Back in April 2009, I wrote a blog about the strings attached to federal stimulus funds, "Why are states rejecting Stimulus money?"  The strings are real and Maryland business leaders are speaking out against Maryland legislation to try to capture $127 million worth. 

The strings in the form of unemployment benefit expansions would cost Maryland businesses an additional $20 million every year into perpetuity which is way more than the $127 million they can get for short time relief against their rising unemployment trust fund balance. 

So this is a common discussion across states and certainly there are circumstances where it may be necessary to buy short term relief for future considerations, but what I find baffling in this case is that certain officials are "absolutely baffled" by why anyone would think this could be a problem. 

Trust me, there isn't much in life that you can get for free, and it sounds like Maryland businesses may not be thrilled about paying the price in this case.

Tammy Mullin

In December, 2009 TALX hosted a webcast detailing "The Great Recession of 2009"  We discussed the damage done and the steps to recover. If you were not able to attend the webcast, attached is the link so that you can listen to it now.

http://talxcorp.acrobat.com/etswebcastdec2009/ 

The U.S economy has been, and continues to be in a "Great Recession."  While many economists are now claiming that the economy has turned the corner and the recession is beginning to fade, the Total Unemployment Rate (TUR) is still hovering around 10%.   This is a normal occurrence when the country is recovering from a recessionary period.  However, the depth and length of this economic disaster is like no other in history with the exception of the Great Depression.

It has now been 26 months since the recession officially began in December of 2007.  By comparison, the worst recession in the previous 40 years (1981-1982) lasted only 16 months.  Job Losses are more than double the '81/'82 recession, UI Claims are at an all time high, and the duration of the average claim is around 26 weeks (the highest in recorded history).  But wait, it could very well get worse in 2010 before it starts to get better.

Insolvent States

All of this has taken a heavy toll on the Unemployment Trust Fund (UTF).  Thirty states have depleted their accounts in the UTF and are taking or currently requesting Title XII loans from the Federal Unemployment Account (FUA).  Below is a breakdown of state borrowing as of January 21, 2010:

Kansas, Massachusetts and New Hampshire have requested approval from the Secretary of Labor to take Title XII loans, but have yet to drawdown their first advance.  Twelve states have borrowed in excess of $1 billion, while NY, MI and PA are over $2 billion.  California leads the way with $6.7 billion.

Insolvent Federal Accounts

With almost $30 billion in Title XII loans being advanced to the states, the UTF Federal accounts were also depleted during 2009.  There are three Federal accounts in the UTF: 

1)  The Employment Security Administration Account (ESSA);

• This account receives 80% of the Federal Unemployment Tax (FUTA) collected by the Internal Revenue Service.
• Used to fund administration of state UI and ES programs.

2) The Extended Unemployment Compensation Account EUCA);

• Receives 20% of FUTA revenues
• Funds the Federal share of extended benefits and now the EUC08 emergency benefits 

3)  The Federal Unemployment Account. 

• Funds Title XII Advances to states that have depleted their state account

With the EUCA and FUA accounts both becoming insolvent during 2009, Congress passed HR 3357, and the President signed it into law, allowing the UTF to drawdown funds "as needed" from General Revenue to continue paying extended and emergency benefits and making interest free loans to states.  The UTF, however, is required to pay interest on these General Revenue loans at the same rate the Treasury pays on the National Debt, approximately three and three eighths per cent.  As of December 3, 2009, the UTF had already taken $18.9 billion in General Revenue loans.

Where to Now?

The US Dept. of Labor is now projecting that approximately 40 states will borrow up to $90 billion dollars before the end of 2012 and states are starting to wrestle with how this will be paid back and how long it will take.  Do they raise taxes?; Do they reduce benefits?; Do they wait for a Federal "bailout?" Different states are taking different approaches. 

The National Association of State Workforce Agencies (NASWA) recently conducted a survey of states regarding solvency issues.  The survey results indicated that approximately 24 states plan to increase their taxable wage base for 2010.  In 17 states (AK, HI, ID, IA, MN, MT, NV, NJ, NM, NC, ND, OK, OR, UT, VI, WA, WY) the taxable wage base is indexed and will happen automatically as a result.  The seven remaining states (AR, FL, IN, NH, TN, VT and WV) passed legislation to raise the taxable wage base.  However, at least two of those states, Fl and IN, are now working on legislation to postpone the implementation of the newly passed tax legislation in order to avoid increasing taxes on employers at a time when the economy is trying to recover.  A large increase in employment tax is feared to prolong the high unemployment rate as employers will continue not hiring or creating new jobs while trying to reduce costs and increase profits.  These states also site the possibility of a Federal Government bailout in the form of relief from repaying Title XII loans as justification for the delay.  My personal opinion is that this probably will not happen because the UTF is borrowing from General Revenue, with interest accruing. Who bails out the UTF and General Revenue Account?  The tax paying public!

The NASWA survey also concluded that 28 states will see an increase in their tax rate schedules in 2010.  While 10 states are already at the maximum rate schedule and would have to pass legislation to increase further, most of the states have automatic increases built in to the experience rating structure when trust fund balances are low.  If there is one thing you can count on, it is that most, if not all, states will see a UI tax increase in 2010.  The NASWA survey indicated these increases will range between 2.5% to 600%.

FUTA Increase?

According to UWC President, Doug Holmes, The House Ways and Means Committee is looking at the possibility of increasing the FUTA taxable wage base to address the large deficit in the Federal Accounts in the UTF.  In my opinion, an increase in the $7,000 FUTA taxable wage base is very likely within the next year and may even be indexed to create more flexibility to increase revenues during recessionary periods.  In addition, increasing the FUTA taxable wage base will require all states to approve a taxable wage base that is equal to, or greater than, the FUTA wage base, thus, improving the stability of state accounts in the process. 

Rett Hensley

Consultant

It is faciniating to me to look at how other countries are trying to combat their own problems with unemployment.  I ran across an interesting plan being discussed by the European Union.

The plan calls for establishing a fund of 100 million euros for unemployed youth and the long-term unemployed to start their own businesses.  Compared to Obama's 33 billion tax credit plan, the European plan seems to be one geared toward inspiring growth through new innovation and promoting an entrepreneurial spirit.

Don't get me wrong, I'm not knocking Obama's plan which I personally believe will promote job growth, I just love the uniqueness of the EU plan which gets at the heart of what any economy, or business for that matter, needs to grow and that is innovation.  Really thinking outside the box and norm to see what consumer needs will be in the future.  Kudos to the individuals who came up with the idea.

Tammy Mullin

Ran across an interesting article "Churn, Baby, Churn" in Forbes recently which talks about the normal churn of jobs gained and lost in the economy.  It was amazing to see how much hiring activity continues to go on in the economy even with the unemployment rates as high as they are. 

The connection the author makes between churn and disrupting technologies is telling and really drives home the fact that job seekers need to be open to opportunities to use their skills in new ways.  By taking an inventory of "transferable skills" and matching those skills against industries and companies currently hiring the job seeker will be much more effective in becoming reemployed sooner. 

For more information on how employers can help their displaced workers with a service that helps pay for itself through lowered unemployment taxes and other savings, click here.

Tammy Mullin

We have been hearing a lot about job creation over the last year and have read a lot of arguments around how to accomplish this very daunting task.  Over the past couple months I've been seeing more about giving tax breaks to employers for hiring.  Makes sense given our current tax system.  We are used to seeing tax credits.  TALX even has a whole service dedicated to helping employers obtain tax credits. 

Today, however, I read an article proposing another approach.  Instead of giving a tax credit for hiring someone who has been unemployed, 2 senators are proposing a tax break on the employer's portion of social security taxes for the rest of 2010.  Their position is that it would encourage hiring sooner and be a much more simple program to administer.

While I'm sure there will be many reasons why this won't work (aren't there always?), I did feel pretty good about the fact that there are legislators out there trying to not only think outside the box and solve the specific problem at hand, but are actually thinking about doing it in a way that would cost less tax dollars and be easier on the employer.  That's not to say that this would do either of those 2 things (I wouldn't pretend to have an opinion on it either way without a lot more detail), but it's nice that they actually thought about it.

Tammy Mullin

Here is the latest on what you can expect in the states in which you do business for 2010.  I'll send updates periodically.

Click here.

Tammy Mullin

HR Service Matters

By: Mike Smith

Since inception, the focus of my blog has been HR services.  And, in thinking about the important roles for the HR teams, employee communication seems to be of foremost concern in these uncertain times.  Intertwined with employee communications is the need for thoughtful marketing as you approach employee messaging.

My last blog highlighted the top trends in marketing and those trends that HR can incorporate for better HR service.  But how can we make those trends come alive for our organization?  Looking once again to marketing we can uncover ways to reach our employees with a positive message.

Today I looked at some reviews and references to a new book (just released 1/26/10) by Seth Godin, Linchpin: Are You Indispensable?  Seth Godin revolutionized marketing with bestselling books that have changed the way people think about marketing and change.  There is an interesting interview with Seth where you can hear Seth tell first hand about his premise in the book.

http://www.gooseeducationalmedia.com/Talks/SethGodinLinchpinInterview/tabid/199/Default.aspx

What caught me from the reviews of Linchpin was Seth Godin’s concept that to make a tangible difference in the lives of our customers today, we must provide exceptional value.  I believe that employees need encouragement to take the risks needed to consistently provide exceptional value.  Seth said in an interview, “…if you do work that is remarkable, people will remark on it.”  So for HR teams, I believe we should provide a forum in our HR Service delivery to promote (e.g. remark on) employees who are demonstrating remarkable work.  The person who does work that matters should be celebrated in our organizations.  Not the same old celebration, but a focus on the indispensable aspects of their work that keeps customers coming back again and again.

Situation

Representative Steve Conway, Chairman of the House Commerce and Labor Committee, has introduced and fast tracked House Bill (HB) 2553 in the Washington State Legislature. This unemployment insurance (UI) legislation seeks to amend the voluntary quit statutes to liberalize the payment of benefits. If enacted, UI costs to employers could increase.

What Employers Need to Know

HB 2553 proposes adding language to the 11 set reasons in which claimants may currently collect benefits under voluntary quit law provisions. This new language would basically allow payment of UI benefits, if a person quit employment for “unreasonable hardship,” based on the perception of a “reasonable person.”

The pending legislation only loosely defines “unreasonable hardship” and there is no definition for what is a “reasonable person.” In order to be granted UI benefits, a claimant would basically only have to say he/she was dissatisfied with the job to the extent he/she perceived it created an undue hardship. UI benefits paid in this instance would be charged to the employer.

In addition, the proposed bill also provides that a claimant cannot be denied benefits for refusing to seek full time work. Further, a claimant could receive his/her full weekly benefit amount even if his/her job search is restricted to offers of work of only 17 hours or more a week.

Employers who are not in favor of the provisions in HB 2553 may voice their opposition by immediately contacting the office of Governor Christine Gregoire or their state legislator, or both.

Governor Christine Gregoire: Office - 360-902-4111; Fax: 360-753-4110   E-mail: http://www.governor.wa.gov/contact/default.asp

You can locate your Washington state legislator at the following link:http://apps.leg.wa.gov/DistrictFinder/Default.aspx

Tammy Mullin