurance system on Tuesday, arguing the changes would erode the long-term stability of the program.

The unemployment initiatives are a key part of O’Malley’s agenda this legislative session. He is pushing for changes to the benefits available to Marylanders to make the state eligible for $126.8 million in federal stimulus funds that would be used to reduce businesses’ taxes this year and boost the Unemployment Insurance Trust Fund, from which weekly benefits are paid.

Despite the promise of tax cuts, business groups have lined up in staunch opposition to the proposal, calling instead for cuts to the unemployment benefits.

“We are dealing with structural unemployment here,” said Ronald Adler, CEO of Laurdan Associates Inc., a human resources consulting firm based in Potomac, and the Maryland Chamber of Commerce’s representative at the Senate Finance Committee hearing on SB 107.

“If we are not looking at the benefit side, we will not have fiscal soundness, we will not have trust fund solvency,” Adler said.

The heart of O’Malley’s legislation is three changes to unemployment benefits that will make the state eligible for the federal infusion. The first, and most contentious, would change the period during which workers would have to prove employment from the first four of the previous five calendar quarters to the most recent four quarters.

The administration and some members of the business community agree that change will likely be required by the federal government at some point.

“This is a train that is coming, and we think it’s a good idea to get on board now,” said Julie Squire, assistant secretary of the Department of Labor, Licensing and Regulation.

O’Malley’s proposal would make technical changes to part-time worker benefits already allowed under state law and double the 26 weeks of benefits available to unemployed people enrolled in work force training programs.

Legislative analysts predict the changes would add about $20 million in benefits paid every year.

Most of the stimulus funds, which would be pumped into the trust fund within 45 days of passage of O’Malley’s legislation, would be used to offset tax rollbacks for businesses in 2010.

“This is something the governor tries to sell as being pro-business, but all the business people oppose it,” said Senate Minority Leader Allan H. Kittleman, R-Howard and Carroll.

The unemployment tax rate is determined annually based on the amount of money in the fund as of Sept. 30 of the prior year.

With $301 million in the fund last Sept. 30, taxes jumped at least 300 percent for every business in the state. The minimum rate in 2010 is $187 per employee, compared to $51 last year. The 2010 rates top out at $1,147.50 per employee.

The administration’s proposal would use $83 million from the federal money to lower the minimum rate to $153, and the high end to $1,096.50.

“The rate relief in this bill is insignificant,” said Champe C. McCulloch, president of the state branch of the Associated General Contractors of America. The “$51 [reduction] doesn’t matter. If you have 100 employees, $5,000 isn’t going to keep your doors open.”

The business groups did, however, support part of the bill that would reduce the interest rate on late payments from 1.5 percent to 1 percent. DLLR will also work with businesses to develop tax payment plans.

Regardless of the legislation passed, or not passed, DLLR plans to borrow up to $300 million from the federal government to keep the trust fund afloat until the wave of payments expected at the end of April.

Squire said the state would be able to pay back the entire interest-free loan this year.

During strong economic times, the fund swelled to more than $1 billion and benefit payments hovered around $400 million per year.

When the rate was set for 2009, the fund had slipped below $900 million. Nearly $1.1 billion in benefits were paid out last year.

On Jan. 14, the fund sat at $95.9 million, enough to pay out about five weeks worth of claims.