HOUSE BILL REPORT
HB 1278


This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by House Committee On:
Commerce & Labor

Title: An act relating to revising the industry average unemployment contribution rates.

Brief Description: Modifying industry average unemployment contribution rates.

Sponsors: Representatives Conway, Simpson and Kenney; by request of Governor Gregoire.

Brief History:

Commerce & Labor: 2/2/07, 2/8/07 [DPS].

Brief Summary of Substitute Bill
  • Makes unemployment insurance contribution rates for new employers 90 percent, 100 percent, or 115 percent of average industry rates, depending on benefits charged and contributions paid by new employers in a three-year period.


HOUSE COMMITTEE ON COMMERCE & LABOR

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 8 members: Representatives Conway, Chair; Wood, Vice Chair; Condotta, Ranking Minority Member; Chandler, Assistant Ranking Minority Member; Crouse, Green, Moeller and Williams.

Staff: Jill Reinmuth (786-7134).

Background:

Washington's unemployment insurance system requires covered employers to pay contributions on a percentage of taxable payroll. The contributions of covered employers are held in trust to pay benefits to unemployed workers. The contribution rates are the sum of an array calculation factor rate, a graduated social cost factor rate, and in some circumstances, a solvency surcharge.

For qualified employers:

Nonqualified employers include those who have had employees for two years or less as of
April 1 of the previous year. For new employers:


Summary of Substitute Bill:

Unemployment insurance contribution rates for new employers are:

The rates are subject to the following limitations:

   

Substitute Bill Compared to Original Bill:

Unemployment insurance contribution rates for new employers are 90 percent, 100 percent, or 115 percent of average industry rates, depending on benefits charged and contributions paid by new employers in a three-year period, instead of 100 percent of average industry rates.


Appropriation: None.

Fiscal Note: Available.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony:

(In support) The Governor has introduced several bills on economic development, especially on helping Washington businesses get off to a good start. This bill is among those, and will put $9 million in the pockets of new businesses. In the past, the rate was set at 115 percent of the average industry rates because we presumed that new businesses had a higher failure rate, and a higher tax rate was needed to cover potential inactive accounts.

However, circumstances have changed. There are fewer inactive accounts. The unemployment insurance system is more experience rated. New employers paid $96 million in taxes, and were charged $25 million in benefits.

We can strike a balance between protecting the unemployment insurance system and protecting new businesses. The Governor, business, and labor agree on the amendment using a sliding scale to establish new employer tax rates. With the sliding scale, the Legislature will not have to revisit this issue.

(In support with amendment) With the amendment, our association can support this bill. It protects existing businesses and encourages new businesses.

(Opposed) We have not seen the substitute. It seems to solve the problem.

Persons Testifying: (In support) Marc Baldwin, Office of the Governor; and Jeff Johnson, Washington State Labor Council.

(In support with amendment) Mellani McAleenan, Association of Washington Business.

(Opposed) Larry Stevens, National Electrical Contractors Association and Mechanical Contractors Association.

Persons Signed In To Testify But Not Testifying: None.