Wednesday, March 23, 2011
Gov. Urged To Sign Jobless Bill
By Dan Boyd
Copyright © 2011 Albuquerque Journal
Journal Capitol Bureau
SANTA FE — Supporters of legislation to shore up New Mexico's unemployment fund by increasing employer contributions and reducing jobless benefits are urging Gov. Susana Martinez to think twice about her plan to veto the measure.
Supporters say a veto of the solvency bill, which easily cleared both legislative chambers during the 60-day session that ended March 19, could lead to even higher unemployment taxes on businesses and the need for a costly bail-out from the federal government.
"I think it would be a real mistake for her to veto it," said Rep. Mimi Stewart, D-Albuquerque, who sponsored House Bill 59.
The Greater Albuquerque Chamber of Commerce and the Association of Commerce and Industry (ACI) also are concerned about a veto.
"By vetoing this legislation, she in effect forces a ... (huge) increase on our employers," said ACI president and CEO Beverlee McClure.
Martinez told reporters shortly after the Legislature adjourned Saturday she intends to veto the unemployment fund solvency bill, claiming the fund isn't in imminent danger and that more private-sector jobs will be created if certain regulations are eliminated.
Her office elaborated on those remarks Tuesday.
"We're developing a plan and will continue to assess the situation with the unemployment insurance fund as the year unfolds," Martinez spokesman Scott Darnell said. "Given the uncertainty that exists with regard to employment levels and economic growth, the governor feels it would be very premature to lock New Mexico small businesses into a tax increase, and it could prove harmful to the state's economy."
Martinez, whose office, along with some Democrats, is characterizing the proposed increase in employer contributions to the unemployment insurance fund as a tax increase, is a Republican who vowed during her 2010 campaign to oppose any tax hike during her first term.
The state's unemployment fund is being depleted by continuing high rates of recession-fueled unemployment.
The unemployment fund had a balance of about $137 million as of last week, according to the state Workforce Solutions Department. That's down from about $159 million at the start of February.
The legislation recently approved by lawmakers and sent to Martinez for final approval would require businesses to pay increased contributions for each of their employees for one year, starting in January 2012.
Employers currently pay an average of about $215 annually per employee. The new rate called for in the legislation would increase that to an average of about $370 for each employee per year, generating an estimated $128 million.
Unemployment benefits would also be trimmed by about $86 million, Stewart said, in large part by limiting how long the state would continue to help pay benefits for the jobless.
Martinez spokesman Darnell said the governor supports those eligibility restrictions, but not the higher employer contribution rate.
The Association of Commerce and Industry said in a prepared statement this week that 32 states already have had their unemployment funds go broke and that maintaining the solvency of New Mexico's fund could help the state land new companies.
"This is a problem Governor Martinez inherited, but not one that she cannot fix," McClure said in the statement. She said the business community was willing to lobby for the temporary tax increase, or higher employer contributions, in order to avoid a potentially dramatic increase in employer contributions if the fund were to totally run dry.
In that scenario, employers would have to pay an average of about $512 annually per employee under the highest of six unemployment insurance tax "schedules."
"When the fund goes insolvent, the state must automatically raise all employers to highest level of 'Schedule 6'," resulting in a huge tax increase on businesses, the ACI letter explained.
Other business groups have expressed similar concerns. The Greater Albuquerque Chamber of Commerce originally preferred a Senate bill that would have featured deeper benefit cuts, but threw its support behind Stewart's proposal when the Senate measure couldn't find traction.
Chamber of Commerce President and CEO Terri Cole said earlier this week that there might not be time to wait for the economy to rebound and new jobs to be created.
"We are worried about the governor's veto more than anything else," Cole told the Journal.
The ACI letter cited a legislative analysis that predicted the fund could be insolvent by November, if changes aren't made.
Even if the legislative fix is signed into law, the fund could be in the red by the end of March 2012, according to the Workforce Solutions Department.
While Martinez has vowed to oppose tax increases, lawmakers say failing to sign the unemployment fix bill would leave the cash-strapped state at the federal government's mercy.
Stewart, who said she's already sent a letter to the Governor's Office, said a veto of the measure could lead to insolvency of the unemployment insurance fund.
If that were to happen, the higher tax rate on businesses would be triggered and New Mexico would have to borrow money from the federal government to help pay jobless benefits. Interest on that loan would then have to be paid back from the state's general fund.
"If she vetoes this bill, by the end of the calendar year taxes on businesses will double," Stewart said Monday.
Martinez could place the unemployment fund solvency issue on the agenda for a legislative session on redistricting that's expected to take place later this year, but lawmakers say that approach could be politically risky.
"I think she needs to look at that one for the full 20 days before she vetoes it," said Senate Finance Committee Chairman John Arthur Smith, D-Deming, referring to the governor's deadline to act on the measure.
Lawmakers did include language in the state's $5.4 billion budget bill that would allow $30 million from the state's Tobacco Settlement Permanent Fund — which is generally spent on health-related programs — to temporarily be shifted into the unemployment fund if necessary in order to pay benefits.
Martinez has until April 8 to sign or veto bills passed by the Legislature during the session's final days. Bills that aren't acted upon by that date are automatically vetoed.