|Although there are signs the state economy is recovering faster than expected, unemployment remains high. Last June, the Employment Security Department warned that unemployment insurance taxes could increase sharply to rebuild a depleted UI trust fund. At the time, Seattle Times business reporter Paul Roberts wrote,
By 2022, taxes that employers pay to cover state jobless benefits could rise to an average of $936 per worker. That’s almost three times the expected 2020 figure of $317, according to preliminary figures released Thursday by the state Employment Security Department (ESD).
And those are average increases: Employers who had more layoffs could see higher per-employee taxes.
Last week, Washington Research Council economist Kriss Sjoblom, reviewed the data. He reports,
The ESD-calculated average tax rates increase from 0.94 percent in 2020, to 1.88 percent in 2021 and 2.74 percent in 2022, and then decline thereafter.
There’s the doubling and tripling of UI taxes reported by Roberts. If the increases were to occur just as many employers want to bring back furloughed workers and employees are eager to return to work, the disincentive to add jobs would severely damage the recovery.
State policymakers, however, could act to lessen the tax burden. By last June, lawmakers in more than half the states had already taken such action, according to the Tax Foundation.
As of mid-May, 26 states and the District of Columbia have declared-mostly through executive order or labor department guidance-that COVID-19-related layoffs will not be charged against employers for purposes of calculating the experience ratings that determine their UI tax rates. This is a reasonable way to help protect businesses and industries that have been disproportionately impacted by mandated business closures and stay-at-home orders. It will also help ensure more businesses will be able to survive this crisis and rehire their employees once they can safely resume operations.
Washington makes the map with an asterisk.
Meanwhile, six states-Arkansas, Maryland, Mississippi, Nevada, South Dakota, and Washington-have specifically said that based on current law and plans, employers will be charged for layoffs despite the extenuating circumstances surrounding this pandemic. (Washington has provided some flexibility; the state plans to charge employers for pandemic-related claims except for claims that arise due to the temporary closure of a business due to potential contamination of the business site. In addition, the legislature has appropriated $25 million to provide employers with relief from charges for employees who were put on standby.)
Policymakers here are considering steps that can be taken to minimize increases in UI taxes that would discourage job creation and recovery. Last week, ESD’s Unemployment Insurance Advisory Committee received a presentation by Dan Zeitlin, Employment System Policy Director for ESD. For those with an interest in details and options, we recommend going through the slides.
We review some of the options in this post. While we imagine there will be much more discussion of mitigation strategies in the coming weeks, we’re encouraged that policymakers recognize the importance of not increasing employment costs as the economy emerges from the COVID-19 recession.
State leaders will receive another revenue forecast September 23. With revenue collections for the two months following the June forecast beating expectation by a cumulative $643 million – 20%! – many observers believe that the September numbers will be represent an upward revision. Or not. Predicting the pandemic and the public policy, business and consumer responses to it has frustrated experts for months. The better-than-expected revenue collections may still represent a combination of pent-up demand and the effects of the federal stimulus dollars.
Lawmakers remain reluctant to go into special session before the November election. But even with an improved revenue outlook, early adjustments to the state budget make sense, although “early” now probably means sometime toward the end of this year.
Association of Washington Business president Kris Johnson uses his column to make the case for a special budget session.
About that hoped-for federal relief, the Associated Press reports,
The prospects for a pre-election COVID-19 relief measure appear to be dimming, with aid to states and local governments one of the key areas of conflict.
An editorial in the Everett Herald also calls on lawmakers to act before 2021.
But there are two good reasons why the Legislature should convene for a special session, and do so as soon as possible:
One: The more that lawmakers cut now, the less drastic that cuts might have to be later. (The same goes for new revenue; the sooner a new tax is adopted, the sooner it begins collecting revenue.)
Two: There are areas of spending that must be protected from cuts if we are to have any hope for the shortest possible recession and a return to the strong economy – and the ample revenue – the state enjoyed at the start of the year before the pandemic hit.
The editorial also makes this point about state spending:
If there’s an “unprotected” area of state spending that will be crucial in an economic recovery, it is the higher education programs that prepare high school graduates for future careers. And more than just protected from significant cuts, those programs and institutions should be among the first in line to receive any investments made available by federal pandemic relief aid.
For there to be a sustained economic recovery, businesses must be able to reopen and stay open. No sector of the economy has been hit harder than the restaurant industry. Anthony Anton, president and CEO of the Washington Hospitality Association, writes in an op-ed that customers play a critical role in keeping restaurants open.
If we want our state’s economy to thrive, we need thriving restaurants. If we want thriving restaurants, we need more indoor seating for fall. And in order to get our case counts low enough to accommodate indoor seating in just a few weeks, we need to wear masks now and keep wearing them.
The Washington Hospitality Association is part of a coalition of a dozen industry groups to promote mask wearing. Our message is simple: Your mask today saves a job tomorrow. You can join our campaign by posting a picture of yourself to social media using the hashtags #StaySafeWa and #MaskUpWa. Together, our masks today can save tens of thousands of jobs tomorrow when we need it the most.
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