Higher state unemployment tax proposed for businesses

Thursday, Oct. 7, 2004 | 11:20 a.m.

CARSON CITY -- More than 50,000 Nevada businesses face a higher unemployment tax in 2005.

The state Employment Security Council on Wednesday recommended the rate be raised to 1.38 percent. It will be assessed against a projected average wage of $22,900 in 2005, compared with $22,000 this year.

The average tax rate for employers has remained -- for four years -- at 1.29 percent of the average wage of a worker.

An additional 0.05 percent is added on to finance an employment program so the total rate next year will be 1.43. So the average tax bill per employee would rise from $294 to $327 next year.

Council member George Foster, a labor representative from Reno, said, "When times are good we should build up the trust fund balance. The tax rate of 1.38 percent makes sense to me."

Council member Rick Wilkening, also a labor representative from Las Vegas, said it was "time to start putting nuts away for the winter."

The council is made up of representatives from business, labor and the general public.

Cynthia Jones, administrator of the employment security department, will hold a public hearing Nov. 16 and set the rate for the coming year. Traditionally the administrator follows the recommendation of the council.

Council Chairman Paul Havas of Reno said this was an "infinitesimal" increase and it allows for long-term stability of the fund that pays unemployment benefits.

The trust fund on Sept. 30 this year measured $439.2 million, or 9 percent higher than needed to meet the solvency test required by law. But the reserve has been declining since 2001 when it was $505.1 million.

With the new rate, the balance on Sept. 30, 2005, should be $455.7 million.

The money paid by employers goes into the state fund for benefits for the jobless. The average weekly unemployment check this year is $243. It is estimated the average weekly payment will be $249 next year.

The federal government also imposes a tax of $56 per year, per employee, and that money is returned to the state to pay for administering the state agency.

When unemployment shot up in Nevada after the Sept. 11 attacks, the federal government sent the state an additional $68.1 million to help keep the fund solvent. The 2003 Legislature agreed to take $12 million of that money to build a new headquarters for the agency in Las Vegas.

The tax rate on an individual business varies depending on the turnover of workers.

For instance, those with the lowest turnover pay a rate of 0.25 percent and those with the highest turnover are assessed 5.4 percent. The department said that 43.6 percent, or 12,116 employers, are expected to be in the lowest rate next year and 939 businesses will be at the top end.

New businesses must pay a 2.9 percent rate for their first three and a half to four years before they gain an experience rating and qualify for a lower tax. There are an estimated 22,900 businesses in the new category.

With the taxes and interest earned, the fund should receive $309.1 million for the coming year and pay out $292.6 million in benefits. It is estimated that the fund would end up with $455.7 million next Sept. 30 when it is measured.

Bob Murdock, chief economist for the department, predicted the strong economy for the state to continue for the coming year. He said the unemployment rate this year of 4.3 percent could rise to 4.5 percent next year and then to 4.8 percent in 2006.

"This not that dramatic," he said.

Job growth this year will be about 4.5 percent and should inch down to 4.1 percent in 2005 and then to 3.7 percent in 2006, Murdock said. This year construction employment jumped 9 percent.