Brewer signs bill imposing unemployment insurance surcharge - East Valley Tribune: Business

Brewer signs bill imposing unemployment insurance surcharge

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Posted: Monday, April 25, 2011 6:46 pm

Arizona employers are going to be shelling out more later this year to keep each worker on the payroll.

Legislation signed Monday by Gov. Jan Brewer directs the state to impose a surcharge on what companies pay in unemployment insurance. While the exact rate is to be worked out, lawmakers said they intend to cap the fee at $28 per worker for the balance of the year.

Next year the additional fee would jump to an anticipated $42.

Steve Meissner, spokesman for the Department of Economic Security, which administers jobless benefits in Arizona, said the first bills to employers are likely to go out this fall.

All this is necessary because the state’s unemployment trust fund, which is supposed to be self-supporting, went broke more than a year ago.

The legally obligated benefits to workers have continued quite simply because the state has been borrowing money from the federal government. While the state at one point was $600 million in the hole, as of last week Arizona still owes more than $332.9 million.

Last year, when the economy was at its worst, Congress agreed to provide money to all the states without interest. But that is no longer true, with Arizona now incurring charges at the rate of about 4 percent.

But the desire to raise money -- and quickly -- stems from the fact that at the end of 2012 the federal government can demand immediate repayment of anything still owed.

Marc Osborne, lobbyist for the Arizona Chamber of Commerce and Industry, said the fear is that would result in a huge spike in assessments on employers who are ultimately responsible for anything owed. He predicted that could force companies to come up with $200 for each worker.

Business interests specifically negotiated the two-step surcharge. The idea of a higher assessment next year is based on the premise that the economy will have improved and that companies will be better able to afford the extra costs.

The fund, which at one time had more than $1 billion, is financed by a tax on the first $7,000 of each worker’s salary.

How much each firm pays is based on how often it lays off workers without cause, meaning the employees are eligible for benefits. Companies that lay off the fewest number of workers could pay less than $2 a year; those with high turnovers can pay as much as $378.

And that, he said, would mean an even bigger -- and unpredictable -- spike in employer costs.

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