GOVERNOR MARTIN O’MALLEY ANNOUNCES UNEMPLOYMENT INSURANCE TAX RELIEF FOR SMALL BUSINESSES

Unemployment Insurance Trust Fund modernization plan means immediate rate reduction; revised payment plan for small businesses; stabilization of Trust Fund

ANNAPOLIS, MD – Governor Martin O’Malley announced today a proposal to provide $83 million in rate relief for Maryland employers and to make modernization adjustments to the unemployment insurance laws to allow the State to access $126.8 million in federal dollars to shore up its unemployment insurance trust fund this year. The result of a law signed in 2005, the State’s rise in unemployment has resulted in a substantial increase in unemployment insurance rates for small businesses beginning next year, an increase that Governor O’Malley has vowed to address with emergency legislation.

“If we want a strong and growing middle class, we must strengthen the small business community that accounts for three out of every five jobs in our State,” said Governor O’Malley. “The drastic rate increase Maryland small businesses are facing is too great a burden for many, , and we must work together with all stakeholders to provide immediate relief to our small business owners.”

The Governor proposes to mitigate the recession’s impact on employers’ rate obligations in three ways:

1) Administrative payment plans and legislative interest rate reduction: The O’Malley-Brown Administration will offer payment plans to allow employers to spread out their payments over a longer time frame. It will also seek a reduction of the current 1.5% interest rate for late payment of rate obligations to 1%.

2) $83 million in rate relief: The Administration will propose legislation to provide $83 million in immediate rate relief to employers. The bill will authorize the equivalent of a one-year shift from Table F to Table E when the State’s taxable wage base declines $1 billion and the trust fund receives an influx of outside funds to compensate for the revenue reduction.

3) Immediate influx to trust fund of $126.8 million in federal dollars: The Administration will seek to shore up the fund’s declining balance and reduce the financial impact of providing rate relief by proposing legislation to access $126.8 million in federal Recovery and Reinvestment Act funds. To enable Maryland to meet federal requirements for accessing the funds, the proposal will:

a. Adopt Alternative Base Period, a second method of calculating workers’ eligibility for benefits which has been adopted by 36 States and will likely be required soon as a matter of federal law or policy;

b. Make technical adjustments to our existing law allowing benefits for part-time workers; and

c. Provide additional benefits to unemployed workers in training programs, the lowest-cost option which will stimulate workforce development and the training necessary to get people working again.

The Governor’s proposal will ease the burden of employers’ rate obligations without further jeopardizing the trust fund’s solvency and the benefits upon which thousands of unemployed Marylanders depend. It will allow employers to keep $83 million they would otherwise be required under the 2005 law to pay beginning next April, and it will allow them more time to meet their reduced rate obligations. It will also decrease the risk of fund insolvency and the harmful impact of long-term borrowing by instituting the relatively low-cost modernization measures necessary to access $126.8 million in federal dollars. These new funds will offset the modest, incremental cost of the modernization measures for seven years, during which time the State will climb out of the recession and both employers and workers will regain surer footing.

The Governor’s plan comes just weeks after announcing two initiatives designed to create jobs and strengthen small businesses as the State transitions from recession through recovery to prosperity. The Governor announced earlier this month a proposal to establish a temporary $3,000 tax credit for Maryland businesses to hire unemployed workers as well as a proposal to expand existing loan guarantee programs to increase access to credit for small businesses.