House Committee Increases Benefit Expansion in UI Tax Reduction Bill

Legislation to reduce businesses’ unemployment insurance taxes took a turn for the worse when the House Labor and Workforce Development Committee inserted a provision that adds a new dependent care benefit and strikes the training benefit requested by the Governor.

AGC supports the tax deferral which would save employers $300 million in 2011 alone and opposes the dependent care benefit increase. Read a Seattle Times editorial that mirrors AGC’s position by clicking here.

AGC testified in support of the original legislation (House Bill 1091) that combined the tax reductions with a training benefit but now opposes the bill (Substitute House Bill 1091) that was passed out of the House committee.

AGC’s Legislative Counsel Van Collins testified at the hearing: “As a result of policy changes enacted several years ago Washington State has maintained an extremely good benefit structure while employers have been paying too much into the system. This is evidenced by the large reserve that was accumulated. We had almost 22 months of benefits in the trust as recently as 2008. The governor’s proposal makes necessary adjustments and fine tuning and ultimately brings that down to a manageable 14 months.”

Unfortunately the Labor and Workforce Development Committee passed the bill but not before adding the dependent care benefit which the business community coalition has said is a permanent benefit expansion which would lead to future tax increases. The vote was along party lines as all Democrats on the committee voted for it and all Republicans opposed it. As the bill is considered by the Rules Committee and the full House AGC will work to have it amended back to its original form.

Increasing the stakes even more is the fact that the Governor says that for the tax deferral to take effect in 2011 the bill has to be on her desk by Feb. 8. Gov. Gregoire held a press conference last week during which she urged the Legislature to pass the original bill and leave the debate about expanded dependent benefits for another day.

Meanwhile on the Senate side the Labor and Commerce Committee voted out Senate Bill 5135 which provides for the 2011 tax deferral (but does not make it permanent) and omits both the training and dependents benefit expansions. The amended bill also eliminates provisions that are necessary to keep in place separate and distinct federally-funded extended benefits. Labor unions have urged Senate Democrats to delay the consideration of benefit increases until later in the Session hoping to tie them in with similar discussions on workers’ compensation system reforms.

The situation is fluid and will likely have more twists before the Feb. 8 deadline is reached. For more information contact Van Collins at 360-352-5000.