[atlas:bill]

AN ACT Relating to the state reserve trust and state reserve interest accounts; amending RCW 50.04.070, 50.04.072, 50.16.020, and 50.29.025; reenacting and amending RCW 50.16.010; adding a new section to chapter 50.24 RCW; adding a new section to chapter 50.29 RCW; creating new sections; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 50.24 RCW to read as follows:

(1) A state reserve trust account is established as a separate account, identifiable and apart from all public moneys or funds of this state. Contributions to this account shall accrue and become payable by each employer described under RCW 50.04.080 for any calendar quarter beginning on or after January 1, 2000, except employers described in RCW 50.44.010 and 50.44.030 who have properly elected to make payments in lieu of contributions, taxable local government employers as described in RCW 50.44.035, employers who are required to make payments in lieu of contributions, and those qualified employers assigned rate class 20 under RCW 50.29.025, at a basic rate of four-tenths of one percent. The amount of wages subject to tax shall be determined under RCW 50.24.010.

(2)(a) Contributions under this section are due and must be paid by each employer under rules that the commissioner may prescribe, and may not be deducted, in whole or in part, from the remuneration of individuals in the employ of the employer. A deduction in violation of this section is unlawful.

(b) In the payment of a contribution under this section, a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to one cent.

(3) Money deposited in the state reserve trust account may be used only for loans to the unemployment trust fund, as security for loans from the federal unemployment insurance trust fund, and to pay the administrative costs related to collection of contributions under this section and administration of the state reserve trust account and the state reserve interest account. An appropriation is not required for expenditures.

(4)(a) Interest earned from investment of the state reserve trust account shall be deposited in the state reserve interest account, established as a separate account, identifiable and apart from all public moneys or funds of this state. Moneys in the state reserve interest account may be used only for addressing the costs of programs specifically listed in this subsection and for refunds to eligible employers as provided in (b) of this subsection.

(b) The commissioner shall make employer refunds under rules adopted by the commissioner. The commissioner shall determine refund amounts for rate year 2001 by December 31, 2000, and for each rate year thereafter by December 31st of the year preceding the rate year. The amount of the refund shall be calculated as a pro rata share of the amount in the state reserve interest account as of June 30th of the year of calculation and shall be based on the employer's taxable wages in the fiscal year ending in the year of calculation multiplied by a factor representing the ratio of the difference between the employer's benefit ratio and contribution rate under RCW 50.29.025.

(d) As used in this subsection, "eligible employer" means an employer whose contribution rate for a rate year under RCW 50.29.025 is higher than the socialized cost rate for that rate year, as determined by the commissioner, and is higher by twenty percent or more than the employer's benefit ratio calculated under RCW 50.29.027 for a rate year, expressed as a percentage.

Sec. 2. RCW 50.04.070 and 1985 ex.s. c 5 s 4 are each amended to read as follows:

"Contributions" means the money payments due to the state unemployment compensation fund as provided in RCW 50.24.010, to the federal interest payment fund under RCW 50.16.070, to the state reserve trust account under section 1 of this act, or to the special account in the administrative contingency fund under RCW 50.24.014.

Sec. 3. RCW 50.04.072 and 1985 ex.s. c 5 s 5 are each amended to read as follows:

The terms "contributions" and "payments in lieu of contributions" used in this title, whether singular or plural, designate the money payments to be made to the state unemployment compensation fund, to the federal interest payment fund under RCW 50.16.070, to the state reserve trust account under section 1 of this act, or to the special account in the administrative contingency fund under RCW 50.24.014 and are deemed to be taxes due to the state of Washington.

Sec. 4. RCW 50.16.010 and 1993 c 483 s 7 and 1993 c 226 s 10 are each reenacted and amended to read as follows:

(1) There shall be maintained as special funds, separate and apart from all public moneys or funds of this state an unemployment compensation fund, an administrative contingency fund, a state reserve trust account, a state reserve interest account, and a federal interest payment fund, which shall be administered by the commissioner exclusively for the purposes of this title, and to which RCW 43.01.050 shall not be applicable.

(2) The unemployment compensation fund shall consist of

((~~(1)~~)) (a) all contributions and payments in lieu of contributions collected pursuant to the provisions of this title,

((~~(2)~~)) (b) any property or securities acquired through the use of moneys belonging to the fund,

((~~(3)~~)) (c) all earnings of such property or securities,

((~~(4)~~)) (d) any moneys received from the federal unemployment account in the unemployment trust fund in accordance with Title XII of the social security act, as amended,

((~~(5)~~)) (e) all money recovered on official bonds for losses sustained by the fund,

((~~(6)~~)) (f) all money credited to this state's account in the unemployment trust fund pursuant to section 903 of the social security act, as amended,

((~~(7)~~)) (g) all money received from the federal government as reimbursement pursuant to section 204 of the federal-state extended compensation act of 1970 (84 Stat. 708‑712; 26 U.S.C. Sec. 3304), and

((~~(8)~~)) (h) all moneys received for the fund from any other source.

(3)(a) All moneys in the unemployment compensation fund shall be commingled and undivided.

The administrative contingency fund shall consist of all interest on delinquent contributions collected pursuant to this title, all fines and penalties collected pursuant to the provisions of this title, all sums recovered on official bonds for losses sustained by the fund, and revenue received under RCW 50.24.014: PROVIDED, That all fees, fines, forfeitures and penalties collected or assessed by a district court because of the violation of a state law shall be remitted as provided in chapter 3.62 RCW as now exists or is later amended.

(b) Moneys available in the administrative contingency fund, other than money in the special account created under RCW 50.24.014, shall be expended upon the direction of the commissioner, with the approval of the governor, whenever it appears to him or her that such expenditure is necessary for:

((~~(a)~~)) (i) The proper administration of this title and no federal funds are available for the specific purpose to which such expenditure is to be made, provided, the moneys are not substituted for appropriations from federal funds which, in the absence of such moneys, would be made available.

((~~(b)~~)) (ii) The proper administration of this title for which purpose appropriations from federal funds have been requested but not yet received, provided, the administrative contingency fund will be reimbursed upon receipt of the requested federal appropriation.

((~~(c)~~)) (iii) The proper administration of this title for which compliance and audit issues have been identified that establish federal claims requiring the expenditure of state resources in resolution. Claims must be resolved in the following priority: First priority is to provide services to eligible participants within the state; second priority is to provide substitute services or program support; and last priority is the direct payment of funds to the federal government.

(c) Money in the special account created under RCW 50.24.014 may only be expended, after appropriation, for the purposes specified in RCW 50.62.010, 50.62.020, 50.62.030, 50.04.070, 50.04.072, 50.16.010, 50.29.025, 50.24.014, 50.44.053, and 50.22.010.

(4) The state reserve trust account shall consist of contributions collected under section 1 of this act and may be expended only for the purposes specified in section 1 of this act. The state reserve interest account shall consist of the interest earned on investment of the state reserve trust account and may be expended only for the purposes specified in section 1 of this act.

Sec. 5. RCW 50.16.020 and 1993 c 226 s 12 are each amended to read as follows:

The commissioner shall designate a treasurer and custodian of the unemployment compensation fund, the state reserve trust account, the state reserve interest account, and ((of)) the administrative contingency fund, who shall administer such funds in accordance with the directions of the commissioner and shall issue his or her warrants upon them in accordance with such regulations as the commissioner shall prescribe. The treasurer and custodian shall maintain within the unemployment compensation fund three separate accounts as follows:

(1) a clearing account,

(2) an unemployment trust fund account, and

(3) a benefit account.

All moneys payable to the unemployment compensation fund, upon receipt thereof by the commissioner, shall be forwarded to the treasurer, who shall immediately deposit them in the clearing account. Refunds payable pursuant to the provisions of this title from the unemployment compensation fund may be paid from the clearing account upon warrants issued by the treasurer under the direction of the commissioner: PROVIDED, HOWEVER, That refunds of interest or penalties on delinquent contributions shall be paid from the administrative contingency fund upon warrants issued by the treasurer under the direction of the commissioner.

After clearance thereof, all other moneys in the clearing account shall be immediately deposited with the Secretary of the Treasury of the United States to the credit of the account of this state in the unemployment trust fund, established and maintained pursuant to section 904 of the social security act, as amended, any provisions of law in this state relating to the deposit, administration, release, or disbursement of moneys in the possession or custody of this state to the contrary notwithstanding.

The benefit account shall consist of all moneys requisitioned from this state's account in the unemployment trust fund. Moneys in the clearing and benefit accounts and in the administrative contingency fund shall not be commingled with other state funds, but shall be deposited by the treasurer, under the direction of the commissioner, in any bank or public depository in which general funds of the state may be deposited, but no public deposit insurance charge or premium shall be paid out of the fund.

Such moneys shall be secured by said bank or public depository to the same extent and in the same manner as required by the general depository law of the state and collateral pledged shall be maintained in a separate custody account.

The treasurer shall give a bond conditioned upon the faithful performance of his or her duties as a custodian of the funds in an amount fixed by the director of the department of general administration and in a form prescribed by law or approved by the attorney general. Premiums for said bond shall be paid from the administration fund. All sums recovered on official bonds for losses sustained by the unemployment compensation fund shall be deposited in such fund. All sums recovered on official bonds for losses sustained by the administrative contingency fund shall be deposited in such fund.

Sec. 6. RCW 50.29.025 and 1995 c 4 s 2 are each amended to read as follows:

The contribution rate for each employer shall be determined under this section.

(1) A fund balance ratio shall be determined by dividing the balance in the unemployment compensation fund as of the June 30th immediately preceding the rate year by the total remuneration paid by all employers subject to contributions during the second calendar year preceding the rate year and reported to the department by the following March 31st and, beginning with the determination preceding rate year 2001, multiplied by 1.25. The ((~~division~~)) calculation shall be carried to the fourth decimal place with the remaining fraction, if any, disregarded. The fund balance ratio shall be expressed as a percentage.

(2) The interval of the fund balance ratio, expressed as a percentage, shall determine which tax schedule in subsection (5) of this section shall be in effect for assigning tax rates for the rate year. The intervals for determining the effective tax schedule shall be:

Interval of the

Fund Balance Ratio Effective

Expressed as a Percentage Tax Schedule

2.90 and above AA

2.50 to 2.89 A

2.10 to 2.49 B

1.70 to 2.09 C

1.30 to 1.69 D

1.00 to 1.29 E

Less than 1.00 F

(3) An array shall be prepared, listing all qualified employers in ascending order of their benefit ratios. The array shall show for each qualified employer: (a) Identification number; (b) benefit ratio; (c) taxable payrolls for the four calendar quarters immediately preceding the computation date and reported to the department by the cut-off date; (d) a cumulative total of taxable payrolls consisting of the employer's taxable payroll plus the taxable payrolls of all other employers preceding him or her in the array; and (e) the percentage equivalent of the cumulative total of taxable payrolls.

(4) Each employer in the array shall be assigned to one of twenty rate classes according to the percentage intervals of cumulative taxable payrolls set forth in subsection (5) of this section: PROVIDED, That if an employer's taxable payroll falls within two or more rate classes, the employer and any other employer with the same benefit ratio shall be assigned to the lowest rate class which includes any portion of the employer's taxable payroll.

(5) The contribution rate for each employer in the array shall be the rate specified in the following tables for the rate class to which he or she has been assigned, as determined under subsection (4) of this section, within the tax schedule which is to be in effect during the rate year:

Percent of

Cumulative Schedules of Contributions Rates

Taxable Payrolls for Effective Tax Schedule

Rate

From To Class AA A B C D E F

0.00 5.00 1 ((~~0.48 0.48 0.58 0.98 1.48 1.88 2.48~~))

.08 .08 .18 .58 1.08 1.48 2.08

5.01 10.00 2 ((~~0.48 0.48 0.78 1.18 1.68 2.08 2.68~~))

.08 .08 .38 .88 1.28 1.68 2.28

10.01 15.00 3 ((~~0.58 0.58 0.98 1.38 1.78 2.28 2.88~~))

.18 .18 .58 .98 1.38 1.88 2.48

15.01 20.00 4 ((~~0.58 0.78 1.18 1.58 1.98 2.48 3.08~~))

.18 .38 .78 1.18 1.58 2.08 2.68

20.01 25.00 5 ((~~0.78 0.98 1.38 1.78 2.18 2.68 3.18~~))

.38 .58 .98 1.38 1.78 2.28 2.78

25.01 30.00 6 ((~~0.98 1.18 1.58 1.98 2.38 2.78 3.28~~))

.58 .78 1.18 1.58 1.98 2.38 2.88

30.01 35.00 7 ((~~1.08 1.38 1.78 2.18 2.58 2.98 3.38~~))

.68 .98 1.38 1.78 2.18 2.58 2.98

35.01 40.00 8 ((~~1.28 1.58 1.98 2.38 2.78 3.18 3.58~~))

.88 1.18 1.58 1.98 2.38 2.78 3.18

40.01 45.00 9 ((~~1.48 1.78 2.18 2.58 2.98 3.38 3.78~~))

1.08 1.38 1.78 2.18 2.58 2.98 3.38

45.01 50.00 10 ((~~1.68 1.98 2.38 2.78 3.18 3.58 3.98~~))

1.28 1.58 1.98 2.38 2.78 3.18 3.58

50.01 55.00 11 ((~~1.98 2.28 2.58 2.98 3.38 3.78 4.08~~))

1.58 1.88 2.18 2.58 2.98 3.38 3.68

55.01 60.00 12 ((~~2.18 2.48 2.78 3.18 3.58 3.98 4.28~~))

1.78 2.08 2.38 2.78 3.18 3.58 3.88

60.01 65.00 13 ((~~2.38 2.68 2.98 3.38 3.78 4.18 4.48~~))

1.98 2.28 2.58 2.98 3.38 3.78 4.08

65.01 70.00 14 ((~~2.58 2.88 3.18 3.58 3.98 4.38 4.68~~))

2.18 2.48 2.78 3.18 3.58 3.98 4.28

70.01 75.00 15 ((~~2.88 3.08 3.38 3.78 4.18 4.58 4.78~~))

2.48 2.68 2.98 3.38 3.78 4.18 4.38

75.01 80.00 16 ((~~3.08 3.28 3.58 3.98 4.38 4.68 4.88~~))

2.68 2.88 3.18 3.58 3.98 4.28 4.48

80.01 85.00 17 ((~~3.28 3.48 3.78 4.18 4.58 4.88 4.98~~))

2.88 3.08 3.38 3.78 4.18 4.48 4.58

85.01 90.00 18 ((~~3.68 3.88 4.18 4.58 4.88 4.98 5.18~~))

3.28 3.48 3.78 4.18 4.48 4.58 4.78

90.01 95.00 19 ((~~4.08 4.28 4.58 4.98 5.08 5.18 5.38~~))

3.68 3.88 4.18 4.58 4.68 4.78 4.98

95.01 100.00 20 5.40 5.40 5.40 5.40 5.40 5.40 5.40

(6) The contribution rate for each employer not qualified to be in the array shall be as follows:

(a) Employers who do not meet the definition of "qualified employer" by reason of failure to pay contributions when due shall be assigned ((~~the~~)) a contribution rate ((~~of five and six-tenths percent~~)) that is two-tenths percent higher than the maximum rate in effect in the applicable rate year, except employers who have an approved agency-deferred payment contract by September 30 of the previous rate year. If any employer with an approved agency-deferred payment contract fails to make any one of the succeeding deferred payments or fails to submit any succeeding tax report and payment in a timely manner, the employer's tax rate shall immediately revert ((~~to five and six-tenths percent~~)) for the current rate year to a rate that is two-tenths percent higher than the maximum rate in effect in the applicable rate year;

(b) The contribution rate for employers exempt as of December 31, 1989, who are newly covered under the section 78, chapter 380, Laws of 1989 amendment to RCW 50.04.150 and not yet qualified to be in the array shall be 2.5 percent for employers whose standard industrial code is "013", "016", "017", "018", "019", "021", or "081"; and

(c) For all other employers not qualified to be in the array, the contribution rate shall be a rate equal to the average industry rate as determined by the commissioner; however, the rate may not be less than one percent. Assignment of employers by the commissioner to industrial classification, for purposes of this subsection, shall be in accordance with established classification practices found in the "Standard Industrial Classification Manual" issued by the federal office of management and budget to the third digit provided in the Standard Industrial Classification code.

NEW SECTION. Sec. 7. A new section is added to chapter 50.29 RCW to read as follows:

For the purpose of simplification of employer reports, the "combined contribution rate" shall be used in the calculation of employer taxes. The combined contribution rate shall include the regular contribution rate as determined under RCW 50.29.025, and the special contribution rates required under RCW 50.24.014 and section 1 of this act. A mention of the "combined contribution rate" may not be made on a tax form or publication unless the form or publication specifically identifies the specific contributions. The combined contribution rate may not be quoted on a form unless the specific component rates are also quoted. The sole purpose of the combined contribution rate is to allow an employer to perform a single calculation on a tax return rather than several separate calculations.

NEW SECTION. Sec. 8. If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state or the eligibility of employers in this state for federal unemployment tax credits, the conflicting part of this act is inoperative solely to the extent of the conflict, and the finding or determination does not affect the operation of the remainder of this act. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state or the granting of federal unemployment tax credits to employers in this state.

NEW SECTION. Sec. 9. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 10. Sections 1, 6, and 7 of this act apply to tax rate years beginning on or after January 1, 2000.

NEW SECTION. Sec. 11. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 1999.