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The PA Chamber supports passage of legislation that would begin to address the debt our Commonwealth has accrued borrowing from the federal government to pay unemployment compensation benefits.

S.B. 1310 was authored in light of Pennsylvania’s overwhelming $4 billion debt to the federal government, which has risen steadily since our UC Trust Fund became insolvent as result of increased pressure from the recession and an overly liberal benefits program that is second only to California in amount of benefits paid annually. PA Chamber members have urged lawmakers to resolve the debt, since businesses are assessed not only their traditional UC payments, but interest payments to the federal government that will hinder their ability to invest, grow jobs and improve the economy until the debt is repaid.

Specifically, Senate Bill 1310 would raise the amount of the employee’s salary that is taxed for the UC Trust Fund (currently at $8,000) to a wage base of $10,000 over seven years.  To maintain revenue neutrality, the bill would cap the maximum state adjustment factor formula (part of the UC tax rate) toward benefits through 2018. The bill would also direct the Pennsylvania Economic Development Financing Authority to issue bonds in an amount that would improve the fund’s cash flow and would pay the Federal Unemployment Account in full. By allowing the bonds to become a funding stream, the debt would be paid down without spending general fund revenue and would save Pennsylvania businesses an estimated $50 million.

In addition, the bill would establish an Unemployment Compensation Amnesty Program for a three month period in 2012 that would allow businesses owing money to the UC Fund to waive 50 percent of their interest costs if they pay their outstanding obligation. It would also allow the Pennsylvania Department of Labor and Industry to utilize a U.S. Treasury Offset Program to obtain money that businesses owe due to lack of reporting. 

In June, the PA Chamber’s collaboration with legislators and the Corbett administration culminated in Act 6, which strengthened UC eligibility standards, provided automatic employer relief from payments under certain circumstances and will save the UC system $130 million a year. However, the act did not address the insolvency of the trust fund or Pennsylvania’s looming debt to the federal government, and PA Chamber members have called to enact additional UC reforms ever since. 

While S.B. 1310 does not directly resolve Pennsylvania’s UC debt, it would stabilize the fund and provide welcome relief for job creators anticipating a sharp increase in UC interest payments over the next several years. The PA Chamber promotes this measure as a step in the right direction to alleviate the onerous UC tax burdens on employers.

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Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of Business.