By John Kennedy
The News Service of Florida
The House wasted no time delaying what had been a steep increase in the state’s unemployment compensation tax – siding with business groups Tuesday which warned the spike could spark more layoffs by recession-strapped employers.
The legislation (CS/HB 7033) was the first bill approved by the House – with the Senate expected to follow suit Tuesday afternoon, sending the measure to Gov. Charlie Crist, who has indicated he would sign it into law quickly.
House Republicans and Democrats acknowledged Tuesday that the legislation had flaws, but approved it 117-0.
“It provides the necessary bridge for our small businesses and large corporations, alike,” said Rep. Ronald Brise, D-Miami. “Let’s do everything we can in our power to encourage businesses to open and employ Floridians.”
Only a day before, House Speaker Larry Cretul, R-Ocala, joined Senate President Jeff Atwater, R-North Palm Beach, in condemning the federal debt level and calling for the Florida Legislature to join a push for a constitutional convention demanding a balanced budget.
But the tax delay will force Florida to continue borrowing an average $225 million monthly from the federal government to replenish the bankrupt unemployment compensation trust fund, depleted by a Florida unemployment rate that has now hit 11.8 percent, the highest in 35 years.
By the beginning of this month, the state had already borrowed $1.2 billion from the federal government. Hundreds of millions of dollars in interest payments are due beginning in September 2011.
“It certainly is not the ideal public policy,” conceded Rep. Janet Long, D-Seminole.
But most lawmakers also said the tax increase – which employers were scheduled to begin paying April 1 – could swamp already fragile companies. Rep. Eric Eisnaugle, R-Orlando, said it was critical to cut businesses slack to allow them to survive and have any chance of maintaining their existing payrolls.
“We are facing the most challenging economy we have ever seen,” Eisnaugle said.
The same business organizations clamoring for the delay, including the Florida Chamber of Commerce, Florida Retail Federation, and National Federation of Independent Business, last year supported the increase, in part, to stave off a push by legislative Democrats for revamping the unemployment eligibility system.
The groups said they had no idea that the tax increase would prove so significant.
The minimum annual rate charged by the state to employers with a strong record of retaining employees was on track to rise from $8.40 per worker to $100.30. The maximum rate, now $378-per-worker, was scheduled to climb to $459.
With the new legislation, the minimum rate now will be $25.20 per-employee, an increase that reflects increased costs stemming from 37,000 Florida businesses that have folded over the past year. The maximum rate will stay at $378, under the legislation.
The measure also rolls back the taxable wage base from $8,500 to $7,000, the level it was last year. Florida’s unemployment benefits, capped at $300 weekly, are among the lowest in the U.S., according to federal Labor Department surveys.
The tax-financed unemployment trust fund had brimmed with $1.3 billion in December 2008 but fell into the red by last August as the state’s unemployment rolls grew.
The unemployment IOU comes on top of the state already reaching an unprecedented $26.4 billion level of accumulated debt – which last year cost Florida taxpayers $2.1 billion to maintain.
The tax-delay Tuesday sailed through the House with only passing references by Democratic lawmakers to the idea of trying to expand unemployment eligibility by adopting the so-called alternative base period for calculating benefits. Derided by business groups, the move would allow Florida to cover a larger pool of jobless workers, especially in construction, seasonal work, service and the retail industries.
Advocates say the system would pump more money into the state’s economy. But business groups say the $444.3 million in additional federal stimulus Florida could draw by adopting the alternative base and would prove a drop in the bucket – paid out in claims in about two months, critics say.
But Democrats say the Obama administration may demand that more be done for workers before they consider what are likely future pleas from states seeking forgiveness for the loans now propping-up unemployment trust funds.
Thirty-five states have adopted the alternative base system, including 17 states last year when the extra stimulus cash was put on the table, according to the National Conference of State Legislatures.
