Labor committee approves extensive unemployment insurance changes

All of them are without business input and will increase UI taxes

Maine’s current Unemployment Insurance (UI) Trust fund, and its overall insurance system in place today, were shaped by reforms put in place nearly 20 years ago. These reforms included, among other things, an increase in the amount of the taxable wage base, the adoption of the “array system” of taxation used in Maine, our benefit structure, and the adoption of a cap on the total amount of trust fund reserves.  Getting to a place where these reforms could be adopted and accepted by the business community was not easy – in fact, it took nearly two years and two stakeholder groups to reach a compromise. However, a compromise was reached because legislators and the administration took the time to involve all impacted parties in the discussions and drafting of the bill.

On Friday, May 21, 2021, as has been typical this entire session, a partisan majority of the Joint Standing Committee on Labor and Housing voted “ought to pass” on the most significant unemployment insurance reforms since 2000 – with barely 20 minutes of actual discussion. The new reforms were negotiated among the Maine Department of Labor, House Speaker Ryan Fecteau, and employee advocates – and without input of the business community and employer stakeholders. Clearly the business community is seen by some as nothing more than an ATM, rather than a partner and participant in the system that ONLY Maine business pay into.
 
The combined bill, LD 1564, An Act to Amend the Laws Governing Unemployment Compensation, is sponsored by Sen. Eloise Vitelli (D-Sagadahoc) at the request of Governor Janet Mills. Its companion legislation, LD 1571, An Act to Strengthen the Unemployment Insurance System in order to Better Serve Maine Workers, was simultaneously submitted by Speaker Ryan Fecteau (D-Biddeford).
 
As drafted, LD 1564 had taken a more modest approach to reforming the system, while still resulting in some additional costs to Maine businesses. Meanwhile, LD 1571 adopted a more expansive and aggressive approach, which expanded access to benefits, created a Navigator program funded by employers and designed to expand access to benefits, and increased administrative burdens on employers of all sizes. All of this would clearly result in higher UI taxes.
 
The Maine State Chamber testified in strong opposition to LD 1571 at the public hearing and adopted a “wait and see” attitude on LD 1564. At the public hearing and in subsequent conversations with members of the Mills administration, the Maine State Chamber and others made it clear they were unhappy that the payors of the system were not being involved with any discussions on the bill’s direction after the public hearing.
 
Last Friday at the Labor committee’s work session, a 20-page amendment that combined portions of both bills was distributed in the committee, seeking to amend LD 1564. While some business community members had seen the draft only the evening before, no employer representative was present during the amendment’s negotiations or drafting. Instead, a “done deal” was presented in committee.
 
The Labor committee then engaged in a start-and-stop process with the bill in the morning when they were given a briefing by staff from the Maine Department of Labor, including Commissioner Laura Fortman, and from their committee analyst. The committee subsequently tabled the bill, only to have it come up again for a final vote shortly after 5:00 p.m. on Friday evening.
 
At that time, there was no substantive discussion of the intricacies of the bill, nor the impact on the finances of the trust fund – essentially, taxes to be paid by Maine businesses. On numerous occasions this session, this committee has simply brushed aside or even ignored the concerns of the business community. The committee vote ended up with a three-way report – with the majority voting “ought to pass as amended;” a second minority “ought to pass” with a different version of the bill; and, the committee Republicans voting “ought not to pass.” If you want to listen to the final few minutes of the committee’s work session, you can do so here, beginning at the 02:03:30 mark. 
 
The bill as approved will increase benefits, including making individuals who lose their child care and transportation eligible for UI benefits; will set up an independently-funded Navigator program for workers, but not employers; will increase both the earnings offset and dependent benefits; and, will set up a stakeholder group to look at the Workshare program, technology issues, increasing worker access to benefits, and simplifying employer reporting requirements. A side-by-side explanation of what exactly is in the bill can be found here.
 
How much will these proposed changes cost Maine businesses in higher taxes? No one knows, as that cost figure was either not calculated, or was withheld from the discussion. It will certainly increase costs at a time when nearly $400 million has been pumped into Maine’s UI Trust fund by Governor Janet Mills using CARES Act and American Rescue Plan Act monies – in addition to a $20 million UI tax increase on all Maine businesses – just to maintain current benefits levels and payout. And yet the Labor Committee brushed aside this information, and our concerns, voting to raise costs once again – taxes- on already struggling Maine small businesses.
 
The fact that the funders of our UI system – Maine businesses – were shut out of any negotiations regarding the drafting of the original bill, and the subsequently adopted amendment is slap in the face.  The concerns and needs of a critical stakeholder in the process were shut out of the development of the most significant changes to our UI system in more than 20 years. We were not even given the courtesy of a reason for being excluded at any point along the entire process. It would be easy enough to oppose the bill for this reason alone. Overall, the bill gives the payors of the system nothing – except higher taxes. It is for this reason the Maine State Chamber is strongly opposed to the enactment of LD 1564.
 
It is likely this bill will come before the entire legislature when lawmakers return to the Statehouse in June. The Maine State Chamber will be following the bill closely and will be alerting members about the full impact of the bill once the amended language has been analyzed. For additional information or questions, please contact Peter Gore by calling (207) 623-4568, ext. 107, or by emailing [email protected].