11:46 AM PDT on Saturday, October 25, 2003

Associated Press

OLYMPIA – Washington's unemployment insurance tax rates will rise by an average of 12 percent next year, as the state rebuilds a trust fund that has been hammered by the state's deep unemployment.

The trust fund, which covers weekly unemployment checks, shrank by 24 percent between September 2002 and this past September. The state paid out more than $1.6 billion in regular state benefits, plus $780 million in federally financed extensions and $60 million in federal-state extensions.

By Sept. 30, the trust fund had dropped to about $1.1 billion, about $200 million less than the level needed to avoid a higher tax rate.

The increase, affecting more than 200,000 employers covering about 2.9 million workers, will amount to an average of 12 percent, beginning next April 30.

Companies with employees who make more than $30,200 a year face a larger increase, averaging about 14 percent, up from an average of $741 per employee this year to $863 next year.

The actual amount for an individual employer will vary widely, primarily based on how often they lay off workers.

The Department of Labor and Industries will mail out rate notices in early December.

The tax schedule is laid out in state law. After several years at the low end of a seven-tier tax schedule, the heavy payouts have forced the state into higher brackets in the past two years.

The rates required for 2004 will range from 0.97 percent of an employees' quarterly taxable wages to 5.4 percent.

"The high number of laid-off workers collecting unemployment benefits has continued to draw down the trust fund balance," said Employment Security Commissioner Sylvia Mundy. "State law requires the change to a higher tax rate schedule next year to sustain the fund and assure money is available to assist workers who haven't found jobs."

Gov. Gary Locke's spokesman, Michael Marchand, said replenishing the trust fund is "the best investment we could make in the state's most valuable resource, the people who live and work here.

"This is a safety net that enables them to stay here" until they find new jobs, he said.

Carolyn Logue, head of the state affiliate of the National Federation of Independent Business, said the business community knew the big hit was coming – but that foreknowledge doesn't make it any easier to absorb.

"We're in a real squeeze," agreed Don Brunell, head of the Association of Washington Business. "This 12 percent comes on top of 19 percent rate increases for workers' comp (insurance to cover on-the-job injuries), and business are paying 25 to 30 percent more for health care coverage and the same or more for liability insurance."

Logue said future rate hikes will be moderated by changes the Legislature approved this year in the so-called Boeing Session.

Lawmakers reduced unemployment benefits from 30 weeks to 26, froze maximum benefit amounts, banned benefits for most workers who voluntarily quit their jobs, and decided to calculate benefits on what a worker earns over a year, rather than just over two quarters.

Washington has had the country's most generous benefits, but changes will bring the state more into line with the rest of the country, and make insurance more affordable for companies, she said.