Governor Paterson Introduces Comprehensive Legislation to Reform New York's Unemployment Insurance System

June 29, 2010

Legislation Would Restore Insolvent System to Fiscal Stability; Gradually Bring Benefits into Line with Other States; Strengthen Penalties for Fraud

Governor David A. Paterson today announced that he has submitted legislation to repair the State’s broken system for Unemployment Insurance (UI). Currently, the State’s UI fund is $3.2 billion in deficit, and as a result New York employers will be forced to pay interest penalties estimated at over $1.265 billion over the next eight years if no action is taken. Moreover, the maximum benefit has been fixed at $405 since 2000, and as a result, has been significantly eroded by inflation, as well as New York’s share of federally funded extended unemployment benefits are subject to severe limitations.

“In my tenure, I have sought to bring fiscal responsibility to State government, and I cannot achieve that goal while leaving our system for providing unemployment insurance insolvent,” Governor Paterson said. “This bill would place that system on firm financial footing, while creating a responsible and gradual path to bringing benefits into line with wages, and ensuring that our most vulnerable citizens are protected in times of economic crisis.”

The Governor’s bill would gradually increase the maximum benefit available to beneficiaries of the UI program to starting at $475 in January 2011 until it is indexed in July 2018 to 50 percent of New York’s average weekly wage. Currently 35 states provide for an index of 50 percent or more. This legislation would also ensure that the UI fund pay for all benefits resulting from unemployment due to compelling family reasons so they won’t be unfairly passed on to employers who bear no responsibility.

This bill would also:

Establish a minimum benefit of $75.
Increase the taxable wage base on which UI contributions are calculated from the current $8500 to $14,000 on January 1, 2018. In 2019, the taxable wage base would be set at 18% of the average annual wage, but would increase if the trust fund is too small at year’s end and decrease if the fund meets a sufficiency threshold.
Eliminate the lowest tax brackets for employers with positive experience ratings; at present employers in these brackets pay very little in UI taxes, which makes the creation of a solvent system impossible without placing extraordinary burdens on other employers.
Increase and index the wage thresholds that trigger employer obligation to pay UI contributions, so that they increase as wages do.
Double the time by which an individual can re-qualify for unemployment for individuals who are terminated for misconduct, refuse a job or leave a job without good cause, to produce savings for employers.
Significantly increase penalties associated with claimants’ willful false statements and misrepresentation for the purpose of obtaining benefits.
Increase penalties for employers who fail to keep UI records.
Lower the number of employees an employer must have to be eligible for the Shared Work Program from five to two.

New York State Labor Commissioner Colleen Gardner said: “The State’s UI system is a critical safety net, which provides stimulus in times of recession and essential funds for individuals and families in need. The enactment of Governor Paterson’s proposal is essential to ensuring that this vital program continues to function effectively for all New Yorkers.”

The New York State Department of Labor estimates that the Governor’s proposal would bring the Trust Fund into solvency in 2015, three years earlier than projected under current law, and save nearly $3.3 billion in additional taxes and $634 million in UI loan interest that would otherwise be paid by the State’s employers from 2011-2018. Additionally, by implementing a gradual increase in benefits, and various cost saving measures, this legislation would reduce costs to business by over $1 billion over the next eight years, compared with similar bills currently under consideration in the Legislature.