Article by Erik Smith. Published on Saturday, January 22, 2011 EST.
Workers Would Get New Benefit if They Have Kids – Business Must Decide if a Tax Break is Worth It
The House Labor and Workforce Development Committee takes a vote Friday.
By Erik Smith
Staff writer/ Washington State Wire
OLYMPIA, Jan. 22.—A House committee took labor’s side on a key unemployment-insurance bill Friday, forcing a showdown with business on a tax-break proposal that must be settled within two weeks.
Labor and a big coalition of social-service groups are insisting that if business gets a big break on unemployment taxes, the deal ought to include a new benefit for workers with dependent children.
The vote Friday in the House Labor and Workforce Development Committee forces business groups to decide whether the deal is worth it.
The panel voted on a party-line 8 to 5 to include the new benefit in House Bill 1291. The measure now advances to the House floor.
Labor groups were cheered. The additional payment of $15 a week for each dependent child, would make a huge difference, they said. In a year when lawmakers must cut $5 billion in state spending and social programs will be whacked, they say it’s likely the only positive thing the Legislature will do this year.
“It’s the only chance they have to do something good for families,” said Kathy Cummings of the Washington State Labor Council.
The only problem is that business gets the bill – $37 million a year. “You have to understand that every dollar paid in benefits is paid for by the business community,” said Cary Condotta, R-Wenatchee.
Behind-the-scenes politicking continues at a frantic pace. And one thing the vote has done is to finally bring everything in the open. There are still some big financial questions that haven’t been answered.
Feb. 8 is Deadline
The unemployment issue has emerged as the hottest issue in the opening weeks of the 2011 session because a Feb. 8 deadline is approaching fast. Lawmakers need to act by that date so that the Employment Security Department can send out revised tax notices to business for the first quarter of 2011. Unless legislators act, businesses across the state will pay an average 36 percent increase in unemployment taxes this year.
Gov. Christine Gregoire has proposed reducing tax rates for business by $300 million this year, a move that would draw down the state unemployment insurance trust fund. The account would be reduced from 14-and-a-half months of benefits to about 11 months, an amount all parties seem to agree would be sufficient. That would cut this year’s average increase in about half, and business groups are wildly enthusiastic about that idea.
But nothing in the Legislature is ever simple. Business and labor both say they want a deal on all the big-picture issues surrounding unemployment insurance this year before the tax break goes through. Labor has just as much to lose – without a tweak to state law, some 70,000 unemployed workers will lose extended benefits.
And it all seems to come down to the dependent-child benefit. The state can qualify for an additional $98 million in federal funding for unemployment insurance if it makes one tweak to the program from a list provided by the feds. All of them require the state to permanently increase benefits, meaning bigger bills for employers. The governor wants the money, and labor wants the benefit. The governor’s proposal would provide unemployment benefits for workers when they are in job-retraining programs, and business is grudgingly on board with that one.
But the labor council and a lengthy list of allies prefer the dependent-child benefit, which would cost business nearly twice as much, at least in the short run. They’ve formed a coalition they call United for Washington Families, and they have made a big show of force in the Legislature so far, packing hearings with hundreds of union members and unemployed workers. They’ve made it clear that the issue is a top priority.
Big Administrative Costs
Condotta, the ranking Republican on the labor committee, explained the business objections to the dependent-child benefit. Not only would it impose a bigger burden on business, it also would force the Employment Security Department to change the way it processes benefits. It would have to start checking birth certificates and other documentation regarding dependent children, something it does not have to do at present.
“It is an extreme change,” he said. “The entire computer system has to be changed. The entire benefit structure has to be changed, because we are adding a benefit for dependents. Personally I think it also opens the door to some potential fraud.
“Let’s talk about balance. The governor’s proposal was pretty well balanced, since what it did is put some money back into the employment market. We need to reduce these payroll taxes, we all agree on that. But at the same time it doesn’t reduce benefits. That is truly a win-win situation.
“Unfortunately this proposal, expanding benefits, expanding administrative costs and expanding the costs dramatically of the system, is not a win-win. In the long run it will increase the cost of labor and will increase the cost of jobs.”
A Greater Good
Democrats said it comes down to a choice between the two benefits, and the dependent-child benefit makes more sense to them. It would serve a greater number of people, they said, and pump more money into the economy because workers almost certainly would spend every penny they got.
The training benefit “was going to be a fairly deep benefit for a fairly small number of folks, and to the extent that we are looking at the return on investment from our trust fund, the child benefit provides a much more immediate benefit to a far greater number of folks,” said Rep. Timm Ormsby, D-Spokane. “Approximately between 1,900 and 2,000 recipients would be getting the very narrow and deep benefit of the training benefit, and about 170,000 families would be receiving the broader, more shallow benefit of the dependent-child allowance. Given the economic multiplier effect of unemployment insurance benefits, it would be a far better economic boost and provide for money for those mainstream businesses that are struggling.”
Allows Dollars-and-Cents Debate
The issue has developed so quickly that a number of seemingly obvious questions haven’t been addressed in legislative hearings. For example, the various proposals to expand benefits also contain a permanent reduction in unemployment tax rates. But so far no one has asked whether the permanent reduction would offset the additional cost.
Testimony also has not addressed the additional-administrative-cost argument that Condotta raised in the hearing Friday. So there isn’t a dollar figure for that one, either.
The labor council says the numbers support its position, and it plans to present its analysis next week. Over the long haul it says there really isn’t much of a cost difference to business.
Now that the two proposals are on the table, fully fleshed out and in writing, it may be a little easier to make a comparison.
Big Coalition is Formed
It’s a mistake to say it’s just a business-versus-labor issue, the labor council says. Poverty groups and social-service advocates have climbed aboard, considerably broadening the effort.
Groups that have signed on to the United for Washington Families Coalition are:
Washington State Labor Council, AFL-CIO; Welfare Advocates Group, Washington State Building and Construction Trades Council, AFL-CIO; Statewide Poverty Action Network, Main Street Alliance of Washington, United Food and Commercial Workers, Local 21; Washington Federation of State Employees, National Organization for Women, Washington State Chapter; American Federation of Teachers, Washington; Children’s Alliance, Certified Electrical Workers of Washington, International Association of Machinists and Aerospace Workers, District 751; Washington Education Association, International Union of Operating Engineers, Local 302; Sheet Metal Workers, Local 66; Association of Western Pulp and Paper Workers, Washington and Northern Idaho District Council of Laborers, Legal Voice, Washington Teamsters; International Brotherhood of Electrical Workers, Local 77; United Food and Commercial Workers Washington State Council, Locals 81, 141, 365, 367 and 1439; Unemployment Law Project, United Auto Workers, Local 4121; International Federation of Professional and Technical Engineers, Local 17, Food Lifeline, Service Employees International Union, Healthcare 775 NW; Washington Community Action Network, Lutheran Public Policy Office of Washington, Northwest Harvest, Service Employees International Union, Local 925; One America, Service Employees International Union, 1199 NW; National Association of Social Workers, Washington Chapter; ElderCare Alliance, Economic Opportunity Institute, Washington State Nurses Association, and the Puget Sound Alliance for Retired Americans.
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