Panel probes revamp of jobless fund
With unemployment taxes likely to increase, New Hampshire lawmakers are feeling more pressure to do something about “negative-rated employers,” those seasonal companies whose workers receive more in unemployment benefits than they pay in unemployment taxes. Whether legislators do anything about it is another question.
Workers in seasonal companies collect unemployment during the off season, enabling those companies to keep their workforce intact year-round, at the state’s expense, state Department of Employment Securities Commissioner Richard Brothers explained at a July 17 meeting in Manchester — the third of the year after more than three years of study on the topic.
“It gets to be obscene,” said Brothers. “Some get 10 times what they pay in.”
Last year, according to state figures presented to the committee, negative employers cost the trust fund $19 million, and over the last five years the price tag has been $105 million. Now the fund is at $213 million, below the $225 million threshold to maintain the current discount in the unemployment tax rate. More money is coming in, but Brothers predicts it won’t quite get over the threshold by Sept. 1, the day of reckoning to decide next year’s unemployment tax rate, meaning it will go up by a half of percentage point.
If the trust fund falls below $200 million, the rate will rise by a full percentage point.
Brothers doesn’t anticipate that latter scenario, but then again, “I don’t anticipate that home heating oil will go up $7 a gallon either,” referring to the havoc energy costs have caused and could further wreck the economy.
The study committee heard various options to increase the rate on negative employees, ranging from a simple increase of a half of a percent to complicated ones that fall more heavily on employers with larger negative balances, or increasing the rate as the trust fund shrinks.
Under one scenario, employers with a 6.5 percent tax rate would see an increase of 3 percent – nearly a 50 percent increase.
Brothers said he didn’t like any of the scenarios, preferring instead to simply stop paying unemployment benefits to seasonal employees during the off season. Unemployment is supposed to cover people when they are unexpectedly laid off, he contended. No one is surprised when a school bus driver is let go during the summer or when a construction worker is pink-slipped when his worksite is under two feet of snow.
Pressure is coming from businesses – more than 60 percent of which pay into the fund and have never laid off a worker – and labor, which is worried about the health of the Unemployment Trust Fund.
Brothers stressed that New Hampshire’s trust fund is doing better than most states. Rhode Island may soon have to be bailed out by the federal government, and Massachusetts is not far behind. New Hampshire’s fund could handle the worst recession in 20 years for more than a year, even without getting an extra dime, he said.
So why go after the construction industry, asked Gary Abbott, executive vice president of Associated General Contractors of New Hampshire. Abbott displayed statistics showing that negative employers presented the same drain on the fund 20 years ago as they do today, and the construction industry makes up the same percentage of negative employers. And while its workers collect more than they pay in, they pay in an awful lot, by the nature of their work, he said. Raising the rates even more would be a severe hardship on the industry.
But Rep. Frank Bishop, R-Raymond, who chaired the study committee, countered that “the way the economy is going, it is appropriate” to at least study the issue.
Rep. Mary Gorman, D-Nashua, acting chair of the House Labor Committee, stressed that “we are not looking to be punitive to business.”
She said that while there does appear to be some companies who “take more advantage of the trust fund than others,” the committee is at the very “primitive stages” of understanding the issue, and that any action is a long way off.
Bob Sanders can be reached at bsanders@nhbr.com.
