Advisory Council — 2 May 2013 meeting — and legislative actions today

Belated notes on the last meeting of the advisory council and recent legislative events.

At this meeting, Jim Buchen for WMC was replaced by Scott Manley, a WMC VP.

The council then took action on the following items.

D-06 — Dep’t error redefined to exclude computer error / new COA for collection Approved by the council at this meeting after originally being declined.

D-08 — Claimants providing DWD with information
The council amended this proposal to make Wis. Stat. § 108.04(1)(hm) applicable to all information requests to claimants from the Department and to make restore claimants’ eligibility to the date of the original benefit suspension once the information is provided. There will no longer be a requirement that there be good cause for the delay. Wis. Stat. § 108.04(1)(i) is repealed.

Legislators items #25 (temp agency employment offers), #27 (Loan to cover UI interest), #28 (Holiday limits on UI eligibility), #30 (Link eligibility weeks to unemployment rate), and #31 (Additional tax brackets for high experience employers) were declined by the council. The council, however, also indicated that it had no objection to the bill already drafted that essentially implemented item #27.

WASS letter
The Council also considered a letter from the Wisconsin Association of Staffing Services to raise the current taxable base wage from $14,000 to $28,000 while effectively halving current tax rates and the Department’s response/analysis of that proposal. The short answer is that the Department finds that the higher taxable base wage would lead to greater revenues over the long-term. Low-wage employers would pay slightly less in UI taxes. Higher wage employers would most likely see a noticeable increase in their UI taxes.

Last week, LRB-drafted bills representing these recommended changes by the council were introduced and scheduled for committee hearings that took place today. A quick glance at the bill indicates that many of these changes will become effective on June 30th of this year.

In addition, the Joint Finance Committee took up the Department and Legislative proposals that the council did NOT adopt. WisPolitics Budget blog has what information is available to me:

> Here are some highlights of the UI package:
> -it would reduce payments to those on unemployment by $14.1 million
> in 2013-14 and $23.1 million in 2014-15 by changing rules regarding
> voluntary termination of work, misconduct and substantial fault, work
> search, and reduced partial benefits during holidays.
> -employers would pay $17.2 million more in unemployment taxes in
> 2014-15 and $32 million annually thereafter. But they would also see
> reduced interest payments to the federal government of $19 million in
> 2013-14 and $7 million in 2014-15.
> -the reduced interest payments would occur because the state would
> provide up to $30 million to pay interest on loans from the federal
> government to cover unemployment payments.
> – the state also could provide a loan of up to $50 million to the
> unemployment fund in 2014 to lower the tax rate employers pay as the
> state seeks to pull the fund out of the red. The federal unemployment
> tax administration credit, which lowers the rates employers pay if
> their states have positive fund balances, is calculated on Nov. 9 of
> each year. Because the state is expected to have a positive balance
> on that day, employers would avoid $191 million in additional taxes
> without the transfer.

This afternoon, these changes were approved on a party-line vote.

To see a description of the quit changes and the new substantial fault standard, see the relevant pages in this memo.

As many of you have suggested, some kind of training regarding all of these changes is needed. Given the extent of what is happening, I’m not sure where to start. June will be a busy month.

PowerPoint on UI financing

Here is a PowerPoint presentation from the February 6th meeting of the Advisory Council.

It has been difficult getting a copy of this presentation. The presentation explains that the current UI debt exists — in large part because the tax rate on employers has not kept pace with growth in the wages being paid to employees. This financing gap goes back to the early 1990s, but interest earned on the UI reserve fund covered up the problem during the 1990s. When interest rates declined in the 2000s, the fund balance declined and the 2008 recession emptied it completely.

The recommended fix is not easy. It involves raising the base wages that are taxed for unemployment purposes (currently $14,000) to a higher amount based on maintaining a certain balance in the trust fund to cover possible emergencies. In other words, the amount of taxable wages would vary as the balance that had to be maintained changed.