UI BILL TOUGH MEDICINE FOR SICK SYSTEM

PREPARED FOR : SENATE LABOR, ELECTIONS & URBAN AFFAIRS

                                  COMMITTEE & ASSEMBLY LABOR & INDUSTRY

                                  COMMITTEE

DATE                     : February 14, 2008 

Wisconsin’s Unemployment Insurance system is ailing.  SB 431 & AB 757 may restore the system’s health.  It is tough but necessary medicine that will raise taxes on every Wisconsin employer.  It has to be done.  Wisconsin Independent Businesses supports the bill.  

During deliberations WIB, on behalf of the small, stable employers of Wisconsin, asked for consideration of two important issues.  We asked that the tax increase be phased in and we requested that employers whose workers drain the system be held more responsible than stable employers.  SB 431 & AB 757 deliver on both of those requests.  We want to give special thanks to Representative Mark Honadel for his leadership in providing this protection for Wisconsin’s most stable employers.  

The tax increase is phased in with increases in 2009, 2011 & 2013.  The phase-in allows the state’s small employers to prepare their businesses to absorb the tax increase.  Meanwhile, employers with a negative balance in their account – meaning their workers have drawn more in UI benefits than the business has paid in UI taxes – will have a greater portion of their UI tax paid toward the UI fund’s “balancing account.”  The balancing account is that portion of the fund that has had a seriously negative balance in recent years. 

The Unemployment Insurance Fund must be fixed.  It is essential for workers and employers alike that a scenario akin to the disaster of 1983 be avoided.  After many years of strong balances, created through adequate employer taxes and a modest annual benefit drain on the UI fund, the overall fund balance has declined significantly in recent years.  The UI fund balancing account has had an especially bad run, leaving it with a significant negative balance. 

WIB remembers too well the fund’s insolvency nearly a quarter-of-a-century ago.  That insolvency led to massive borrowing from the federal government and years of the highest UI tax rates in state history.  As the national economy slumps, WIB remains anxious to avoid a repeat of 1983’s devastating episode. 

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