Jobless fund tax to shrink

January 21, 1994|By Frank Langfitt | Frank Langfitt,Staff Writer

Maryland business owners will probably not have to pay as much as expected into the state's unemployment insurance fund this year.

Both the state Senate and the House of Delegates unanimously passed legislation yesterday to reverse last year's decision increasing a 3-year-old surcharge.

The surcharge, which began in 1991, will remain at 1.7 percent of the first $8,500 earned by each employee.

Charles Middlebrooks, an assist ant secretary with the state Department of Economic & Employment Development, said the legislation should save Maryland businesses about $17 per employee annually, or about $25 million overall.

Yesterday's votes came after signs that the fund -- which pays unemployment benefits to out-of- work Marylanders -- is rebounding after being strained by the recession. It also is a nice election-year gift to the state's business community.

"It's something everybody wanted to do," said Mr. Middlebrooks, who monitors the fund for the state.

Differences between the Senate and House bills, however, will have to be reconciled before the legislation can become law.

House Bill 115 would freeze the surcharge businesses pay only for this year. Senate Bill 184 would freeze it through 1995.

Members of the Senate Finance and House Economic Matters committees will meet on the bills next week. Gov. William Donald Schaefer has supported the House bill and is expected to sign it, or something very similar, into law.

Sen. James C. Simpson, a Southern Maryland Democrat who sponsored the Senate version, said he wants to resolve the matter before the state sends out the higher tax bills, which are expected to reach business owners in March.

The state's unemployment insurance trust fund ran into trouble when the recession hit and unemployment claims began to deplete its reserves.

For instance, in September 1990, the fund held $546 million. Two years later, it had dropped to $172 million.

As the fund dropped below certain levels, a surcharge kicked in to build it back up. Last year, the legislature voted to increase the surcharge by 0.2 percent, from about $144 per employee to $161. Yesterday, it officially changed its mind.

It did so after the fund rebounded this fall, rising back to $221 million. Mr. Middlebrooks said that as the economic recovery continues, the fund is expected to reach $291 million by next September.

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