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This week, the PA Chamber joined a number of nationwide business associations in sending a letter to the U.S. Senate urging enactment of legislation that would provide federal unemployment payroll tax relief to employers that have been hard hit by the recession.

Among other provisions, the business groups asked federal lawmakers to extend the waiver of interest on loans to states to pay unemployment compensation through 2012. Doing so would help states, including Pennsylvania, develop plans to address financial troubles facing their UC systems and to implement solvency legislation within a reasonable time frame.

Twenty-eight state UC trust funds have depleted their balances and already borrowed $31.5 billion from the federal unemployment account to pay continued state benefits. The U.S. Department of Labor projects that 40 states will need to borrow by the end of 2010 and will be subject to interest penalties beginning in 2011.

At the state Labor and Industry's budget hearing this week, Secretary Sandi Vito testified that Pennsylvania has borrowed $2.2 billion for Pennsylvania's insolvent UC Trust Fund. Without a UC reform agreement in place, the Commonwealth is projected to borrow $3.7 billion through 2010.

The PA Chamber, which, as a member of the state's UC Advisory Council, has been working with organized labor and the Rendell administration to find a solution, has put forth a multi-pronged remedy that impacts employers and employees and contains commonsense reforms to control future costs.

In addition to waiving interest on federal loans, the business groups also asked lawmakers to reduce the federal unemployment tax.

In 2009, Congress enacted H.R. 3548 to provide further emergency unemployment compensation and to extend the temporary FUTA 0.2 percent surtax through June 2011. The extension will cost employers an estimated $2.4 billion in additional taxes, while at the same time state UI payroll taxes are set to dramatically increase. FUTA tax increases serve to discourage job creation at the very time that measures are needed to enable employers to hire workers. The temporary extension of the FUTA 0.2 percent surtax should be repealed and consideration given to additional short-term reductions in the FUTA tax.

Additional relief provisions are included in the coalition letter, which is available here.