Unemployment fund problem not going away
The Senate agreed with the House position to firm up the unemployment fund. Labor Secretary Jim Garner believes we will need to borrow from the federal government to meet our obligations to the unemployed.
The fund is financed by taxes that are assessed on each Kansas business in accordance to their historical use of the fund.
There are three types of employers in Kansas: positive employers, who have paid more into the fund than their employees have taken out in benefits; negative employers, who have paid less into the fund than their laid-off employees have received in benefits; and new employers, who have no historical experience.
All new employers pay in at 4 percent (of taxable payroll determined on the first $8,000 of the base salary earned by each employee during a calendar year) for 24 months except for construction companies who pay in at 6 percent before they are rated for experience.
Garner testified last year that the fund was stable and could probably weather the worst of downturns. When Garner sent out notices of the new tax rate to businesses in December, I received calls and letters about the 400 percent to 700 percent increases in unemployment taxes.
Businesses said they could not afford their payments, due in April, as it would only compound their unemployment problem by requiring additional worker layoffs in order to pay the tax.
Businesses then asked the Legislature to adopt the original 2010 tax rates as determined by Garner.
The rates were a true reflection of each businesses experience and use of the fund.
When the Department of Labor calculated the original 2010 rates, it didn't bring in the amount needed to meet the planned yield required by law so they compressed the rates, causing positive employers with little experience to be charged astronomical rates.
The secretary anticipates the original 2010 schedule will cause Kansas to borrow an additional $150 million over the next two years to prop up the unemployment insurance fund. Regardless of who the next governor is, they will inherit a problem that will require a lot more money and probably policy changes.
In my Feb. 26 newsletter, I failed to mention $4.4 million of the $9 billion tax exemption between 1995 and 2009 was the reduction in property taxes.
This amount represents the difference between 35 mills for school funding versus the current 20 mills.
The change was made in the mid-1990s following property revaluation; when property values were adjusted upward to market value, the mill rate was supposed to be lowered so that the higher property values generated the same amount of property tax, which had increased 96 percent between 1995 and 2008.
Visitors to our office this past week included students of the government class at Northern Valley High School.
It is always a pleasure to have the students visit, and we appreciate Jason Dibble's annual efforts to have them experience first-hand our state government in action.
Ralph Ostmeyer represents the 40th Senate District.
ralph.ostmeyer@senate.ks.gov