Unemployment Insurance

The issue of our state unemployment insurance (UI) system has been something of political football in the Legislature during the past few years.

In 2003 — over the objections of labor groups — dramatic reductions were made to the complex calculation of UI benefits. While the changes had the effect of reducing the amount of taxes paid by employers into the unemployment system, they also reduced payments to individuals between jobs who rely on their unemployment checks to pay their bills while they find new work.

In 2005 — over the objections of some business groups — a new calculation of benefits was adopted to restore payments to out-of-work individuals and seasonal workers. These changes didn’t increase employer taxes. But because they were funded by one-time revenues, they were only intended as a temporary solution.

In the 2006 session, Senate Democrats crafted a permanent fix through the high art of compromise. The fix, Senate Bill 6885, was the result of an extensive, bipartisan process that included the input and support of labor and business groups.

SB 6885 strikes a balance between reducing taxes for business and protecting workers, while ensuring a solvent UI trust fund for the future.

For determining benefits, the bill keeps the calculation put in place in 2005: An individual’s weekly benefit amount is set at 3.85 percent of the average in the two quarters of the base year in which wages were highest (two-quarter averaging).

For assessing unemployment taxes, the bill reverts to the calculation adopted in 2003: charging benefits as though the weekly benefit amount is 1 percent of wages in all four quarters of the base year (four-quarter averaging).

The bill also creates greater stability for business in our UI system. Rather than relying on socialized taxes, SB 6885 ensures that rates assessed to businesses are based more on their actual UI usage. As a result, it’s expected to lower taxes for business in rate class one — predominantly small businesses — by 20 percent.

Again, none of these changes are made at the expense of workers. The bill ensures that people can expect more assistance when they’ve lost their jobs.

Washington’s UI trust fund – the fund from which unemployment benefits are paid – is well-managed and exceptionally healthy. As an additional safeguard, SB 6885 changes the solvency tax threshold to ensure that the trust fund never goes broke. SB 6885 saves the business community $444 million. According to Washington’s Employment Security Department, we could sustain another dot-com bust and 9-11 recession, and the business community would still save around $110 million.

In a session of breakthroughs on issues that have long divided members of the Legislature — such as medical malpractice and Columbia River water rights— Senate Democrats consider the historic agreement of unemployment insurance among our crowning achievements.