BOISE — Idaho employers will pay millions of dollars more than necessary in unemployment insurance taxes after a bill that was supposed to lower those costs failed on the final day of the 2017 session.
Officials from the Idaho Department of Labor and Gov. C.L. “Butch” Otter’s office had pushed lawmakers to reduce a key component in how Idaho calculates the unemployment insurance tax rate because the trust fund Idaho uses to pay unemployment benefits has more money than it needs to survive an economic crisis. However, that effort failed Wednesday after it was amended to include a separate tax cut proposal.
The bill, SB 1195, would have saved employers a total of $115 million over the next three years and would have cut the cost of unemployment insurance taxes by 30 percent. Those savings could have helped employers increase wages or hire more employees, said Department of Labor Director Ken Edmunds, while testifying in front of lawmakers last week.
In Idaho, employers pay a state unemployment tax that goes into a trust fund in charge of distributing unemployment benefits to workers. The unemployment insurance tax rate itself is determined by a complicated formula that includes factoring in a measure called the “average high-cost multiple,” or determining how long a trust fund can last in an economic recession.
The federal government says a state trust fund should be able to remain solvent for at least a year during a recession. Yet under Idaho law, this measure of how long the trust fund can last in troubled times has become much more conservative each year since 2011 and is on track to be above and beyond what the federal government recommends starting in 2018.
The bill would have stopped that latest increase, giving more flexibility to the unemployment insurance tax rate formula to make sure employers don’t pay more than they have to.
Until the final weeks of the session, the bill was on track to sail through the Legislature. Then it hit a snag when the Senate revamped a House-approved tax cut proposal that slashed the top personal and corporate tax rates into a repeal of the state’s 6 percent sales tax on groceries.
Taken aback by the Senate’s actions, House leaders immediately began looking for ways to find a bill already moving through the Statehouse to attach their corporate and personal income tax plan.
Ultimately, the unemployment insurance bill became their prime target, with House Majority Leader Mike Moyle successfully pushing the House to tack on a revised $28 million tax relief plan in the final days of the session.
Senate lawmakers then killed the tweaked version on a 29-5 vote Wednesday.
“This is unfortunate,” said Republican state Sen. Steve Vick, of Dalton Gardens, before voting no on the bill. “Our employers are going to end up paying more than they should because of the games that were played with this bill.”
A spokeswoman for the Department of Labor did not immediately return a request for comment. Otter canceled a scheduled a press conference Wednesday due to laryngitis.
Currently, Idaho’s trust fund has more than $700 million in it and is expected to hit almost $1 billion by 2020. It’s a big bounce from 2008 during the Great Recession and was forced to borrow $202 million from the federal government after having to pay more than $400 million in unemployment benefits.