Jobless insurance premiums may drop

About two-thirds of Utah employers could see their unemployment insurance premiums drop by 25 percent in 2007, thanks in part to the state's gangbuster economy.

"Utah has had an extremely low unemployment rate and significant growth in jobs," said Bill Starks, unemployment insurance director for the Utah Department of Workforce Services.

Because fewer people have been laid off in the last few years, and businesses have been creating jobs, Starks said more money has gone into the state's Unemployment Trust Fund — the fund from which unemployment benefits are paid. As of Dec. 1, 2006, the fund neared $700 million, Starks said.

"That trust fund basically has increased significantly in the last two years, so it is at a level that is considered adequate," Starks said.

He added, however, that even in a healthy economy, employers who lay off a large portion of their work force could see rate increases.

Like auto insurance rates that vary according to a driver's safety record, unemployment insurance premiums vary in that employers that have stable work forces and fewer layoffs have lower rates, Starks said. For 2007, the minimum rate is .003 percent (down from .004 percent in 2006), while the maximum rate is 9.3 percent.

About 1 percent of Utah employers pay the maximum rate, while about 68 percent fall under the .003 percent rate, Starks said.

What will a 25 percent reduction mean?

"For the 68 percent (of businesses) that have the minimum rate, it would result in about a $25 per year, per employee reduction in unemployment taxes," Starks said. And that's assuming that the employee made the maximum taxable amount of $25,400 per year.

The reduction might be welcome, particularly after significantly higher rates during 2001-2003 when, among other factors, the high number of unemployment claims depleted the fund. Starks said the fund paid out "several hundred million dollars in unemployment benefits annually" during the lean years.

In 2004, the department sponsored legislation that, according to Starks, "eased the increases, so that tax rate increases wouldn't have the steep hikes it had under the (previous) statutory formula."

Still, Utah's unemployment insurance rates historically have been comparatively low — about 20 percent below the national average, the department said. Which brings Starks back to fundamentals.

"We've done a very good job of managing the payment of those (unemployment) benefits, and we've had a very, very healthy economy for several years," he said.

Looking ahead, the department said further rate reductions could be coming, if the economy remains strong.

---

E-mail: jnii@desnews.com