2007 Legislation
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SENATE BILL NO. 1108 – Unemployment tax/multiplier incrsd

SENATE BILL NO. 1108

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S1108.......................................by COMMERCE AND HUMAN RESOURCES
UNEMPLOYMENT INSURANCE - Amends existing law to increase the desired fund
size multiplier from eight-tenths to nine-tenths for unemployment insurance
tax purposes.
                                                                        
02/09    Senate intro - 1st rdg - to printing
02/12    Rpt prt - to Com/HuRes

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   First Regular Session - 2007
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1108
                                                                        
                         BY COMMERCE AND HUMAN RESOURCES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO TAXABLE WAGE BASE AND TAXABLE WAGE RATES FOR  UNEMPLOYMENT  INSUR-
  3        ANCE  PURPOSES;  AMENDING  SECTION  72-1350,  IDAHO  CODE, TO INCREASE THE
  4        DESIRED FUND SIZE MULTIPLIER.
                                                                        
  5    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  6        SECTION 1.  That Section 72-1350, Idaho Code, be, and the same  is  hereby
  7    amended to read as follows:
                                                                        
  8        72-1350.  TAXABLE  WAGE  BASE AND TAXABLE WAGE RATES. (1) All remuneration
  9    for personal services as defined in section 72-1328, Idaho Code, equal to  the
 10    average  annual  wage in covered employment for the penultimate calendar year,
 11    rounded to the nearest multiple of one hundred dollars ($100), or  the  amount
 12    of  taxable wage base specified in the federal unemployment tax act, whichever
 13    is higher, shall be the taxable wage base for purposes of this chapter.
 14        (2)  Prior to December 31 of each year, the director shall  determine  the
 15    taxable  wage rates for the following calendar year for all covered employers,
 16    except cost reimbursement employers, in accordance with this section, provided
 17    however, and notwithstanding any other provision of  the  employment  security
 18    law  to the contrary, for calendar years 2005 and 2006, the taxable wage rates
 19    for all covered employers except cost reimbursement employers shall be  deter-
 20    mined as follows:
 21        (a)  For  calendar  year  2005,  the taxable wage rate shall be determined
 22        using a base tax rate of one and fifty hundredths percent (1.50%);
 23        (b)  For calendar year 2006, the taxable wage  rate  shall  be  determined
 24        using  a  base  tax rate of one and sixty-seven hundredths percent (1.67%)
 25        unless, at any time prior to September 30, 2005, the actual balance in the
 26        employment security fund, section 72-1346, Idaho Code,  is  fifty  percent
 27        (50%)  or  less  than  the  actual  balance  in  the reserve fund, section
 28        72-1347A, Idaho Code, in which case the taxable wage rate shall be  deter-
 29        mined  using  a base tax rate calculated in accordance with subsection (5)
 30        of this section.
 31        (3)  An average high cost ratio shall be  determined  by  calculating  the
 32    average  of  the  three (3) highest benefit cost rates in the twenty (20) year
 33    period ending with the preceding year. For the purposes of this  section,  the
 34    "benefit  cost  rate" is the total annual benefits paid, including the state's
 35    share of extended benefits but excluding the federal share of  extended  bene-
 36    fits and cost reimbursable benefits, divided by the total annual covered wages
 37    excluding  cost  reimbursable  wages. The resulting average high cost ratio is
 38    multiplied by the desired fund size multiplier of  eight  nine-tenths  (0.89),
 39    and  the  result,  for  the    purposes of this section, is referred to as the
 40    "average high cost multiple" (AHCM).
 41        (4)  The fund balance ratio shall be determined  by  dividing  the  actual
 42    balance  of the employment security fund, section 72-1346, Idaho Code, and the
 43    reserve fund, section 72-1347A, Idaho Code, on September  30  of  the  current
                                                                        
                                       2
                                                                        
  1    calendar year by the wages paid by all covered employers in Idaho, except cost
  2    reimbursement employers, in the preceding calendar year.
  3        (5)  The base tax rate shall be determined as follows:
  4        (a)  Divide the fund balance ratio by the AHCM;
  5        (b)  Subtract  the  quotient  obtained  from  the calculation in paragraph
  6        (5)(a) of this section from the number two (2);
  7        (c)  Multiply the remainder obtained from  the  calculation  in  paragraph
  8        (5)(b)  of  this  section by two and one-tenth percent (2.1%). The product
  9        obtained from this calculation shall equal the  base  tax  rate,  provided
 10        however,  that  the  base tax rate shall not be less than sixty-three hun-
 11        dredths percent (0.63%) and shall not exceed  three  and  thirty-six  hun-
 12        dredths percent (3.36%).
 13        (6)  The  base  tax  rate  calculated in accordance with subsection (5) of
 14    this section shall be used to determine the taxable wage  rate  effective  the
 15    following  calendar  year  for all covered employers except cost reimbursement
 16    employers as provided in subsections (7) and (8) of this section.
 17        (7)  Table of Rate Classes, Tax Factors and Minimum  and  Maximum  Taxable
 18    Wage Rates
 19               Cumulative Taxable Payroll Limits   Eligible Employers
 20               More Than      Equal to               Minimum     Maximum
 21                 (% of      or Less Than             Taxable     Taxable
 22     Rate       Taxable     (% of Taxable   Tax       Wage        Wage
 23     Class      Payroll)      Payroll)    Factor      Rate        Rate
 24      1            --          12         0.2857      0.180%      0.960%
 25      2            12          24         0.4762      0.300%      1.600%
 26      3            24          36         0.5714      0.360%      1.920%
 27      4            36          48         0.6667      0.420%      2.240%
 28      5            48          60         0.7619      0.480%      2.560%
 29      6            60          72         0.8571      0.540%      2.880%
 30      7            72          --         0.9524      0.600%      3.200%
                                                                        
 31                                                   Standard-Rated Employers
 32                                                     Minimum     Maximum
 33                                                     Taxable     Taxable
 34                                            Tax       Wage        Wage
 35                                          Factor      Rate        Rate
 36                                           1.000      1.000%      3.360%
                                                                        
 37               Cumulative Taxable Payroll Limits   Deficit Employers
 38               More Than      Equal to               Minimum     Maximum
 39                 (% of      or Less Than             Taxable     Taxable
 40     Rate       Taxable     (% of Taxable   Tax       Wage        Wage
 41     Class      Payroll)      Payroll)    Factor      Rate        Rate
 42      -1           --          30         1.7143      1.080%      4.800%
 43      -2           30          50         1.9048      1.200%      5.200%
 44      -3           50          65         2.0952      1.320%      5.600%
 45      -4           65          80         2.2857      1.440%      6.000%
 46      -5           80          95         2.6667      1.680%      6.400%
 47      -6           95          --         2.6667      5.400%      6.800%
 48        (8)  Each  covered  employer, except cost reimbursement employers, will be
 49    assigned a taxable wage rate and a contribution rate as follows:
 50        (a)  Each employer, except standard-rated employers, will be  assigned  to
 51        one (1) of the rate classes for eligible and deficit employers provided in
 52        subsection  (7)  of  this  section based upon the employer's experience as
 53        determined under the provisions of sections 72-1319, 72-1319A, 72-1351 and
                                                                        
                                       3
                                                                        
  1        72-1351A, Idaho Code.
  2        (b)  For each rate class provided in subsection (7) of this  section,  the
  3        department  will  multiply the base tax rate determined in accordance with
  4        subsection (5) of this section by the tax  factor  listed  for  that  rate
  5        class in the table provided in subsection (7) of this section. The product
  6        obtained  from this calculation shall be the taxable wage rate for employ-
  7        ers assigned to that rate class, provided however, that the  taxable  wage
  8        rate shall not be less than the minimum taxable wage rate assigned to that
  9        rate  class and shall not exceed the maximum taxable wage rate assigned to
 10        that rate class in the table provided in subsection (7) of this section.
 11        (c)  For standard-rated employers, the department will multiply  the  base
 12        tax  rate  determined in accordance with subsection (5) of this section by
 13        the tax factor listed for standard-rated employers in the  table  provided
 14        in subsection (7) of this section. The product obtained from this calcula-
 15        tion shall be the taxable wage rate for standard-rated employers, provided
 16        however,  that  the  taxable wage rate shall not be less than  the minimum
 17        taxable wage rate assigned  to  standard-rated  employers  and  shall  not
 18        exceed  the maximum taxable wage rate assigned to standard-rated employers
 19        in the table provided in subsection (7) of this section.
 20        (d)  Deficit employers who have been assigned a  taxable  wage  rate  from
 21        deficit  rate class six will be assigned contribution rates equal to their
 22        taxable wage rate.
 23        (e)  All other eligible, standard-rated  and  deficit  employers  will  be
 24        assigned  contribution  rates equal to ninety-seven percent (97%) of their
 25        taxable wage rate. Provided however, that for each calendar year a reserve
 26        tax is imposed pursuant to section 72-1347A, Idaho Code, the  contribution
 27        rates for employers assigned contribution rates pursuant to this paragraph
 28        shall be eighty percent (80%) of their taxable wage rate.
 29        (9)  Each  employer  shall  be notified of his taxable wage rate as deter-
 30    mined for any calendar year pursuant to  this  section  and  section  72-1351,
 31    Idaho  Code.  Such  determination shall become conclusive and binding upon the
 32    employer, unless within fourteen (14) days after delivery or  mailing  of  the
 33    notice  thereof  to  his last known address, the employer files an application
 34    for redetermination, setting forth his reasons therefor. Reconsideration shall
 35    be limited to transactions occurring subsequent to any previous  determination
 36    which  has  become final. The employer shall be promptly notified of the rede-
 37    termination, which shall become final unless an appeal is filed  within  four-
 38    teen  (14) days after delivery or mailing of notice to his last known address.
 39    Proceedings on the appeal shall be in accordance with the provisions  of  sec-
 40    tion 72-1361, Idaho Code.

Statement of Purpose / Fiscal Impact


                      STATEMENT OF PURPOSE
                                
                           RS 16959
                                
Section 72-1350, Idaho Code, sets out the formula for calculating
employer tax rates for assessment of the unemployment insurance
tax. Part of that calculation determines the balance the
Unemployment Insurance Trust Fund must maintain to handle benefit
claims equal to the average of the three highest claim years in the
previous 20 years. The formula currently calls for the trust fund
to be maintained at 80 percent, or a multiple of 0.8, of that
average. This results in comparatively wide annual swings up and
down in tax rates. Raising the trust fund target to 90 percent, or
a multiple of 0.9, would smooth those fluctuations out and provide
a more stable tax rates for employers year to year. 




                           FISCAL NOTE
                                
There would be no impact on the state General Fund. There would be
an increase in the balance of the Unemployment Insurance Trust Fund
of an average of $5 million a year over the next five years. This
will have a minimal impact on employer tax rates between 2008 and
2011, and the tax rate will be essentially the same under either
0.8 or 0.9 multiple in 2012.
 


CONTACT:

Name:     Bob Fick
Agency:   Commerce and Labor, Dept. of
Phone:    332-3570 ext 3628

                                               
STATEMENT OF PURPOSE/FISCAL NOTE                           S 1108