CARSON CITY, Nev. (AP) — Nevada businesses on average will pay $77 more per employee in state unemployment-insurance taxes next year to try to shore up the state’s jobless benefits trust fund, which was drained during the Great Recession as a record number of workers lost their jobs.
Employment Security Administrator Renee Olson on Tuesday adopted a new average tax rate of 2.25 percent on the first $26,900 of an employee’s wages. The new rate takes effect Jan. 1 and amounts to a 12.5 percent increase under a formula used to calculate the tax.
Nevada’s unemployment insurance trust account had a healthy surplus before the recession. But as the economy plummeted and jobs disappeared, the state’s reserves dried up and Nevada, along with many other states, had to borrow money from the federal government to pay jobless claims. Nevada has been borrowing money since late 2009 and as of October owes $625 million to the federal government. That balance at one point reached $800 million.
Despite the hardship on businesses, the rate increase was supported by the Las Vegas and Reno-Sparks chambers of commerce, as well as the Nevada Manufacturers Association.
“I wish I was up here in support, but I think I’m more up here in understanding,” Tray Abney, government relations director at the Reno-Sparks Chamber of Commerce, told Olson during Tuesday’s brief hearing.
“We understand this decision; we agree with your decision. It’s the only possible choice that you have,” Abney said.
The Nevada Taxpayers Association also supported the higher rate.
“We think this is a necessary move,” said Carole Vilardo, the group’s executive director. “Hopefully next year we won’t be sitting here in this same situation.”
Nevada is also paying interest on the federal loan. Gov. Brian Sandoval in 2011 set aside $66 million from the general fund for interest payments.
State officials estimate interest charges for the next two-year budget cycle will total $40 million to $48 million.
Olson told reporters Tuesday her agency has recommended establishing a special assessment on employers to make interest payments, which by law cannot be paid out of the trust fund used to pay jobless claims.
It’s unknown whether Sandoval again will propose using general fund dollars to cover the interest costs. Sandoval will outline his budget proposal in January, before the 2013 Legislature convenes Feb. 4.
Agency staff estimate Nevada may be able to pay off the loan by 2016, and the state’s trust fund could become solvent again by 2018.
