The Legislature is poised to act quickly and positively to delay for two years a major increase in the unemployment compensation tax.
It's a move that could save beleaguered employers as much as a twelvefold increase on their unemployment tax bills.
The legislation zipped through both Senate and House committees. Its supporters claim it will stimulate job creation and allow businesses to stay afloat in a down economy.
The Senate and House bills -- SB 1666 and HB 7033 -- would roll back the base wage from $8,500 to $7,000. They would also save employers already paying the maximum unemployment tax rate from handing over an extra $80 per person.
“This is not perfect,” Randy Miller, executive vice president of the Florida Retail Federation, told the Senate Ways and Means Committee. “It’s simply asking for balance. We think that in two years, things are going to change.”
Some legislators and advocates say the bill only addresses half the problem with the state unemployment system. It would be better, they say, to go ahead as planned with the increase -- set to become effective in April -- and make a start at expanding and modernizing its outmoded system. Then, the state could qualify for as much as $444 million in federal stimulus money.
But, there's no time to waste discussing modernization versus delay, said Sen. Rudy Garcia, R-Hialeah, chairman of the Senate Commerce Committee and sponsor of the bill in his chamber. It’s important to move swiftly, he said, because the new tax bills are on employers’ desks right now.
If approved, the bills would postpone the state unemployment tax increase until 2012. They would also freeze the wage base at $7,000 for two years as well as allow employers to pay it in quarterly installments.
Both bills could clear their chambers as early as today, the first day of the new session. Gov. Charlie Crist has praised the House and Senate for supporting them.
The Legislature approved the looming hike in the unemployment tax last summer, with businesses’ support, to compensate for Florida’s depleted Unemployment Compensation Trust Fund. To replenish it, the state borrowed $1.1 billion from the federal UCTF.
And, the reason businesses are now complaining the hike is burdensome? Proponents of the bill felt at the time of passage that the state’s troubled economy would have peaked at 10 percent unemployment, said Tammy Perdue, general counsel of Associated Industries of Florida. They’ve since been proven wrong, with the unemployment rate at 11.8 percent in December.
If the tax hike is not suspended, small businesses will see an almost twelvefold rise in their payments between their 2009 and 2010 state unemployment tax bills. The minimum per person unemployment tax bill businesses will pay will rise from $8.40 to $100.30, the maximum from $378 to $459.
“I feel a little uncomfortable voting for something that delays the inevitable,” Senate Majority Whip Nancy Detert, R-Venice, told the Senate Commerce Committee. “But, we’re all hanging on by our fingertips.”
Perdue said a large South Florida company with a few thousand employees initially anticipated its unemployment tax bill would be $200,000. Later, it learned the bill will be closer to $1 million. “That’s $700,000 they could use to hire new people,” Perdue said.
Even if the Legislature approves the delay, however, many employers will still see higher bills because of "the experience rate" -- the formula the state uses to calculate tax rates, said Allen Douglas, state legislative affairs director for the National Federation of Independent Business.
The experience rating of a business rises with its number of unemployed, and employers with a high experience rating pay higher bills. (More on the experience rate can be found in the state unemployment compensation handbook.)
The economic turmoil of the past year forced businesses to lose staff, Douglas said. This means their experience rating rose.
Unless businesses are already paying the maximum rate, they would be confronted with higher tax bills -- although, not as high if the tax hike passes.
Some have said the bills to delay fail to address the mass amounts of unemployed workers who have been added to the state since the recession.
Rep. Kevin Rader, D-Delray Beach, has introduced a bill calling for the state to modernize and expand its unemployment system, thus allowing Florida to qualify for a one-time payment of about $444 million in federal stimulus money.
To receive the full $444 million, the state must change the system for submitting unemployment applications, approve a statute specifying part-time workers qualify for unemployment benefits and expand payments to workers who must quit their jobs due to domestic abuse, illness in their immediate families or spousal relocation.
Sen. Dan Gelber, D-Miami Beach, a Democratic candidate for attorney general, said he had little doubt the Legislature would pass the unemployment delay. But, modernizing eventually would help Florida barge its way into the federal government’s good graces after borrowing money.
"If we don’t accept the modernization, there’s no chance the federal government will forgive Florida’s debt,” Gelber said.
Modernizing the state’s pre-computer unemployment system would allow workers to qualify for unemployment compensation by registering their most recent quarter of employment. Because of processing time, the state’s system currently only allows people to qualify for unemployment compensation by registering the first four quarters of their last five employed.
Speaking to the Senate Ways and Means Committee, Karen Woodall, a political consultant representing the Farmworker Association of Florida, said, “We’re just asking to recognize that we do have computers, and we need to change the system."
Adopting this “Alternate Base Period” would allow the state to qualify for one-third of the $444 million. The state could receive another component of the money by amending its unemployment compensation law with a statute specifying part-time employees qualify for unemployment benefits. (They can receive the benefits now, although there is no such statute.)
Florida could receive the rest of the money by allowing workers to qualify for unemployment compensation if they leave their jobs due to domestic abuse, illness of a spouse, child or parent or the relocation of their spouse.
Garcia said now is not the time to discuss unemployment modernization, and he would consider the bill if it came before the Senate Commerce Committee at a later date, but proponents of modernization might not understand all it entails. Not all businesses have computers to enter their most recent employment data, and following the new rules could be burdensome, he said.
“You’re going to give them an additional responsibility," said Garcia.