December 2010 Legislative Report

Legislative Report – December 27, 2010
By: Ken Daniel

The inauguration of Governor Brownback will be on January 10. This is my first report for the 2011 Kansas Legislative session, which will begin in less than two weeks. This first report covers Unemployment Taxes.

Unemployment Taxes

Perhaps the most important issue small businesses will face in this session will be changes in the structure of Unemployment Taxes. The 2011 U.I. Experience Rating Notices went out by mail on December 13. I wish I could provide some generalizations about what one should expect but this is so complicated that I can’t. I’ll cover all of the committee hearings on this subject and report frequently.

Remember that all funds in the Kansas Unemployment Insurance Trust Fund are contributed by Kansas employers.

  • On June 30, 2008, the balance in the Kansas U.I. Trust Fund was a very healthy $663 million. Kansas’ fund was rated the 19th healthiest in the U.S. This was in spite of a partial 3-year reduction on premiums in 2007, 2008, and 2009.
  • By June 30, 2009, the balance was down to $340 million.
  • By March 30, 2010, it was down to $.7 million. It was at this time that Kansas began to borrow from the federal government. By Sept. 30, 2010, $88 million had been borrowed and the U.I. Fund had a negative balance.

The question is how far down the negative balance will go, and how the trust fund will be rebuilt. Following are some of the suggestions from earlier this year as to how to raise the extra hundreds of millions needed:

  • Increase the taxable wage base from its present $8,000 to $9000 in 2011 and $10,000 in 2012
  • Index the $10,000 by 3.8% per year beginning in 2013.
  •  Add nine additional negative balance rate groups to the existing ten groups.
  •  Put a two-year moratorium on increases in the maximum weekly benefit amount.
  • Establish a special tax to repay the interest on the amounts being borrowed from the federal government.

We’ll be following this issue as well as others during the upcoming legislative session to help keep you informed and up-to-date on issues that may impact your business and operations.