Employers to pay more for jobless insurance - East Valley Tribune: Business

Employers to pay more for jobless insurance

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Posted: Tuesday, January 6, 2004 9:38 am | Updated: 5:00 pm, Thu Oct 6, 2011.

The state’s jobless rate may finally have stabilized, but the bill is coming due for the high unemployment of the last few years.

Beginning immediately, Arizona employers will have to pay an average of 1.04 percent of the first $7,000 earned by each worker. That is a 30 percent increase over the 0.8 percent rate of the prior two years.

But officials at the Department of Economic Security said that even with the hike Arizona’s unemployment insurance taxes remain among the lowest in the nation. And it still remains less than half of the national average.

The change is necessary to replenish the fund from which jobless benefits are paid. State law spells out that workers who are laid off or otherwise lose their jobs through no fault of their own are entitled to receive one half of what they were earning. That, however, is capped at $205 a week.

Payments come from the trust fund.

Federal law recommends that states maintain enough money in that trust fund to ensure it will not go broke. Specifically, it means taking a look at the worst unemployment rate in recent history and having assets to make payments for anywhere from 12 to 18 months with the current number of people in the work force.

For Arizona, that touchstone is the recession of the mid-1970s when more than one in seven Arizonans was out of work.

According to DES, the economic slowdown of the last few years has taken its toll on the trust fund. As of the end of December it sits at $604.7 million — less than two thirds of where it was on June 30, 2002.

That makes a premium hike necessary.

Farrell Quinlan, spokesman for the Arizona Chamber of Commerce, said that is not a surprise.

He said the trust fund premiums are a "lagging indicator" of the economy, designed to be low when the number of people unemployed is high and companies already are struggling.

Then, as times get better, the fund is replenished for the next recession.

Not everyone pays that average rate, which translates to $72.80 per employee.

Employers with the best record — meaning the fewest layoffs — can pay premiums as low as 0.05 percent. That means just $3.50 a year.

By contrast, those with the worst record could end up with bills as high as $378 a year.

Figures prepared last year by DES staffers predict that the average rate will rise to close to 1.3 percent next year and, presuming no major change in the economy, level off at that point.

Quinlan said the increase will not deter his organization from its support of a two-step increase in the maximum jobless benefit, taking it eventually to $240 a week.

Lawmakers approved such a measure last year.

But it was vetoed by Gov. Janet Napolitano who did not like provisions in the legislation placing new restrictions on who could collect benefits.

Napolitano particularly objected to a section that said someone had to earn wages in 20 weeks out of 52 to collect any benefits at all, no matter how much they made.

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