Gov. Martin O'Malley went into this General Assembly session with a proposal to secure nearly $127 million in federal funds that would allow the state to lower the unemployment insurance taxes of Maryland's businesses. The response from the business community? Fierce opposition. Business leaders worried that delaying the increases would destabilize the unemployment insurance fund and lead to a bigger bite later, and they complained about the strings attached to the federal funds.
But that changed yesterday with the agreement of the Maryland Chamber of Commerce and the Maryland Retailers Association to back an amended version of the bill. Some of their initial objections to the governor's proposal were overblown, but the compromise worked out by the administration and legislators - chiefly Sen. Thomas M. "Mac" Middleton, the finance committee chairman - will offer better benefits for workers and more flexibility for employers.
The federal government is offering cash as an incentive for states to modernize their unemployment insurance systems. For Maryland to be eligible for the money, it would have to make changes to its current benefits, costing $18 million-$19 million a year. The most expensive change is the adoption of what's known as the "alternative base period" in determining whether a worker's employment history makes him eligible for benefits. The way the state determines that now doesn't consider work in the most recent three months, a relic of an era before computerized records when information could not be updated in real time. Most states, including many in the region, already use the alternative base period.
That change alone will cost Maryland businesses $16 million-$17 million a year, but even business groups acknowledge that the federal government is likely to mandate the change within the next few years. We could adopt it now and get cash for it or wait and be forced to do it with no compensation.
The other major change we need to make to get the money is to extend additional benefits to workers in approved job training programs. Not only is that the least expensive of the options the federal government offered but it also is the one that provides the greatest benefit to businesses in the form of a better trained work force. That will cost about $1.8 million a year. Other benefits in the governor's initial proposal included allowing businesses to spread out their payments into the fund - now, most payments are made in the first few months of the year - and to reduce penalties for late payments.
There was really no need for the business community to make demands beyond the governor's initial proposal. It offered them a more stable fund and only a small increase in costs beyond what they would have had to pay eventually anyway.
But the negotiations have sweetened the deal significantly. The administration has agreed to eliminate benefits for those who are too sick to work or seek employment, which is already the case in most states; increasing the minimum weekly benefit, which has not changed in nearly 30 years, from $25 to $50; increasing penalties for workers fired for misconduct or gross misconduct; and lowering the amount of wages a worker can earn per week while on unemployment without reducing his benefits. That limit is now $100 and would be reduced to $50, another change that would put Maryland more in line with its neighbors. Those provisions roughly offset the additional costs to the system. They also come with a promise to review their effects to make sure the cost offsets materialize.
But the most important change from the business community's perspective was counter-intuitive. The O'Malley administration dropped a provision that would have lowered the payments businesses will be required to make into the trust fund this year. That means businesses will have to pay more now, but the trust fund will be replenished faster. That was key to winning the Chamber of Commerce's support.
The legislation may not be exactly what either side wanted, but at a time when government seems hopelessly polarized, it serves as a reminder that compromise still is possible.
See what happens when we work together? O'Malley took an unintended consequence of a law that was passed before he got there and worked with the right people for the best possible solution. More folks in Annapolis can learn from the governor on this one.