Vermont Unemployment Insurance Premiums at Risk of 3-fold Increase

Unemployment Insurance Bill

Latest Update 5.7.21
House Commerce and Economic Development Committee passed S.10 on a vote of 8-2-1. The committee removed 2020 from the UI Trust Fund calculation and removed the Senate’s proposed $50.00 dependency benefit. There is no rate freeze, so employers will pay UI taxes using Schedule 3 next year and Schedule 4 for two years.

The committee chair, Rep. Michael Marcotte (R-Coventry), summarized his committee’s changes by stating that eliminating 2020 is not a benefit to employers. It is an adjustment to the UI Trust Fund formula due to the anomaly created by the pandemic. He added that the Trust Fund is in a $300 million hole, and this has to be repaid by employers. To dig a deeper hole by adding a dependency benefit is unwise at this time. He also felt that childcare issues are best considered in House Human Services.

There are still those opposed who feel that employers are getting a better “deal.” Employers who struggled through this pandemic are still responsible for replenishing this $300 million through no fault of theirs. Employers are not benefiting from this change. To say otherwise is disingenuous.

Latest update: 4/30/21

House Commerce Committee changes the Unemployment Insurance Bill:

The hotly debated bill, S.10 left the Senate with a $50.00 dependent benefit for UI recipients but no adjustment to the UI Trust Fund formula. Businesses wanted this adjustment to account for the pandemic, which created an anomaly that will increase UI taxes on employers.

This week the House Committee on Commerce and Economic Development is considering a strike all amendment that will remove 2020 from the formula. The rate schedule would likely increase to Schedule 3 next year, Schedule 4 for the following two years, and then begin to decline. While businesses will pay a bit more in the near term than they would have under a Schedule 1 rate freeze, they feel that ultimately this is a more appropriate proposal than the language the Senate passed.

This committee also received thorough review from Joint Fiscal Office analyst Joyce Manchester on the newly passed childcare benefits in the American Rescue Plan Act. The Senate Economic Development Committee had added their $50 dependent support right before these new benefits were made clear to legislators. On Friday she reviewed further documents highlighting new childcare benefits. In light of this development the House Commerce and Economic Development Committee removed this benefit.

There will be a public hearing on Tuesday, May 4th from 5:00-7:00 via Zoom. If you would like to testify you may register here. You will have 2 minutes to share with the committee why you support these changes.

Latest update: 4/16/21

The House Commerce and Economic Development Committee took testimony this week on S.10, a bill to extend unemployment insurance provisions related to Covid-19. The bill drew a great deal of attention from employers who oppose increasing benefits while not addressing an anomaly in the unemployment insurance calculation that will increase future UI tax rates. Testimony will line up again in the coming weeks, with business owners hoping that the committee will be more receptive to their concerns. The bill passed the Senate earlier by a vote of 18-12.

Latest update: 4/9/21

S.10 is in House Commerce and Economic Development Committee but they have not yet taken the bill up for consideration.

Latest update: 4/2/21

This controversial unemployment insurance bill included expanded worker benefits and was sent to the Senate floor several weeks ago. In response to strong opposition from Vermont’s business community, the bill was pulled back into the Senate Committee on Economic Development, Housing and General Affairs for revisions. The Committee’s amended bill passed the Senate on Tuesday by a vote of 18-12.

S.10 freezes employer UI tax rates at Schedule 1 (the lowest UI tax rate for businesses) and removes a proposed 20% increase in weekly UI claimant payments. A new $50 dependent benefit will take effect when the federal COVID UI aid ends and will sunset in 5 years.

The bill includes a confusing plan to “pay back” employers for their one-year rate freeze using UI trust funds. Since employers fully finance this fund, Sen. Randy Brock, R-Franklin continued to argue that this pay back is not a benefit.

The formula to calculate the necessary UI Trust Fund balance uses a 10-year average of UI rates. The business community sought to remove 2020 from the formula, arguing it is an anomaly and skews the calculations to require excessive employer contributions. Instead, S.10 includes a study to determine the appropriate balance.

Sen. Michael Sirotkin, D-Chittenden, intends to take up the issue next year. He said that any recommended UI tax decrease is an “employer benefit,” and therefore UI recipients will need to receive additional benefits as a quid pro quo.

S.10 now moves to the House Commerce and Economic Development Committee for further work.

Original Post

Your Vermont Lodging Association is working hard to address the issues with this bill currently before the Senate Economic Development, Housing, and General Affairs Committee.

S.10 was originally put forth as a mechanism to extend certain pandemic related unemployment benefits such as PUA and to provide a process for employers to maintain their current experience ratings.

Three other issues are under discussion:

1. An additional provision needs to be added to freeze our Schedule 1 status. Without this addition, on July 1, an automatic increase in UI taxes will be triggered to replenish the UI Trust Fund that was depleted due the Covid crisis.

While your experience rating may not be impacted by Covid related unemployment claims, if no provision is added to the current bill to freeze the tax schedule, the schedule will automatically jump from Schedule 1 to Schedule 5. What does this mean for you? If you have a 0% Experience Rating  (75% of businesses)                                you are currently paying a Schedule 1 rate of $58.00 per employee for the UI tax. Without legislative action this will automatically jump to Schedule 5 and you will pay $189.00 per employee.

VLA’s position: Support the proposal of the Scott Administration to freeze the UI tax rate schedule for one year and limit the amount tax rate schedules can change in any one year moving forward.  This will defer the tax increase required to replenish the Trust Fund until lodging has a chance to get back on its feet.

2. The committee is also considering a provision that would further deplete the fund and potential exacerbate our impending workforce shortage.

There is a proposal to amend the bill to increase unemployment benefits for employees by 20% . (In addition to this increase the federal bill is providing additional benefits for people on unemployment.) The problem with the 20% is two-fold. It will further deplete the UI trust fund by $35million. That is money that will need to be replenished through future UI tax increases.

More urgently, this increase in benefit would come at a time when we are trying to re-open our lodging properties and will be facing a labor shortage. Federal supplemental unemployment will  help individuals through the crisis. If Vermont adds a 20% increase, it will make it even harder to bring back employees.

VLA’s position: Strongly oppose the proposal by Senate Economic Development Committee Chair Michael Sirotkin to provide a one year, 20% increase in UI benefits.

3. The current system bases the taxes required to maintain the UI trust fund on the “most costly” year in the past ten years. 2020 was an anomaly that will artificially drive up the tax rate required to replenish the fund over the next ten years.

VLA’s position: Include a provision to remove 2020 from the calculation of Trust Fund target reserves to even out the amount employers pay over the years ahead.

S.10 legislation is currently before the Senate Economic Development, Housing, and General Affairs Committee.

VLA is actively reaching out to committee members to share our deep concerns and asking for their support.

Please join us at the Monday Meetup for the latest updates on this bill and to express any opinions you might have. As always, please don’t hesitate to contact any VLA board members to discuss further.

If you live in a district represented by any of the committee members below. Please reach out to them in your own words that support the positions above.

Senate Economic Development Committee Members:

Senator Michael Sirotkin (Chair) (Chittenden County)
(802) 999-4360

Senator Alison Clarkson (Vice Chair) (Windsor County)
(802) 457-4627

Senator Becca Balint (Windham County)
(802) 828-3806

Senator Randy Brock (Franklin County)
(802) 868-2300

Senator Kesha Ram (Clerk) (Chittenden County)
(802) 828-2228

Note: Senator Balint is also the Senate President Pro Tempore, Senator Clarkson is the Majority Leader, and Senator Brock is the Minority Leader.