Georgia Unemployment Insurance Trust Fund

Informational Booklet January 2013

Georgia Unemployment Insurance Trust Fund

Table of Contents Quick Facts ............................................................................................... 1 How Did We Get Here? ............................................................................. 4 Current Trust Fund Loan Balance ........................................................... 5 Loan Repayment ....................................................................................... 6 Employer Base .......................................................................................... 7 State Unemployment Tax (SUTA) ............................................................ 8 Federal Unemployment Tax (FUTA) ........................................................ 9 Claimant Benefits ................................................................................... 10 Unemployment Rate ............................................................................... 12 What is Solvency? .................................................................................. 13 Trust Fund Solvency Plan ...................................................................... 14 UI Trust Fund Task Force Contact List ................................................. 16

Georgia Unemployment Insurance Trust Fund Quick Facts Current Trust Fund Balance (as of January 18, 2013)

$3.3M (for Benefits)

Loan Balance (as of January 18, 2013) Principal

$578M

Current Fed FY Interest

$5.5M (Accrued since October 1, 2012)

Interest Rate

2.94% (January 1, 2012 – December 31, 2012) 2.58% (January 1, 2013 – December 31, 2013) Interest Payments Year

Amount

2011

$21,041,643.71

2012 2013

$22,352,062.47 $15.2M (Estimated)

Interest is compounded daily. Rate is set by U.S. Treasury and is non-negotiable. Interest payments are due by September 30th each year. Loan Repayment Projected Payoff Date November 2014 Employer Base (as of January 11, 2013) Contributory Employers

204,172

Reimbursable Employers

1,558 (government/non-profit)

January 2013

Page 1

Georgia Unemployment Insurance Trust Fund Quick Facts (cont’d) State Unemployment Tax (SUTA) Current Taxable Wage Base

$9,500 per employee (January 1, 2013)

Previous Taxable Wage Base

$8,500 per employee (1990–2012)

Maximum Tax Rate

8.10%

Minimum Tax Rate

0.04%

2012 Est. Average Tax Rate

2.70%

Solvency Surcharge

50%

2012 Tax Revenue

$862M

2013–2017 Est. Revenue Per Year

$940M

Federal Unemployment Tax (FUTA) Taxable Wage Base

$7,000 per employee Tax Rate with Reduced FUTA Credit Total Tax Per Employee

Year

Tax Rate

FUTA Credit

Net Tax Rate

Increase Per Employee

2010

6.2%

5.4%

0.8%

$0

$56

2011 Jan–Jun

6.2%

5.1%

1.1%

$21

$77

2011 Jul–Dec

6.0%

5.1%

0.9%

$21

$63

2012

6.0%

4.8%

1.2%

$42

$84

2013

6.0%

4.5%

1.5%

$63

$105

(Net Tax Rate x $7K)



FUTA Credit reduced at a rate of 0.3% per year due to State borrowing to pay benefits.



FUTA is paid on wages from the previous year.

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January 2013

Georgia Unemployment Insurance Trust Fund Quick Facts (cont’d) Claimant Benefits Current Maximum Benefit Weeks is 19 based on 8.7% unemployment rate sliding scale. Current Benefit Amounts Weekly Benefit Amount

Duration

Maximum

$330.00

20 Weeks

Minimum

$44.00

14 Weeks

Average

$263.12

13.2 Weeks

Benefits Paid Total Benefits Paid in 2012

$825M

Estimated Benefits Paid Per Year 2013–2017

$775M

Unemployment Rate (December 2012)

January 2013

8.7%

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Georgia Unemployment Insurance Trust Fund How Did We Get Here? As a result of record unemployment, Georgia’s Unemployment Insurance Trust Fund was depleted paying unemployment benefits to workers who lost their jobs through no fault of their own. •

In 1999, the Trust Fund balance was approximately $1.9B.



From 2000–2003, experience-rated contributory employers enjoyed a 99% tax reduction.



In 2008, the Trust Fund had a balance of $1.3B.



In 2008, the recession started. Georgia experienced record unemployment resulting in benefit payments from the Trust Fund totaling $1.7B in 2009.



In December 2009, the fund was depleted, and Georgia was required to borrow funds from the federal government to pay unemployment benefits.



Georgia borrowed from the federal government to pay benefits for more than two consecutive years. Therefore, contributory employers began losing FUTA credit at a rate of 0.3% per year beginning with wages paid in 2011.

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January 2013

Georgia Unemployment Insurance Trust Fund Current Trust Fund Loan Balance Federal Fiscal Year 2013 - October 1, 2012 through September 30, 2013 Amount Beginning Loan Balance (October 1, 2012)

($650M)

Loan Repayments (December 2012 / January 2013)

$110M

2013 Cash Flow Borrowing (Through January 18, 2013)

($38M)

Current Balance (January 18, 2013)

($578M)

Loan payments in December/January saved $2M in interest.

January 2013

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Georgia Unemployment Insurance Trust Fund Loan Repayment Beginning Balance (January 1, 2013)

($540M)

2013 Estimated Tax Revenue

$940M

2013 Estimated Benefits Paid

($775M)

Difference (Est. Loan Repayment)

$165M

2013 Estimated Cash Flow Borrowing

($150M)

2013 Cash Flow Repayment

$150M

2013 Estimated FUTA Credit

$140M

January 2014 Beginning Balance

($235M)

2014 Estimated Tax Revenue

$940M

2014 Estimated Benefits Paid

($750M)

Difference (Est. Loan Repayment)

$190M

2014 Estimated Cash Flow Borrowing

($150M)

2014 Cash Flow Repayment

$150M

2014 Estimated FUTA Credit

$210M

November 2014 Balance – Projected Payoff Date

$0

Assumptions:

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Estimates based upon current economic trends and conditions.



Estimates integrate conservative projections of declining unemployment rate, civilian labor force growth, and revenue growth.



Cash flow borrowing only, which may be needed through 2015.



All estimated FUTA credits will be applied to loan by the U.S. Treasury.

January 2013

Georgia Unemployment Insurance Trust Fund Employer Base (as of January 12, 2013) Type Employer

Number

Contributory Employers

204,172

Reimbursable Employers

1,558 Total

205,730



SUTA is paid by contributory employers.



Reimbursable employers (government and many non-profits) do not pay SUTA, but reimburse the Trust Fund for benefits paid against their accounts.

January 2013

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Georgia Unemployment Insurance Trust Fund State Unemployment Tax (SUTA) Current Taxable Wage Base

$9,500 per employee (Effective Jan.1, 2013)

Previous Taxable Wage Base

$8,500 per employee (1990–2012)

Maximum Tax Rate

8.10%

Minimum Tax Rate

0.04%

Average Tax Rate

2.70%

2012 Tax Revenue

$862M

2013–2017 Est. Revenue Per Year

$940M Annual Solvency Surcharge Year

Surcharge

2009

Base + 15%

2010

Base + 30%

2011

Base + 35%

2012

Base + 50%

2013

Base + 50%



Georgia Law now requires base UI Tax rates to be increased based upon the condition of the Trust Fund.



In an effort to rebuild the trust fund and achieve solvency, the Taxable Wage Base was increased from $8,500 to $9,500 effective January 1, 2013.



A Solvency Surcharge has applied every year except 2007 and 2008 since the “tax rate holiday” expired in 2003. Regional Taxable Wage Base Comparisons Southeast Region North Carolina Mississippi South Carolina GEORGIA Kentucky Tennessee Alabama Florida

Taxable Wage Base $20,400 $14,000 $12,000 $9,500 $9,000 $9,000 $8,000 $8,000

Source: USDOL –Employment and Training Administration –Comparison of State Unemployment Insurance Laws 2012 and UWC-Highlights of State Unemployment Compensation Laws 2012.

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January 2013

Georgia Unemployment Insurance Trust Fund Federal Unemployment Tax (FUTA) Taxable Wage Base:

$7,000 per employee

Tax Rate with Reduced FUTA Credit Year

Tax Rate

FUTA Credit*

Net Tax Rate

Increase Per Employee

Total Tax Per Employee (Net Tax Rate x $7K)

2010

6.2%

5.4%

0.8%

$0

$56

2011 Jan–Jun

6.2%

5.1%

1.1%

$21

$77

2011 Jul–Dec

6.0%

5.1%

0.9%

$21

$63

2012

6.0%

4.8%

1.2%

$42

$84

2013

6.0%

4.5%

1.5%

$63

$105

*FUTA Credit reduced at a rate of 0.3% per year due to State borrowing to pay benefits. •

Employers pay FUTA at a 6.0% rate on the first $7,000 of wages paid to each employee each year.



Normally, employers can take a credit of 5.4% against their FUTA liability if they reported and paid state unemployment tax on a timely basis.



Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for more than two consecutive years. Once the reduction is in place, the credit is reduced 0.3% in the first year, increasing by 0.3% in each successive year. This means that employers face a 0.3% in the first year, a 0.6% reduction in the second year and so on. The credit reduction is in addition to the normal FUTA tax that employers owe.

January 2013

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Georgia Unemployment Insurance Trust Fund Claimant Benefits Claimant Weekly Benefit Amount and Duration Range

Weekly Benefit Amount

Duration

Maximum

$330.00

14–20 Weeks

Minimum

$44.00

6 Weeks

Current Maximum Benefit Weeks is 19 based on 8.7% unemployment rate sliding scale. Average Claimant Benefits Year

Average WBA

Average Duration

2009

$274.41

15.3 Weeks

2010

$264.31

14.7 Weeks

2011

$260.31

13.3 Weeks

2012

$263.12

13.2 Weeks

Duration Based on Unemployment Rate Sliding Scale Unemployment Rate

Maximum Benefit Weeks

9.0% or greater

20

8.6% - 8.9%

19

8.1% - 8.5%

18

7.6% - 8.0%

17

7.1% - 7.5%

16

6.6% - 7.0%

15

Up to 6.5%

14



The Weekly Benefit Amount (WBA) is calculated by applying a formula to the claimant’s base period earnings.



The formula used to calculate the WBA cannot be changed without jeopardizing federal funding of Emergency Unemployment Compensation (EUC) and requiring repayment of EUC. This Nonreduction Rule does not prohibit reduction of benefit duration or adding waiting weeks.



Earnings of WBA + $50 eliminate the weekly UI benefit. Reported earnings reduce the WBA dollar-for-dollar starting at $51.



Benefit duration is based on April and October unemployment rates and is effective for the periods January–June and July–December, respectively.

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January 2013

Georgia Unemployment Insurance Trust Fund Maximum Benefit Amount •

The Maximum Benefit Amount (MBA) is the total benefit amount a claimant can receive on a single UI claim.



The MBA has been reduced by introduction of the “sliding scale” in 2012 that references the unemployment rate in determining the number of weeks to allow. Regional Weekly Benefit Amount Comparisons Southeast Region

North Carolina Kentucky GEORGIA South Carolina Tennessee Florida Alabama Mississippi

Maximum Weekly Benefit Amount

$522 $415 $330 $326 $275 $275 $265 $235

Source: USDOL –Employment and Training Administration –Comparison of State Unemployment Insurance Laws 2012 and UWC-Highlights of State Unemployment Compensation Laws 2012.

Regional Maximum Benefit Weeks Comparisons Southeast Region

North Carolina Kentucky GEORGIA South Carolina Tennessee Florida Alabama Mississippi

Maximum Benefit Weeks

26 26 14–20 20 26 12–23 26 26

Source: USDOL –Employment and Training Administration –Comparison of State Unemployment Insurance Laws 2012 and UWC-Highlights of State Unemployment Compensation Laws 2012.

January 2013

Page 11

Georgia Unemployment Insurance Trust Fund Unemployment Rate The current unemployment rate is 8.7%. Average Unemployment Rate

Page 12

Year

Average UI Rate

2009

9.8%

2010

10.2%

2011

9.8%

2012

Not Available Until March 2013

January 2013

Georgia Unemployment Insurance Trust Fund What is Solvency? Solvency generally refers to Georgia’s capability of meeting all financial obligations as they become due. The USDOL identifies “minimally solvent” as having enough funds in the UI Trust Fund to pay a year of UI benefits based upon the highest costs incurred by the State in 3 years during the last 3 recessions or last 20 years, whichever is a longer time period. There is no federal statutory requirement applicable to solvency of individual state UI funds. However, starting in 2014, there will be a federal impact on states not pursuing solvency (e.g., non-availability of interest free Title XII cash-flow loans). How much is needed in the Trust Fund? In 2008, the Trust Fund had a balance of $1.9B. The recession that began in 2008 quickly depleted the Trust Fund reserve. Therefore, GDOL recommends a Trust Fund reserve of at least $2.5B.

January 2013

Page 13

Georgia Unemployment Insurance Trust Fund Trust Fund Solvency Plan Current Trust Fund Cycle

We break the cycle through Fiscal Stewardship, Economic Development, and Workforce Development. Fiscal Stewardship •

Repay loan as outlined under “Loan Repayment.”



Borrow for cash flow purposes only, repaying timely to avoid additional principal and interest.



Accumulate $2.5B in Trust Fund.



Reduce UI benefit fraud.



Collect overpayments using various methods, including IRS refunds



Adjust maximum benefit weeks based on unemployment rate.



Reduce costs via increased efficiency and technology. EXAMPLES: 1. Debit cards for benefit payments 2. Electronic employer tax deposits 3. Online employer tax payments

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January 2013

Georgia Unemployment Insurance Trust Fund Economic Development •

Increase employer base, especially in high-growth industries.



Partner with the Governor’s Office of Workforce Development.

Workforce Development •

Cultivate a qualified workforce



Match qualified workers to employers



Reemploy veterans and returning service members



Develop future workforce by producing work-ready Georgia graduates EXAMPLES: 1. GeorgiaBEST partnership with Department of Education 2. Georgia Work Readiness Assessment 3. Jobs for Georgia Graduates 4. Great Promise Partners, cooperative education program for at-risk students

January 2013

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