Editorial: Jobless fund reform will give businesses stability

New Mexico businesses should welcome the unemployment insurance fix the Legislature passed and which the governor is expected to sign for at least two reasons: It makes sense and it removes the process of setting premiums from the legislative political arena.

Senate Bill 334, sponsored by Sen. Stuart Ingle, R-Portales, and pushed as a high priority of the Martinez administration should provide a more stable approach to calculating the annual premiums that businesses pay into a fund from which unemployment claims are paid.

Although it will raise the average employer’s premium slightly starting in 2015, premiums in the future would fluctuate based on a target amount set by the Department of Workforce Solutions to keep the fund solvent. Also figured in would be the type of business, its past unemployment claims and total taxable payroll.

Currently, premiums are based on an employer’s claims and on the ratio between the fund balance and covered wages at the end of the previous calendar year. According to a Legislative Finance Committee analysis, that can mean some employers with high experience levels unfairly benefit without paying more than the current cap of 5.4 percent, leaving other employers with a low claims history to pick up the slack to keep enough money in the fund. The new formula, which also caps the maximum employer contribution at 5.4 percent of the taxable wage base as applied to up to $22,900 of each employee’s earnings, would charge businesses with high claim levels an additional premium.

Gov. Susana Martinez successfully fought off an attempt to boost premiums substantially two years ago, pointing out the process itself was deeply flawed and pushing hard for a permanent fix.

According to the state Economic Development Department, the new system would give employers “more stability in budgeting for unemployment insurance” and make it easier for them to correlate their tax rate with their claims experience.

Best of all, the new formula would end the Legislature’s annual battles over setting the premiums, taking politics out of making sure there is enough money in the fund to cover claims.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.