NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3904
SPONSOR: Simon TITLE OF BILL:
An act to amend the labor law, in relation to the unemployment insurance
law, increasing the maximum benefit rate for unemployment insurance
PURPOSE OR GENERAL IDEA OF BILL:
The bill intends to increase the maximum weekly unemployment benefit
rate and restore fiscal health to the state's Unemployment Insurance
Trust Fund.
SUMMARY OF SPECIFIC PROVISIONS:
Section one of the bill amends section 518 of the Labor Law to gradu-
ally increase the taxable wage base for employer contributions to the
Unemployment Insurance Trust fund until 2017, after which the Department
of Labor would calculate the wage base needed to fund annual increases
for the maximum weekly benefit.
Section two of the bill amends section 590 of the Labor Law to
increase in the maximum weekly unemployment benefit rate to $475 as of
July 2014, to $525 as of July 2016, to $600 as of July 2017, to $650 as
of July 2048, after which the maximum, weekly benefit would equal one-
half of the state average weekly wage as annually calculated by the
State Department of Labor.
Section three establishes the effective date
JUSTIFICATION:
New York State's unemployment rate reached 8.8% in January 2030 with
more than 851,970 New Yorkers out of work. In the New York City metro-
politan area, the rate is over 10%, and disproportionately higher for
Hispanics at 23% and 38.7% for African-Americans. The State's long-term
unemployment rate, which tracks those who are unemployed for 27 weeks or
more, was 34% in 2009 exceeding the national average of 31.5%.
The State's unemployment benefit rate, and taxable wage base have not
been raised since 1998. Due to the large number of persons filing for
unemployment benefits, the Unemployment Insurance Trust Fund has become
insolvent. The State has had to borrow from the federal government to
pay benefits and will owe more than $3.5 billion by the end of the year.
This deficit is expected to rise by an additional $1 billion during each
of the next few years if nothing is done to address the problem.
The limited amount of stimulus funds provided under the American Recov-
ery and Reinvestment Act of 2009 (ARRA) does not resolve this long-term
crisis to the Trust Fund. Both employers and the State will face signif-
icant new costs if the Trust Fund is not restored to fiscal health
continued insolvency of the Fund will result in higher federal unemploy-
ment taxes for employers. When the Fund is solvent, employers may
receive a federal credit reduction against the 6.2% federal tax they pay
under the Federal Unemployment Trust Act (FUTA), which reduces their tax
liability to .8%. When the Fund lacks sufficient contributions to repay
borrowed money by the federal deadlines, the FUTA credit is reduced,
which increases the net federal tax rate for employers. Without this
legislation, the increased tax cost to New York employers is projected
to reach $6.4 billion during the period of 2009-2018.
The failure to increase the taxable wage base will also cost the State
millions of dollars in interest on its federal loan. Under the bill,
however, the State's interest on the loan would continually decline
until 2016, when the Trust Fund's solvency would be restored. New York's
taxable wage base of $8,500 is significantly lower than most other
states, including New jersey ($29,700), Connecticut ($15,000) and Massa-
chusetts ($14,000).
The legislation would also increase the maximum weekly benefit rate of
$405 which was enacted more than a decade ago. Since then, the spending
power of $405 has declined by more than 21% to approximately $322. The
current benefit rate is based on one-half of the state's average weekly
wage in 1998. If this rate were adjusted to the current average weekly
wage, the benefit would be closer to $575. The legislation proposes a
more modest increase in the initial years following enactment in an
effort to strike a balance between the need to increase benefits and
raise employer contributions. New York's current benefit level places
many unemployed workers and their families below the poverty threshold.
The state's weekly benefit rate is much lower than that of nearby states
including New Jersey ($600), Connecticut ($537), and Massachusetts
($628). In Oregon, which indexes unemployment benefits to keep pace with
inflation, the benefit was increased to $493 two years ago.
The need to raise unemployment benefits and the taxable wage base grows
more urgent each year. Because benefits have not been increased, workers
who have recently received extended unemployment benefits from the
federal government have been deprived of additional income they and
their families need at this difficult time. The failure to act also
hurts local economies. Studies show that every dollar provided to work-
ers returns approximately $1.64 through local purchases for rent, food
and other basics, which in turn helps local businesses and generates tax
revenues.
The unemployment system was established to help New Yorkers support
themselves after they lose their jobs through no fault of their own
until they can find new work. This legislation will protect New York's
unemployment system by ensuring the fiscal health of the Trust Fund, and
in so doing, help avoid new costs for employers and the State if solven-
cy of the Fund is not restored.
PRIOR LEGISLATIVE HISTORY:
2023-24: A7911 Simon -referred to labor
2021-22: A7150 Richardson -referred to labor
2019-20: A02158
FISCAL IMPLICATIONS:
to be determined
EFFECTIVE DATE:
This act shall take effect immediately
