The Nevada Job Security Council on Monday recommended increasing taxes employers pay to the Unemployment Trust Fund to 2% of wages by the 2022 schedule.
While this is a third of a percent higher than the current tax level of 1.65 percent, it is significantly lower than the 2.65 percent that businesses had to pay during the Great Recession.
Members, including President Jeff Frischmann, pointed out that unlike the end of the Great Recession, businesses do not have to pay back the $ 332 million Nevada had to borrow from the federal government to cover unemployment benefits. during the pandemic.
Dave Schmidt, chief economist for the Nevada Department of Employment, Training, and Rehabilitation, said the state was able to pay off this debt using federal grants as part of the US bailout, thus preventing commercial operators from having to pay it.
In addition, he and his fellow DETR economist Jason Gotari told the council on Monday that what Nevada borrowed was far less than the $ 800 million borrowed during the Great Recession because, this time, the State was $ 2 billion when the economy shut down, up from $ 1 billion. in 2008-09.
The recommendation was supported by Ray Bacon of the Nevada Manufacturers Association, the only person to testify during the public comments. He said it was the first time in 30 years of tracking the unemployment insurance rate that he saw the federal government allowing states to use federal grants to repay federal government loans – and he doubts that. reproduces itself.
The 2% rate, however, fell between the two highest rates reported by staff – 1.85% and 2.05%. A rough calculation indicates that the 2% will generate a total of just over $ 675 million in calendar year 2022.
Council member Mark Costa said if they stick to the 1.65% rate, it would take more than three years to replenish the trust fund for a potential future recession.
He recommended 2 percent, to get there faster.
“I tend to agree with Mr. Costa,” Frischmann said. “Coming out of this recession, the Trust Fund is in a very sad state.”
Member Tom Susich expressed concern that the significant increase in the rate would hamper the ability of employers to continue to hire.
But Frischmann stressed that not having to repay the $ 332 million in federal loans is a huge boon for employers.
Nevada companies paid off the huge debt after the Great Recession by bonding the money instead of paying more than 6% interest to the federal government. But Nevada employers had to repay the bonds, resulting in significantly higher unemployment insurance rates for several years.
The rate of 2% would be distributed over 18 categories of companies according to the unemployment benefits that their workers use for a year. Those with the best records and the lowest percentage of worker payouts pay only a quarter of a percent of the first $ 36,000 in wages per employee. Those with the worst records – the highest use of unemployment benefits – pay 5.4%.
New businesses all pay 2.95% for the first three years of operation until the DETR formula can rank them fairly against other businesses in the state. The process is designed to eliminate industry-based bias in employer billing.
The board vote on Monday was 5-1 with Peter Guzman voting no. He gave no explanation for his vote.
Monday’s action is just a recommendation that will be passed on to Lynda Parven, Head of the Job Security Division, who will make the final decision. The ESD administrator normally follows the recommendations of the board.