Editor’s note: This commentary is by Vermont Department of Labor Commissioner Lindsay Kurrle.
[I] was excited to announce last week that Vermont employers, as well as Vermonters who are collecting unemployment, will both benefit from three changes to the Unemployment Insurance (UI) program starting July 1, 2018. Due to the health of the unemployment insurance trust fund, the Department of Labor anticipates a reduction in the average UI tax rate paid by employers, while increasing the maximum weekly benefit amount for those temporarily collecting unemployment benefits. If this positive economic trend continues, employers will also see a $2,000 reduction in the taxable wage base on Jan. 1, 2019. The taxable wage base is the amount of wages, per employee, for which unemployment tax is calculated.
But this hasn’t always been the case – so it’s important to reflect on how far we’ve come as we continue our work to make Vermont more affordable for businesses while ensuring eligible individuals have access to benefits.
From 2001 to 2010, Vermont’s unemployment insurance trust fund (UITF) went from having a positive balance of $300.4 million to a negative balance of -$77 million. This propelled the state into a borrowing agreement with the federal government. Through a federal loan, Vermont was able to borrow $77.7 million to help ensure benefits to eligible unemployed individuals.
This negative trust fund balance was the result of declining economic conditions during the Great Recession, increasing unemployment, and increases in benefits while contribution levels into the fund remained unchanged. The unemployment insurance trust fund is designed to be “forward-funded,” meaning tax schedules are calculated to raise more funds during periods of economic growth to ensure adequate funding during economic recessions.
During the 2010 legislative session the laws surrounding the UITF system were overhauled. Business, industry and worker advocates came together to decide on the best measures to ensure the trust fund’s solvency moving forward. For 22,900 of Vermont’s businesses this meant that the taxable wage base would increase over 100 percent, going from $8,000 in 2010 to $17,600. For claimants collecting unemployment, the maximum weekly benefit amount was capped at $425, and a one-week waiting period was implemented. More simply, these changes to the UITF system meant that more money was being collected from employers to help support the health of the fund than was being paid from the fund for benefits.
On July 1, 2017, for the first time since these reforms were made employers began to see relief from the increased rates.
As of Dec. 31, 2017, the unemployment trust fund had a net balance of $381.7 million. The Vermont Department of Labor is hopeful that we will continue this trend of solvency. As we look to the future, and if economic conditions continue to improve, businesses will see additional relief, while Vermonters, who lose their job through no fault of their own, can rely on help when they need it. Similarly, Gov. Phil Scott has asked the Department of Labor to evaluate additional ways to help make Vermont more affordable and stimulate additional economic activity.
It is my sincere hope that we never have to endure another situation like we did a decade ago. That said, my team and I will continue to explore ways to make Vermont more affordable for businesses, while ensuring that individuals who are entitled and eligible for benefits have access to them.
For more information regarding tax schedules and rates, please visit the Vermont Department of Labor’s website.
