SANTA FE — The finances of New Mexico’s unemployment compensation program are improving and the fund should remain in the black through early 2013, a year longer than previously projected, according to Gov. Susana Martinez’s administration.
However, it remains uncertain how much in taxes businesses must pay next year to keep the program afloat. As it stands now because of a veto by the governor, there’s nothing in state law that sets unemployment tax rates for businesses starting in January.
“I think we are seriously in limbo,” said Rep. Mimi Stewart, an Albuquerque Democrat. She sponsored a measure passed by the Legislature in March to shore up the unemployment fund by raising taxes on employers by $128 million annual and cutting benefits.
The governor vetoed the tax increase but allowed the benefit reductions to become law, prompting a group of Democratic lawmakers to file a lawsuit asking the state Supreme Court to invalidate Martinez’s partial veto.
Much to the dismay of Stewart and other lawmakers who brought the case, the court has put the case on hold and is waiting to see if the Democratic-controlled Legislature and the Republican governor can resolve their differences in a special legislative session planned this fall for redistricting.
But the court’s inaction has added to the uncertainty facing employers over what taxes they must pay to cover unemployment claims.
The secretary of the Workforce Solutions Department can administratively set tax rates for employers if there’s no agreement between the Legislature and the governor on the issue, according to agency spokeswoman Joy Forehand. The agency has that power, she said, when state law doesn’t conform to federal requirements for states to annually establish a rate for employer contributions.
At issue is a program particularly critical during an economic downtown. The state is paying about $745,000 a day in unemployment benefits to jobless New Mexicans. Payments reached nearly $1 million a day earlier this year.
The unemployment fund had a balance of $129 million as of July 5, according to the Workforce Solutions Department. It was more than $500 million three years ago.
When the Legislature debated the unemployment issue earlier this year, the fund was expected to run out of money in March 2012 because of the drain from high unemployment.
But according to new projections by the department, the fund won’t become insolvent until March 2013. That assumes no change in tax rates and unemployment remains relatively high.
If current tax rates remain in place, the fund’s balance will dip to $28 million by the end of 2012. That end-of-year balance would be almost $113 million if the vetoed tax increase were in place next year.
The fund’s financial outlook has improved because unemployment has declined, benefit payments have been lower than expected and employers have contributed more into the fund than anticipated.
If the fund becomes insolvent, New Mexico will continue to pay unemployment benefits by borrowing money from the federal government — something more than 30 states have done.
Business groups backed the Legislature’s unemployment solvency measure despite the proposed tax increase. Average tax payments by a business for each of its employees would have increased to about $492 a year, an increase of $167 or about 51 percent from current rates, according to the department. The required contributions vary for each business depending on its history of unemployment claims.
Martinez promised during her campaign not to increase taxes and the upcoming special session’s debate over the unemployment fund will present a test of her political will to keep that promise.
She rejected the higher unemployment contributions in April by vetoing one paragraph in a 50-page bill. She allowed the remainder of the measure to become law, including language that prevents the use of an automatic rate-setting mechanism until 2013. Under state law, the department is to annually set employer contribution rates based on the balance in the unemployment fund and the state’s total yearly payroll. But lawmakers have short-circuited the administrative rate system for several years and instead set employer tax rates by passing legislation, keeping contributions low when the state had a fund surplus.
If the automatic rate mechanism was in effect, then employers would be paying the next-to-highest contribution schedule in 2012, Workforce Solutions Secretary Celina Bussey told a legislative committee last week. Average payments by a business for each of its employees would go to $582 a year— a 79 percent increase — if that happened.
Terri Cole, president and CEO of the Greater Albuquerque Chamber of Commerce, said such an increase would devastate businesses struggling because of the weak economy.
“We are confident that this administration is laser focused on this issue. They don’t want an increase in rates to the business community any more than we do,” Cole said in an interview.
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July 22, 2011 12:18 p.m.
SANTA FE — Gov. Susana Martinez’s administration says the finances of New Mexico’s unemployment compensation program are improving and the fund should remain in the black through early 2013, a year longer than previously projected.
However, it remains uncertain how much businesses must pay in taxes next year to finance the program. As it stands now because of a veto by the governor, there’s nothing in state law that sets unemployment tax rates for businesses starting in January.
The governor wants lawmakers to address the unemployment issue during a special session planned this fall.
About $745,000 a day is paid out in unemployment benefits to jobless New Mexicans.
The unemployment fund had a balance of $129 million earlier this month. It was more than $500 million three years ago.
-- Email the reporter at jmcelroy@abqjournal.com. Call the reporter at 505-823-3823
