Relates to increasing the maximum benefit rate for unemployment insurance

Section two of the bill amends section 590 of the Labor Law to increase in the maximum weekly unemployment benefit rate to $475 as of July 2016, to $525 as of July 2014, to $600 as of July 2017, to $650 as of July 2018, after which the maximum weekly benefit would equal one-half of the state average weekly wage as annually calculated by the State Department of Labor.

Section three establishes the effective date.

Justification

New York State's unemployment rate reached 8.8% in January 2010 with more than 851,970 New Yorkers out of work. In the New York City metropolitan area, the rate is over 10%, and disproportionately higher for Hispanics at 23% and 38.7% for African-Americans. The State's long-term unemployment rate, which tracks those who are unemployed for 27 weeks or more, was 34% in 2009 exceeding the national average of 31.5%.

The State's unemployment benefit rate and taxable wage base have not been raised since 1998. Due to the large number of persons filing for unemployment benefits, the Unemployment Insurance Trust Fund has become insolvent. The State has had to borrow from the federal government to pay benefits and will owe more than $3.5 billion by the end of the year. This deficit is expected to rise by an additional $1 billion during each of the next few years if nothing is done to address the problem.

The limited amount of stimulus funds provided under the American Recovery and Reinvestment Act of 2009 (ARRA) does not resolve this long-term crisis to the Trust Fund. Both employers and the State will face significant new costs if the Trust Fund is not restored to fiscal health. The continued insolvency of the Fund will result in higher federal unemployment taxes for employers. When the Fund is solvent, employers may receive a federal credit reduction against the 6.2% federal tax they pay under the Federal Unemployment Trust Act (FUTA), which reduces their tax liability to .8%. When the Fund lacks sufficient contributions to repay borrowed money by the federal deadlines, the FUTA credit is reduced, which increases the net federal tax rate for employers. without this legislation, the increased tax cost to New York employers is projected to reach $6.4 billion during the period of 2009-2018.

The failure to increase the taxable wage base will also cost the State millions of dollars in interest on its federal loan. Under the bill, however, the State's interest on the loan would continually decline until 2016, when the Trust Fund's solvency would be restored. New York's taxable wage base of $8500 is significantly lower than most other states, including New Jersey ($29,700), Connecticut ($15,000) and Massachusetts ($14,000).

The legislation would also increase the maximum weekly benefit rate of $405 which was enacted more than a decade ago. Since then, the spending power of $405 has declined by more than 20% to approximately $322. The current benefit rate is based on one-half of the state's average weekly wage in 1998. If this rate were adjusted to the current average weekly wage, the benefit would be closer to $575. The legislation proposes a more modest increase in the initial years following enactment in an effort to strike a balance between the need to increase benefits and raise employer contributions. New York's current benefit level places many unemployed workers and their families below the poverty threshold. The state's weekly benefit rate is much lower than that of nearby states including New Jersey ($600), Connecticut ($537), and Massachusetts ($628). In Oregon, which indexes unemployment benefits to keep pace with inflation, the benefit was increased to $493 two years ago.

The need to raise unemployment benefits and the taxable wage base grows more urgent each year. Because benefits have not been increased, workers who have recently received extended unemployment benefits from the federal government have been deprived of additional income they and their families need at this difficult time. The failure to act also hurts local economies. Studies show that every dollar provided to workers returns approximately $1.64 through local purchases for rent, food and other basics, which in turn helps local businesses and generates tax revenues.

The unemployment system was established to help New Yorkers support themselves after they lose their jobs through no fault of their own until they can find new work. This legislation will protect New York's unemployment system by ensuring the fiscal health of the Trust Fund, and in so doing, help avoid new costs for employers and the State if solvency of the Fund is not restored.

Legislative history

2013-2014 S.36-A 2011-12: S.673-A 2010: S.2245-B Advanced to 3rd Reading 2009: S.2245 - Advanced to 3rd Reading A.4921 Advanced to Ways & Means 2008: S.8742 - Referred to Rules A.11642 Advanced to Ways & Means

Effective date

This bill will take effect immediately, provided that section one will take effect 30 days after it becomes law.