CARSON CITY — The Employment Security Council on Tuesday voted to recommend that the average unemployment insurance tax rate for 2012 remain unchanged at 2 percent. The final decision will be made later this year by Cindy Jones, the administrator for the Employment Security Division of the Nevada Department of Employment, Training and Rehabilitation (DETR).
The recommendation was based on economic information provided by the Research and Analysis Bureau of DETR. The bureau conducts a solvency test of the fund annually to determine what the rate needs to be in order to ensure the fund levels are adequate to pay unemployment benefits for the coming year. The bureau then offers the council a number of scenarios to help in determining its recommendation.
Keeping the rate at 2 percent will create an estimated revenue of $438 million during calendar year 2012, officials said.
However, for the trust fund to reach a minimum recommended level of reserves by the end of 2012, the system would need to generate approximately $2 billion in revenue, Jones said.
“Absent some drastic change in the environment, I expect the tax rate adopted through the regulatory process to reflect the recommendation of the Employment Security Council,” Jones said. “The rate recommended … keeps the 50 percent rate increase realized by employers for 2011 in place for 2012.”
State law requires the Employment Security Division administrator to establish tax rates each year by adopting a regulation after receiving input from the Employment Security Council and interested members of the public.
The bureau makes projections for the following year based on number of active employers, amount of taxable payroll, amount of the state unemployment benefits that will be paid, estimated revenues required for benefit payouts and trust fund solvency in the next calendar year. Economists from the bureau presented to the council optional schedules with variable average tax rates and revenue projections.
DETR’s Chief Economist Bill Anderson told the council, “So far, we have an unemployment rate at about 13.2 percent. This tells us in the final months of the year, we are going to see the unemployment rate remain steady. We are looking for employment growth to move in the positive, with about 1 percent growth. This is an improvement from where we’ve been, but still falling short of where we want to be.”
Tuesday’s decision was based on current economic conditions and the state of the trust fund. The state’s trust fund was depleted in October 2009, as Nevada began experiencing the worst unemployment in the country, with a record number of people qualifying for unemployment benefits. When the fund ran out, like many other states, Nevada began borrowing money from the federal government to continue paying benefits, which must be paid back. Nevada’s unemployment insurance trust fund continues to operate at a deficit. As of September, Nevada has borrowed more than $742 million for the continuation of payments of regular benefits.All extended benefit programs remain federally funded.
Gov. Brian Sandoval requested, and the Legislature approved, a general fund allocation to pay interest on the borrowed funds for this year and next. This year’s payment is $22,552,947.02 and will be paid on June 30, 2012 as Nevada was successful in securing a payment delay due to the state’s high unemployment rate, Jones said.
The lowest current rate is set at $66.50 per worker, which drops to $66. Those with the highest turnover will be paying $1,425 per worker, down from the current $1,436. In 2012, employers will pay tax on the first $26,400 of each worker’s wage.
Members of the public will have another opportunity to offer input about the final decision of the rate during a small business workshop scheduled for Oct. 24 and again on Dec. 6. The final adoption of the rate will take place by Dec. 31.