Since 2009, Florida has borrowed more than $2 billion from the federal government to help make payments on unemployment compensation claims.
A recently filed amendment would slow down the repayment of that huge debt in order to provide businesses additional tax relief worth $800 million over the next three years.
The payments would be shifted into the second half of the decade, while the trust fund used to pay claims would be left underfunded, likely until 2018. If another recession happens in the meantime, the state would probably have to go back to the feds, hat in hand.
Last month, Florida lawmakers passed a series of memorials urging Congress to curb spending and reduce its debt in order to get its finances in shape.
Meanwhile, the state’s unemployment tax debt to the federal government continues to balloon. Florida had to pay more than $56 million in interest on the federal government loan last year, and the feds have been cracking down on the leveraged state by reducing credits.
Now, a business-friendly amendment could increase that debt, while giving companies an $800 million break in the final days of the legislative session.
On Thursday morning, Sen. Ellyn Bogdanoff, R-Fort Lauderdale, slipped an amendment onto an unemployment compensation bill (HB 7027) that would save companies as much as $350 million this year. Chiefly backed by a coalition of business groups, the amendment would require Florida to delay its plan to shore up its UC finances by reducing the base wage used to calculate the UC tax, and increasing the recoupment timeline.
The business community has said that companies need further relief to stave off an $817 million unemployment compensation tax increase this year. In 2010 and 2011, the Legislature gave business owners a multimillion-dollar break on unemployment compensation tax – slashing the number of weeks unemployed people can collect payments and cutting business contributions.
Bogdanoff, who was named Most Valuable Legislator by the Florida Chamber of Commerce last year, filed the amendment in the Senate right before her bill’s last stop in the committee process on Feb. 27. Tacked onto a largely noncontroversial bill to rebrand unemployment compensation as “reemployment assistance”—the multi-million tax reduction got no scrutiny during the committee meeting. It faces a vote in the Senate on Thursday.
When the business community first pitched its idea for slashing unemployment compensation taxes (see: letteronUnemploymentInsurance), the state’s chief economist, Amy Baker, struck back.
“This is going to result in more federal advances because we’re not collecting as much, more interest due on those advances because it’s larger, and lower trust fund balances for the state because we’re not replenishing it at the same rate,” she said. “If there is another recession on the forecast horizon, it’s going to exacerbate all of these factors.”
(Here's Baker's presentation on the issue: Download AmyBaker)
Randy Miller, vice president of the Florida Retail Federation, looked at it differently.
“Please consider kicking the can down the road, one more time,” he told lawmakers after Baker’s presentation. “It’s our can, we pay for it either now or later. But we’re telling you that the timing is bad.”
After Baker’s testimony, the business proposal appeared to hit a brick wall in the Legislature. A bill containing the proposal never moved in the House and there was no Senate version.
Bogdanoff is the sponsor of the original rebranding unemployment compensation bill, and didn’t file the amendment until the last committee stop, where Senators voted it through without knowing the economic impact of what they were voting for. The next week the Revenue Estimating Committee attached a price tag: $352.1 million, in the first year.
On the second-to-last day of session, the language was added to the House version of the bill, which passed last month.
If passed, Bogdanoff’s amendment would be a significant win for the business community, which will also be on the receiving end of a $125 million economic development package chocked full of tax breaks for companies.
That bill is slated for a full Senate vote before the 9-week session ends on Friday.
BONUS: Since we’re talking about last-minute multi-million dollar tax breaks for businesses, see today’s post on a last-minute insurance tax break that surfaced on Day 59.