Md. employers brace for higher unemployment insurances costs

By Aaron C. Davis
Washington Post Staff Writer
Friday, December 18, 2009

Employers might grumble about state unemployment insurance taxes whenever they do their books, but the fees make headlines only when there's a problem -- and there is a serious one in Maryland, business owners say.

Battle lines were drawn Thursday in what promises to be one of the first and most contentious battles when Maryland's General Assembly reconvenes in Annapolis next month.

Unemployment insurance costs for Maryland business owners are slated to jump 267 percent from $51 for each employee to $187 per employee annually under a law intended to keep the state's unemployment insurance fund from going bankrupt as early as March. The fund has a balance of about $200 million, but the state has been forced to pay as much as $24 million weekly, or twice as much as usual, to cover unemployment claims. The fund won't receive enough new money to keep it solvent until tax returns are filed in April.

Gov. Martin O'Malley on Thursday released a package of proposals his administration said would keep the fund in the black until then, and limit employers' new costs to $153 annually for one employee. He said his plan would reduce penalties for business owners to pay the tax over time through payment plans.

O'Malley would accomplish that largely by bowing to changes that Congress and President Obama want states to make in unemployment insurance systems. For Maryland, those changes would mean $127 million in federal stimulus funding.

Maryland employers would be required to better report employees' unemployment eligibility. The state also would have to double to a full year unemployment insurance for out-of-work residents who are enrolled in training programs, and provide additional unemployment benefits to some part-time workers.

Nearly every major Maryland business organization, however, rejected the governor's plan, saying it would provide only short-term relief in exchange for requiring business owners to support a more expensive, permanent expansion of the system.

"There's no such thing as a free lunch," said Kathy Snyder, president of the Maryland Chamber of Commerce. "Taking this economic stimulus money has strings attached that would add more long-term payouts to unemployed people than we think Maryland can afford."

The changes would cost an extra $20 million annually, said Julie E. Squire, assistant secretary for unemployment insurance in the Department of Labor, Licensing and Regulation. "We think the governor's proposal is the best solution," Squire said. "It not only gets the [stimulus] funds, but would also create benefits we need."

Del. Herman L. Taylor II, (D-Montgomery) co-chairman of the legislature's Joint Committee on Unemployment Insurance Oversight, which heard testimony Thursday on the proposal, said he thinks a compromise can be reached. Taylor said the governor's administration made a compelling argument for the changes. But he added that he'd gotten an "earful" from business leaders.

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