(Sean Whaley/Nevada News Bureau) – Despite the need to borrow $773 million from the federal government to pay jobless benefits so far in the current economic downturn, an advisory panel today recommended that the average tax rate levied on Nevada employers to pay claims remain unchanged at 2 percent for 2012.
The unanimous vote of the nine-member Nevada Employment Security Council came despite the recommendation from one employer representative for an increase in the rate to 2.5 percent or even 2.75 percent so Nevada could pay off its federal loans more quickly.
Ray Bacon, executive director of the Nevada Manufacturers Association and the only employer representative to testify at the hearing, recommended the increase despite the difficult economic situation in Nevada.
“As we have done in the past, we think that the best remedy for employers is to bring some level of stability to this thing so that we don’t wind up with a rate increase year after year after year and that we get out of from under the federal thumb as fast as reasonable, not as fast as possible,” he said.
Nevada’s unemployment tax rate is low compared to other states, Bacon said.
The 2 percent rate would bring in an estimated $438 million to pay jobless claims. A 2.75 percent rate would bring in just over $600 million.
Leaving the rate at 2 percent means the federal loans, for which interest is being charged that must be paid out of the state’s general fund, won’t be paid off until 2018. A 2.75 percent average tax rate would see the loans paid off in 2016.
But the few members of the council who commented during the meeting expressed concern about the effect of a tax rate increase on job creation efforts.
Bill Anderson, chief economist for the Research and Analysis Bureau of the Department of Employment, Training and Rehabilitation, said Nevada’s job losses have been severe.
“We’ve lost, since the official start of the recession, about 190,000 jobs here in Nevada,” he said.
Cindy Jones, administrator of the Employment Security Division, said it has been the practice in Nevada to increase the tax rate during times of economic health, allowing for the creation of a reserve to pay benefits in tough times.
After listening to two hours of testimony on jobless rates and what different tax rates would do to help pay down the federal loans, Paul Havas, chairman of the panel, recommended to keep the average rate the same.
The rates employers actually pay vary based on a rating system assessing the risk of layoffs. Those rates range from 0.25 percent to 5.4 percent. New employers not yet assessed a risk would pay 2.95 percent. The tax rates will be assessed on the first $26,400 in an employees’ wages.
The recommendation of the council will be used by Jones to formally set the rate for 2012 later this year.
The 2011 average tax rate was increased last year, from 1.33 percent to 2 percent. The new rate will take effect on Jan. 1.
There was a bit of good news reported to the council by Jones during the meeting. Nevada is the only state in the nation that received a nine-month extension on its first interest payment to the federal government that had been due on Sept. 30, she said.
Nevada won’t have to make its payment, estimated now at $22.5 million, until June 30, 2012, Jones said. The reason for the delay is Nevada’s worst-in-the-nation unemployment rate, she said. Nevada is the only state that had a 12-month jobless average that exceeded 13.5 percent, allowing for the extension.
“So unfortunately we had that high unemployment rate,” she said. “I’m very hopeful that we do not qualify next year. I really don’t want the state to endure that sort of unemployment level for the next year in order to qualify for that mere nine-month deferral.”