Md. officials seek to plug drain on unemployment

March 29, 1991|By David Conn | David Conn,Annapolis Bureau of The Sun

ANNAPOLIS -- With more than $50 million a month in unemployment benefits being paid out -- almost twice last year's level -- state officials urged lawmakers yesterday to change Maryland's unemployment insurance law to slow the bleeding from the fund that pays benefits.

The changes would increase each employer's unemployment insurance taxes by about 21.4 percent; raise the maximum level of emergency taxes the state could impose to boost the UI trust fund quickly; and allow the system to respond more quickly to downturns in the economy.

Those changes were offered by Department of Economic and Employment Development officials to the Senate Finance Committee, which yesterday heard debate on a bill that already has passed the House.

But one of the sponsors of the bill, Delegate George H. Littrell Jr., D-Frederick, said the House leaders don't "think we need the amendments at this time." He said the legislature can reconsider the issue in the fall when it reconvenes to address redistricting.

Those amendments to a bill that would have a minor effect on UI taxes are all that's left of a major reform of the UI law that DEED officials envisioned at the beginning of the session.

The desire for reforms was sparked by an independent audit which showed that more than $600 million in UI benefits each year are paid without taxes being charged to the companies where employees were laid off.

Those "leakages" eventually deplete the UI trust fund so much that all employers must pay a surtax -- anywhere from 0.6 percent to 1.7 percent.

The decision to impose the surtax is made on May 31 of each year, when DEED officials decide whether the fund has been depleted enough to warrant the extra tax.

Another concern the DEED officials want addressed is the rapid depletion of the trust fund from which benefits are paid.

The fund's ideal level at the end of May should be $566 million, according to Assistant DEED Secretary Charles O. Middlebrooks. But at the end of this month it will be less than $400 million, he said.

One change that Mr. Middlebrooks proposed to the committee yesterday would authorize the state to examine the fund on Sept. 30, instead of May 31 and to impose any surtax that's needed to build up the trust fund on Dec. 31.

Because employers pay the UI tax on the first $7,000 of each employee's wages, imposing a surcharge after May means the higher taxes don't tend to get paid until the next year, well into the economic downturn that necessitated the surtax.

Mr. Middlebrooks also suggested raising the taxable wage base from $7,000 to $8,500, a 21.4 percent increase.

Companies are now taxed at a rate that roughly corresponds to the amount of unemployment benefits paid to their former workers.

The Maryland Chamber of Commerce and other groups said they had no problem with that plan, but a representative of Bethlehem Steel Corp. argued that it would hurt his company and other heavy manufacturers.

Bethlehem Steel lobbyist Ed Snowden said increasing the taxes would cost his company an extra $600,000 next year.

It would "have an adverse economic impact on our economy, and it would adversely affect Bethlehem Steel," he said.

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