Unemployment insurance changes

A special state extension of unemployment insurance benefits is among several unemployment changes proposed in a bill that won committee approval April 7.

Sponsored by Rep. Jim Davnie (DFL-Mpls), HF3127 would also help pay down the $1.6 billion deficit in the state’s unemployment insurance trust fund. The House Finance Committee approved the bill April 7 and referred it to the House Ways and Means Committee.

The special benefit extension would last up to 13 weeks, and would be effective from June 30, 2010, to March 26, 2011. It would replace a special emergency unemployment compensation program from 2009; however, those who have not exhausted their benefits under the old program could continue to receive benefits up to their original determined maximum.

The bill also contains provisions that would guarantee that people who return to work after being on unemployment, only to get laid off a second time, receive a similar level of benefits to what they had before. These provisions were incorporated into the bill from HF3274, sponsored by Rep. Mike Obermueller (DFL-Eagan).

To help pay down the deficit in the state’s unemployment insurance trust fund, the bill would offer employers a tax discount if they prepay their future unemployment taxes.

“This is a win-win. The trust fund gets additional funds, while the employer saves money through the prepayment,” Davnie said.

The way in which the unemployment tax rate is computed would also be changed. Essentially, the bill would ensure the tax rate remains at its current maximum level unless the trust fund has a positive balance.

Lee Nelson, director of legal affairs for the Department of Employment and Economic Development, said the tax rate is in danger of dropping in the near future, despite the trust fund’s deficit. He said the trust fund could end up borrowing more money and paying more interest if the tax rate drops.

A companion, SF2895, has been incorporated into SF2510, sponsored by Sen. David Tomassoni (DFL-Chisholm). It awaits action by the Senate Finance Committee.