Inside Maryland Politics: The Unemployment Insurance Tax Drop

Inside Maryland Politics. Logo courtesy of WYPR

Inside Maryland Politics. Logo courtesy of WYPR

In case you missed it this morning, I joined Fraser Smith, senior news analyst for WYPR, on Inside Maryland Politics to discuss the expected decrease in the state’s unemployment insurance tax. Continue reading

Going behind the numbers on the unemployment problem

Every month, the state reports unemployment statistics and every month, at least lately, the message that accompanies those statistics follows a formula, something like “things have gotten worse, but they’ve gotten worse less quickly than they have before, so that’s a good thing.”

The numbers released by the state on Friday were made more interesting by the context provided by Gov. Martin O’Malley on Thursday.

O’Malley signed into law a $20 million tax credit program that will give businesses $5,000 for every unemployed Marylander they hire in 2010, up to $250,000 per business. The Department of Labor, Licensing and Regulation expects to start taking online applications for the credits next week.

Less than a day later, DLLR reported that the state’s unemployment rose to 7.7 percent in February, up from 7.5 percent in January. The number of unemployed Marylanders hit 227,524, up from 222,196 the month before.

If businesses decided to take advantage of all the available tax credits and hired 4,000 people immediately, that still would not bring the state’s unemployment situation from the February level down to the January level. That probably says more about the enormity of problem, rather than the scope of the solution.

“While there continue to be signs of improvement in the economy, we are still seeing significant pressure on the job market,” said Labor Secretary Alexander M. Sanchez in a written statement. “Both the unemployment rate and job creation statistics may continue to move erratically as the economy strives to move ahead.”

Maryland lost 68,300 jobs from Feb. 2009 to last month. Of those losses, 13,800 were lost between January and February.

Those figures also have big implications for the Unemployment Insurance Trust Fund, which was the focus of another bill the governor signed Thursday. His overhaul of unemployment benefits will bring the bankrupt trust fund $126.8 million from the feds.

The fund has opened a line of credit with the U.S. Department of Labor to keep paying benefits and state officials hope the one-time infusion brought by the overhaul will keep the state from borrowing again this year. But that assumption is based on the employment situation improving this year. Persistent, high levels of unemployment would be bad news for the fund.

Job creation tax credit passes, will be signed today

The tax credit for businesses who hire unemployed Marylanders was passed out of the General Assembly Thursday morning and will make its way across Gov. Martin O’Malley’s desk in the afternoon.

Businesses will receive $5,000 refundable credits for hires in 2010. Both the Senate and the House amended the bill, an O’Malley initiative, up from the original $3,000 credit, a change requested by the business community. The program will be capped at $20 million. Businesses will be eligible for up to $250,000 in credits. Here’s our story on the Senate’s changes.

The Senate passed the legislation 47-0 on Feb. 26 and the House passed it 134-6 on Monday. The Senate concurred Thursday with minor changes the House made to the legislation, sending it to the governor’s desk.

O’Malley will also sign into law his unemployment insurance reform bill and another measure that would restore manufacturer bonuses for car salespeople.

Unemployment insurance bill passes House

Updated @ 2:20 p.m.:

The House of Delegates passed an expansion of unemployment benefits Tuesday, the next-to-last step for legislation that will qualify the state’s bankrupt Unemployment Insurance Trust Fund for $126.8 million from the federal government.

The measure passed mostly along party lines (the vote was 101-33 in the chamber, but the final tally is still being calculated) without a word of debate. Next stop: Gov. Martin O’Malley’s desk for his signature.

Original post:

The House of Delegates has given preliminary approval to compromise legislation that will alter unemployment benefits to secure $126.8 million for the state’s bankrupt Unemployment Insurance Trust Fund.

The bill survived a series of amendments proposed by Republican lawmakers during an often heated debate on the House floor Monday night. The House will soon take a final vote on the bill before it heads to the second floor of the State House for Gov. Martin O’Malley’s signature.

Continue reading

Unemployment insurance bill gets committee nod

The House Economic Matters Committee approved the governor’s much amended unemployment insurance bill with a 17-5 vote, priming it for a trip to the House floor and moving it one step closer to passage.

The bill, SB 107, was the subject of nearly nonstop negotiations through the first half of the legislative session as lawmakers, governor’s representatives, business groups and labor interests crafted the long-awaited compromise.

It would increase unemployment benefits in some areas and decrease them in others to qualify the state’s Unemployment Insurance Trust Fund for $126.8 million from the federal government. The Department of Labor, Licensing and Regulation first tapped a federal line of credit in February to keep the trust fund afloat.

The legislation was the subject of little debate Tuesday and the vote fell largely along party lines.

“I think we’re adding more burdens to an already overburdened fund,” said Del. Warren E. Miller, R-Howard.

Here’s our most recent story on the Senate vote, and our earlier story on the compromise.

More work to be done on unemployment insurance

The state Senate has given preliminary approval to Gov. Martin O’Malley’s much-amended plan to expand unemployment benefits. (Here’s our most recent story on the compromise bill.)

The legislation will likely be up for a final vote in the chamber this week.

But, one lawmaker said, there is at least one part of the plan that must still be worked out.

As part of the compromise with business groups on the bill, a cut of $83 million to the record-high unemployment taxes in 2010 was removed. The groups argued the cut would hurt the Unemployment Insurance Trust Fund in the long run, and keep businesses paying higher taxes in the years to come.

Sen. Thomas M. “Mac” Middleton, the Charles County Democrat who led the negotiations on bill, said he is working with the governor’s office to create a program that would give businesses loan guarantees to help them pay their unemployment insurance taxes.

One option would be to rededicate part of a small-business loan guarantee program, which is already part of O’Malley’s business agenda this year. Middleton said he is looking for $3 million to $5 million.

“We’re hoping we can take part of that money for a loan guarantee program, a no-interest or low-interest loan program,” he said.

The move could help some small-business owners. The National Federation of Independent Business, which does not support the compromise legislation, had supported the original tax cut provision.

Unemployment insurance taxes shot up for businesses in 2010 as the high jobless rate weighed on the trust fund. The minimum rate in 2010 is $187 per employee, compared with $51 last year. The 2010 rates top at out $1,147.50 per employee.

Job tax credit, unemployment insurance move forward

Today, exactly halfway through the legislative session, two of Gov. Martin O’Malley’s high-profile business initiatives took significant steps forward.

The governor, by the way, was not on hand to see them – he’s in Iraq, visiting soldiers.

While he was away, his unemployment insurance legislation appeared to move toward compromise, with business groups saying a host of proposed amendments address most of their concerns. The governor’s plan would have expanded benefits to qualify the state for $126.8 million in federal funds. The amendments reduce benefits by about the same amount. See our brief story here and stay tuned for more coverage.

Earlier in the day, the Senate passed a job creation tax credit proposal championed by the governor. The amended bill upped the credit from $3,000 to $5,000 for each unemployed worker hired by Maryland companies.

Del. Kumar P. Barve, D-Montgomery, said Friday he expects the House to make a similar change to the plan.

The Senate bill passed 47-0.

Back to the drawing board

Sen. Thomas M. “Mac” Middleton said Thursday what he thought was a workable compromise on the governor’s unemployment insurance proposal fell apart because of a small, $1 million concession sought by labor and employee advocates.

Middleton has in recent days said he believed his work group of business and labor interests was close to a deal, with only a few minor tweaks to make. The governor’s proposal includes an expansion of unemployment benefits in three ways, with an expected cost to the Unemployment Insurance Trust Fund of about $20 million per year.

The group had found offsetting benefit reductions to get business groups on board, which they were until yesterday, said Middleton, D-Charles.

“Everything that brought them back to the table was there, and they rejected it,” said the chairman of the Senate Finance Committee. “I’m really, really puzzled.”

Middleton said the concession sought would have meant about $1 million more in annual benefits paid from the trust fund, which paid as much as $24 million per week in 2009.

He suggested lawmakers may “look beyond” the legislative committees and top lobbyists of the business groups at the bargaining table.

“I’m disappointed they aren’t there,” Middleton said. “I hope they reconsider.”

The unemployment legislation is on of Gov. Martin O’Malley’s top priorities this year. The benefit expansions would qualify the state for $126.8 million from the U.S. Department of Labor. That money would be used to boost the trust fund, and, in the governor’s original proposal, cover $83 million in tax breaks for businesses.

Business groups have already fought successfully against the tax break proposal, arguing that it would hurt the fund in the long run.

The UI saga continues, for now

Maryland lawmakers have for weeks refereed a tennis match as labor and business groups volleyed unemployment insurance proposals back and forth.

The senator running the show said Wednesday morning the game may finally be over.

“I thought we had a very, very good deal on the table,” said Sen. Thomas M. “Mac” Middleton, D-Charles. “My hope is that we can move forward today.

Middleton convened business, labor and employee advocates last night for the latest in a long and nearly constant series of meetings on Gov. Martin O’Malley’s unemployment insurance plan.

Middleton said labor groups are on board with the plan and had offered a small change that would need to be approved by business groups.

The governor’s proposal, filed as SB 107 and HB 91, would expand benefits available to Marylanders to make the state eligible for $126.8 million in federal funds. That one-time infusion would prop up the shrinking Unemployment Insurance Trust Fund and cover the $83 million in breaks for businesses this year.

Middleton has said the tax break portion of the legislation appears to be dead, as most business groups have fought against it.

Debate has centered on finding benefit reductions in other areas to offset the estimated $20 million annual cost of the governor’s proposed benefit expansion.

Misery loves company

Maryland is expected to tap a federal line of credit next week that will allow the state to keep paying unemployment benefits. When it does, it won’t be alone.

As with the unemployment issue, state officials have benefited from tougher economic climates elsewhere as bases for comparison – the jobless rate in Michigan, the housing market in Arizona and budgeting woes in California, to name a few.

When Maryland borrows from the U.S. Department of Labor to keep its Unemployment Insurance Trust Fund afloat, it will be the 28th jurisdiction to do so, following 26 states and the U.S. Virgin Islands. Those other states have nearly $30 billion in outstanding federal loans.

Julie Squire, the DLLR assistant secretary who oversees the unemployment insurance division, said the state has been able to put off borrowing until next week because of a low number of delinquent tax payments and steady claims numbers.

The Department of Labor, Licensing and Regulation expects to borrow $250 million interest-free and pay it all back this year. The infusion will keep the fund solvent until the end of April, when the first wave of tax payments is expected.

Here’s the list of other states that have borrowed. The dollar figures are in millions. And yes, that means California has had to cover a deficit in its trust fund that is more than three times larger than the deficit expected in Maryland’s state budget for next year.

State Loan Balance
Alabama $175.2
Arkansas $253.5
California $6,609.8
Connecticut $3.3
Florida $235.4
Georgia $1,137
Idaho $139
Illinois $1,382.1
Indiana $1,571.5
Kentucky $619
Michigan $3,326.4
Minnesota $372.9
Missouri $514.5
Nevada $183
New Jersey $1,116.5
New York $2,390.3
North Carolina $1,723.1
Ohio $1,857.3
Pennsylvania $2,130.5
Rhode Island $146.2
South Carolina $735.3
South Dakota $11.7
Texas $1,518.6
Virgin Islands $9.9
Virginia $170
Wisconsin $1,025.6
TOTAL $29,488.2