Unemployment insurance-tax operations.

03LSO-0203.C1

                                                         

FISCAL NOTE (HB0065)

 

This bill redistributes unemployment taxes into different funds and does not raise additional revenue.  The bill has three elements:  1) It reduces the taxable wage base on which employers pay unemployment taxes. 2) It eliminates a special reserve tax, which transfers those revenues from the state unemployment trust fund to the federal UI trust fund.  There is also a corresponding increase in the calculation of employers’ base tax rates.  There is no net change in taxes from these two actions. 3) It increases the funds that flow into the employment support fund.  This increase is offset by a corresponding decrease in funds sent to the federal UI trust fund. 

 

 

FY 2004

FY 2005

FY 2006

NON-ADMINISTRATIVE IMPACT

 

 

 

Anticipated Revenue Increase:

 

 

 

EMPLOYMENT SUPPORT FUND

100,000

694,000

742,000

FEDERAL FUNDS

4,300,000

4,700,000

4,700,000

Anticipated Revenue (Decrease):

 

 

 

UNEMPLOYMENT TRUST FUND

(4,300,000)

(4,700,000)

(4,700,000)

FEDERAL FUNDS

(5,123,242)

(4,889,466)

(4,841,466)

 

Source of revenue increase and decrease: This is a redistribution of unemployment taxes already collected. The elimination of the special reserve tax will transfer those revenues to the federal UI trust fund instead of the state UI trust fund.  The increase in the allocation to the employment support fund will result in a decrease to the federal UI Trust Fund. 

 

Assumptions:  Estimated UI taxes will be $21.6M, $23.5M and $23.M in FY04-06 respectively.  Section 3 repeals the special reserve tax rate established at 20% of the base rate.  One of the changes in W.S. 27-3-503(b) removes the reference to the special reserve rate as it applies to an employer’s base tax rate.  Although there is no change in taxes being paid, this does result in 20% of the estimated taxes ($4.3M, $4.7M, and $4.7M in FY04-06) being sent to the federal UI trust fund instead of the state UI trust fund.  W.S. 27-3-505(a) would divert 40%, instead of 20%, of the revenues generated by the noncharge adjustment factor from the federal UI Trust Fund into the employment support fund.  It is estimated that the noncharge adjustment rate will be .0018% in FY 04 and FY05 and .0017% in FY06.  The revenue increase is estimated at $100,000, $694,000, and $742,000 for FY04-06.  The revenue increase in FY04 will be lower than in FY05 and FY06 due to the 25% tax reduction that is effective for calendar year 2003.  W.S. 27-3-102(a)(xviii)(A) reduces the taxable wage base from 55% to 45% of the statewide average annual wage.  It is estimated that the taxable wage base will be $13,100, $13,600 and $14,200 in FY04-06 (down from $16,000, $16,700, and $17,300).  The average number of workers is 233,911 with 70% making at least $13,100 from one job. The average tax rate is 1.1%. This results in estimated tax reduction of $5,223,242 for FY04 and $5,583,466 for FY05 and FY06. W.S. 27-3-505(a) would decrease revenues flowing into the federal trust fund by $100,000, $694,000, and $742,000 in FY04-06.

 

This bill has administrative impact that appears to increase (or decrease) duties or responsibilities of one or more state agencies and may impact agency spending or staffing requirements. As introduced, the bill does not modify any state agency budget or personnel authorizations. The following agency may be affected administratively:

 

Department of Employment

 

Prepared by:     Wendy Madsen, LSO                      Phone:  777-7881 

 

(Information provided by Beth Nelson, Department of Employment, 777-6402)