Senate passes Chamber-backed bill to address UC Trust Fund debt

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Senate passes Chamber-backed bill to address UC Trust Fund debt

Bond payments, amnesty program would alleviate debt burden on businesses

The PA Chamber applauds the state Senate for passing legislation that would begin to address the debt that the Commonwealth has accrued borrowing from the federal government to pay unemployment compensation benefits.

Senate Bill 1310, which passed the Senate on Tuesday, Nov. 15 by a 33-16 vote, was authored in light of Pennsylvania’s overwhelming $4 billion debt to the federal government. This debt has risen steadily as a result of increased pressure from the recession and an overly liberal benefits program, all of which have led to the UC Trust Fund’s insolvency.

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. This added burden will hinder their ability to invest, grow jobs and improve the economy until the debt is repaid.

Specifically, S.B. Bill 1310 would raise the amount of an 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, which 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 the language in the UC law and saved the system $130 million a year, but did not address the trust fund’s insolvency or Pennsylvania’s looming debt to the federal government. PA Chamber members have called on lawmakers to enact additional UC reforms ever since.

Senate Bill 1310 would stabilize the fund and provide relief for job creators anticipating a sharp increase in UC interest payments over the next several years. Having passed the Senate, the legislation will soon be considered by the House of Representatives, where lawmakers have expressed a shared commitment to resolving the UC Trust Fund debt. The PA Chamber urges immediate consideration of this bill, which is a step in the right direction toward alleviating onerous UC tax burdens on job creators.

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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.

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