by National Association of State Workforce Agencies

NASWA has released a survey of the state unemployment trust fund solvency and tax rates. The survey’s findings underscores the significant impact that the current economic recession is having on Unemployment Insurance (UI) costs for all employers.

A total of 24 states will increase their taxable wage base in 2010. Of these 24 states, seven states (AR, FL, IN, NH, TN, VT and WV) have enacted legislation to increase the state’s “taxable wage base,” the level of wages subject to a payroll tax on employers. The remaining 17 state programs (AK, HI, ID, IA, MN, MT, NV, NJ, NM, NC, ND, OK, OR, UT, VI, WA and WY) index their taxable wage bases to the state’s average wages and will automatically increase their taxable wage bases for 2010.

Of the 51 state programs surveyed, 28 states (AK, AL, AZ, CO, GA, HI, IA, ID, IL, KS, MA, MD, ME, MN, MT, ND, NE, NH, NJ, NY, OH, OR, PA, PR, VA, VT, WI and WY) indicated the tax schedule in their state will see an increase in 2010 compared to 2009. The majority of these increases will be automatic; adjustments often triggered by low levels of reserve funds in the state accounts used to finance unemployment benefits. While it is normal for states to recalculate tax rates each year, the magnitude of these rate increases for most states is unusual.

In addition, ten states (CA, CT, DE, KY, MI, MO, NC, RI, SC and TN) indicated their tax rate schedules were already at the highest tier, which would prevent them from automatically increasing in 2010. Consequently, the state legislatures would need to enact changes in state laws – either increasing the tax rates by changing tax rate schedules or increasing the state taxable wage bases.

Six of the 51 state programs surveyed (AR, CA, CT, FL, HI and MA) indicated they will automatically increase their tax rates due to a solvency tax already in state law. The majority of these solvency taxes also activate when states’ trust fund balances fall below specified levels.

Of the 51 state programs surveyed, 35 states estimated the level of UI tax revenue collected in 2010 would surpass the level collected in 2009; with a median projected increase of 27.5%. The range of these projected increases was 2.5% to 600%.

More information can be found at www.workforceatm.org