With Ariz. borrowing for jobless benefits, business groups propose extra charge for employers

Assessment proposed for Arizona jobless benefits

PHOENIX — Business groups are proposing that Arizona employers pay more for unemployment benefits, a burgeoning cost that has forced the state to borrow from the federal government.

In a situation seen in dozens of other states, Arizona began borrowing in March because high demand in the recession emptied the state trust fund that pays for benefits. The fund comes from taxes paid by employers.

The House Commerce Committee on Wednesday plans to consider new legislation that would require employers to pay a special assessment over and above the state tax that they already pay for unemployment benefits.

Money from the assessment will help pay the cost of future borrowing from the federal government and save employers money in the long run, business representatives said Tuesday.

According to a legislative staff memo, the assessment to be charged to businesses would amount to $42 per employee in each of 2011 and 2012.

Meanwhile, automatic adjustments resulting from the program’s rising costs will increase the current state tax for unemployment benefits from the current $146 per employee per year to $158 in 2011 and $161 in 2012. Those increases are not part of the proposed legislation.

But the automatic increase alone wouldn’t provide enough money to start repaying the federal government in time to avoid a dramatic tax increase that the federal government could impose in 2012, officials from the business groups said.

“The question is do we want to control our own fate,” said Farrell Quinlan, state director for the National Federation of Independent Business.

Other options included a permanent tax increase and earlier implementation of the assessment, said Suzanne Taylor, a senior vice president for the Arizona Chamber of Commerce and Industry.

“We were extremely concerned that businesses wouldn’t have time to plan accordingly,” Taylor said.

Though the measure’s advocates said they were unaware of any organized opposition to the newly surfacing proposal, one possible complication could be the requirement of a two-thirds vote of approval by the House and Senate because the legislation increases state revenue.

Though the bill temporarily increases businesses’ costs, it’s for their own sake, said Rep. Michele Reagan, chairman of the House Committee.

“Our job is to protect business in Arizona, and inaction is not protecting them,” she said.

About 170,000 people now collect unemployment benefits in Arizona, up from 25,000 in December 2008, according to the Department of Economic Security, the agency that administers the program.

Arizona is among 33 states that as of late March had borrowed a total of $38.2 billion from the federal government to help pay for unemployment benefits, according to the National Conference of State Legislatures.

States have varied in their approaches as they try to shore up their benefits programs. New Mexico in February raised taxes on businesses and is transferring $100 million from a reserve account. Indiana in March delayed an unemployment tax increase for a year in an effort to avoid job losses.

DES officials last month briefed business groups on the status of the program’s finances and possible options. The department has not taken a position on the proposed legislation, spokesman Steve Meissner said.