Jobless benefit changes approved 

Posted: 6:49 pm Tue, March 23, 2010
By Nicholas Sohr
Daily Record Business Writer

ANNAPOLIS – An overhaul of Maryland’s jobless benefits cleared the General Assembly on Tuesday, moving the state closer to capturing $126.8 million from the federal government to shore up its bankrupt unemployment system.

The 101-33 vote in the House of Delegates ended months of negotiations and near-compromises as lawmakers and administration officials navigated a tightrope between business and labor interests.

The final product differs greatly from Gov. Martin O’Malley’s original proposal. But O’Malley was nonetheless “very pleased” with the passage of SB 107, a spokesman said.

“We have a solution that ultimately maintains the solvency of the [Unemployment Insurance] Trust Fund, which is a benefit to everyone,” said Shaun Adamec, O’Malley’s press secretary.

The trust fund has been battered by the persistently high levels of unemployment in the state. To keep the fund afloat, the Department of Labor, Licensing and Regulation (DLLR) has borrowed $83 million, interest free, from the federal government in the last two months.

Adamec said the governor had not decided when to sign the bill. He will likely do so soon because the state will become eligible for the federal funds once the bill becomes law.

State officials expect the federal money – which is part of the economic stimulus package passed last year – to arrive within 45 days after the governor signs the bill.

Assistant Secretary Julie Squire, who heads the DLLR’s unemployment division, said the department is expecting $870 million in unemployment insurance tax payments this year.

“With the (federal) incentives, our calculations are showing we won’t have to borrow again this year,” she said.

Business leaders and state officials also hope the addition of the federal dollars will help lower unemployment taxes in coming years. The taxes are set yearly, based on the amount of money in the trust fund.

“We’re delighted this heavily amended bill made it through the Senate unanimously and now the House,” said Kathleen T. Snyder, president and CEO of the Maryland Chamber of Commerce.

“There are a lot of ‘if’s,’ but this certainly gives us a better chance of having lower [unemployment insurance] taxes in the out years,” she said.

O’Malley was spurred to action in the fall when the trust fund balance dropped so low that the tax schedule for businesses rose to its highest level. The minimum rate in 2010 is $187 per employee, compared to $51 last year. The 2010 rates top at out $1,147.50 per employee.

O’Malley proposed expanding benefits in three areas – which would have cost the fund about $19 million annually – to make the state eligible for the federal funds. He pushed the proposal as pro-business, including $83 million in unemployment insurance tax deferrals in 2010, interest rate cuts on late payments and optional payment plans.

But business groups balked, pushing for a deal that did not include the tax deferrals and offset the cost of benefit expansion.

“In the beginning, the objective was to provide immediate tax relief to small businesses,” Adamec said. “As we went on, it became clear the business community was more interested in the long-term solvency of the trust fund than the immediacy of the tax relief. In the end, it’s something everybody can work with.”

The compromise bill, to make the benefit shift cost-neutral, would eliminate claims filed by those who are unable to look for work because of illness, increase the minimum benefit payment unemployed workers could claim from $25 to $50, increase penalties for employees fired for misconduct and count more of claimants’ outside income against their benefits.

The benefit changes would go into effect next year. Provisions to reduce monthly interest on late payments from 1.5 percent to 0.5 percent and allow businesses to pay their taxes in installments would take effect immediately.