The severe economic downturn that has put an unprecedented number of workers in line for unemployment benefits will drive the tax rates employers pay to support the benefit program up 70 percent in 2009. The new rates will still be slightly lower than the rates in 2006.
Idaho Department of Labor Director Roger Madsen announced the rate increase on Wednesday to the Workforce Development Council meeting in Boise.
The across-the-board increase in the more than a dozen rate classes is mandated by legislation developed by business and labor and approved unanimously by the Legislature in 2005. In conjunction with the increase in employer tax rates, the maximum weekly benefit for workers will decline about 3 percent.
The rate increase and benefit reduction are driven by a formula intended to keep the Unemployment Insurance Trust Fund solvent. The fund balance has declined from nearly $320 million in November 2007 to under $240 million at the end of September. Benefit payments in recent weeks are double the amounts paid a year ago and well ahead of the record pace of 2003, when over $181 million in benefits were paid.
“The benefits provided idled workers from this fund are critical to the communities they live in and to the economy overall,” Madsen said. “These weekly checks are helping over 15,000 workers and their families pay their bills and support the businesses in their communities. And this keeps these skilled workers in Idaho so businesses will have the labor pool they need once this economy begins growing again.”
Another 8,400 workers, who have exhausted their state unemployment benefits, are receiving additional benefits under the federally financed extended benefits program.
Madsen will sign the executive order setting the 2009 rates this week. All 50,000 Idaho employers will be notified of their exact rate in a letter to be sent Dec. 19.
“I deeply regret having to send this rate notice, but I am mandated by law to do so,” Madsen said. “I have worked for the past 25 years to lower what were the nation’s highest tax rates in 1984 to our lowest rates in history. Unfortunately, the slow economy triggers this automatic tax increase.”
Idaho’s unemployment rate has doubled in the past year, the largest percentage increase in the unemployment rate of any state. More than 40,000 workers were without jobs in October, the highest number in over a quarter century. In the past year, the unemployment rate has risen in every county, city and labor market area in the state.
The average effective tax rate will increase from 0.62 percent of total payroll this year, the lowest unemployment insurance tax rate in history, to 1.05 percent in 2009. The actual rate for individual employers depends on the benefits charged to their accounts.
An employer paying the average annual wage in Idaho will see his tax liability per worker getting that wage rise from $296 to $518.
At the same time the maximum weekly benefit for workers will drop from 59 percent of the average weekly wage – $364 in 2008 – to 57 percent of the average weekly wage – $362 in 2009. Had the reduction not occurred, the average weekly benefit would have risen to $376.
The increase in tax rates in 2009 follows four years of significant savings for Idaho employers. The revisions to the unemployment insurance system in 2005 saved businesses $200 million that would have been contributed to the trust fund under the old law. Tax reductions in both 2007 and 2008 to the lowest average effective rate on record saved nearly $100 million.
The higher rates in 2009 will generate less than $50 million in additional revenue to the fund, only one-sixth of the savings employers have received since 2004.