June 30-- State Senator Jack Hill of Reidsville explains changes to Georgia's unemployment tax law.
Last week's column covered the $746 million debt the state of Georgia has accumulated during the recession paying out unemployment benefits after the state Unemployment Trust Fund was depleted. The state has to pay interest on the debt, over $44 million so far. A solution to repaying the loan and to start replenishing the Trust Fund was the goal of the Legislature this year resulting in the passage of H.B. 347.
HOUSE BILL 347
House Bill 347 is a means to quickly pay back the federal loan and return Georgia's Unemployment Insurance Trust Fund to solvency.
The bill affects three areas of the unemployment insurance law:
- Taxable Wage Base: Paid by employers based on each employee's income
- Experience Base Tax: Paid by employers and varies based on each employer's utilization of the Unemployment Trust Fund (the more former employees that collect unemployment, the more that employer pays)
- Ties the number of weeks unemployment beneficiaries are eligible to Georgia's unemployment rate
House Bill 347 will increase both the taxable wage base and the experience base tax. The current taxable wage base is $8,500 and was set to this amount in 1990. This base is noticeably lower than the current southern wage base average of $9,390. With HB 347 the taxable wage base will increase on January 1, 2013 to $9,500, which will still be under the national average of $10,500.
The state tax rate for the experienced base tax varies depending on the employers' experience rating (number of former employees collecting unemployment insurance). The rate at which an employer pays is set in Georgia law and can fluctuate between 0.025% and 5.40%. Georgia law also provides an adjustment to the tax rate when the Unemployment Insurance Trust Fund is below specified levels. Previously, rate increases were decided by the Department of Labor's Commissioner. House Bill 347 codifies that when Georgia's Unemployment Trust Fund balance is less than one billion dollars and the state has a loan balance with the federal government, the amount paid by employers in the experienced base tax will increase by 50%.
The number of weeks a recipient can receive unemployment benefits will decrease from 26 and can vary from 14 to 20 (depending on Georgia's unemployment rate). Specifically, if the unemployment rate is above 9% then benefits can be received for up to 20 weeks. It will then decrease by one-week intervals for each .5% decrease until the rate is at 6.5% (or below) at which a recipient will be able to attain benefits for up to 14 weeks. Florida has also lowered and tied unemployment rates to the number of weeks recipients can receive unemployment benefits, fluctuating between 12 and 23 weeks.
It is ideal for the state to quickly pay back the federal loan since the FUTA tax credit for employers will decrease by 0.3% with every year the state has not fully paid back the loan. If Georgia has not paid off the loan by 2013, employers will have to pay 1.2% of the FUTA tax (2012 is 0.9%) which is about $82 per employee. However, once the loan is paid off, Georgia can revert back to the former 2011 tax credit of 5.4%.
The passage of House Bill 347 should put Georgia on a path of quicker repayment to the federal government and should also restore solvency to the Unemployment Insurance Trust Fund. With this legislation, the state is put in a better position to handle an increase in unemployment claims and a decrease in employer tax revenue should such economic conditions arise again in the future.