Tax rate for jobless benefits to stay same

Posted Nov. 09, 2008, at 9:13 p.m.
Last modified March 20, 2011, at 6:16 a.m.

AUGUSTA, Maine — As many states are raising taxes on employers to pay for unemployment benefits, Maine employers will see the basic rate structure stay the same for 2009, Labor Commissioner Laura Fortman said in an interview.

“Our rate will be staying at schedule A, the lowest of the tax rates in the tax array,” she said. “But there may be modest increases for some employers based on the experience rating.”

The more an employer uses the unemployment insurance system, the higher tax it pays per employee. Taxes are levied on the first $12,000 of earnings and range from $58.50 to $654 per employee. All UI taxes are paid by employers.

Fortman said Maine is seeing an increase in use of the unemployment insurance system with the unemployment rate continuing to edge up. But Maine is not seeing the sometimes large increases in taxes that employers in other states are seeing in this recession.

“I think that goes to the change that was made a decade ago that stabilized our fund and has made taxes predictable for employers,” she said. “Because of the way our system was established, we do not see those big swings in taxes that are being seen in other states.”

The current reserves total about $460 million. By the end of 2008, Maine employers will have paid an estimated $89.5 million into the fund.

Maine’s latest unemployment rate available is for September, when it was 5.6 percent. That was an increase from 4.9 percent in September 2007 and meant that 39,800 workers were unemployed and looking for work, which is more workers than there are people living in Waldo County.

The number of Mainers receiving benefits in the last week of October was 10,665 and that was up from 5,850 a year ago that week. Already 3,134 Mainers have exhausted the federally funded 13 weeks of extended unemployment benefits passed by Congress in June.

Over 59,000 Mainers had received UI benefits for some period of time during the first nine months of this year, an increase of more than 22 percent from a year ago.

“My crystal ball is pretty hazy, but I think we will be seeing further increases given the economic forecasts,” Fortman said.

Last month the Consensus Economic Forecasting Commission estimated wage and salary employment would be down by two-tenths of a percent this year and seven-tenths of a percent in 2009.

“I’m glad to hear that even despite the fact that utilization of the fund is up, there will not be an increase,” said Peter Gore of the Maine State Chamber of Commerce. “But it makes me wonder if there will be the expected decrease in rates that people were expecting in the future.”

Under legislation passed during the first session of the current Legislature, Maine reduced its reserves from 21 months of benefits to 18 months as part of a compromise that continued benefits for part-time workers and created a training fund to “fill the gaps” between the various job training programs. It also was expected to result in tax rates going down in 2010.

Gore said that of even greater concern is the push by organized labor and others to expand who is covered by unemployment insurance and the size of the benefits under the program. He said employers couldn’t afford any tax increases in this economic climate.

“Small businesses are where the jobs are in Maine, and they cannot afford any tax increase,” said David Clough, Maine director of the National Federation of Independent Business. “I agree that some will push for expansion of benefits and new benefits when they look at that big pot of money, but small employers just can’t afford it.”

Ed Gorham, president of the Maine AFL-CIO, made it clear last month there would be attempts to expand the system to cover more workers in the new legislative session. He said the numbers used by the Labor Department do not tell the whole story of Maine’s unemployed.

For example, Gorham said, seasonal workers are not covered by UI, so they are not “on the radar screen” and counted as out of work and looking for work. He acknowledged that the expansion of UI to cover part-time workers had improved the situation for some workers, but argued the current system is not counting thousands of Mainers who are without a job.

Fortman said Maine computes its numbers the same as other states. To be counted, a person has to be out of work and looking for work. She said there is not a reliable estimate of how many “discouraged” workers there are in the state, but agreed with Gorham that there certainly are workers who have become discouraged.

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