January 28, 2010

Md. unemployment reform proves tough sell

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By Andy Rosen
Andy@MarylandReporter.com

Reforming Maryland’s jobless aid system was supposed to be easy.

When Gov. Martin O’Malley outlined his emergency overhaul to the state’s unemployment system last month, some in the General Assembly believed they could pass it within the first week of the legislative session.

That hasn’t happened, and now there are questions about whether the key component of the legislation will make it through at all this year. The so-called “alternative base period,” has met with furious opposition from the businesses who pay unemployment taxes. Those taxes have tripled for many employers this year, as the state’s reserve set aside to pay benefits become depleted.

The move would allow the state to calculate unemployment benefits based on the most recent pay, which would increase payments for many recipients.

O’Malley had hoped that businesses would buy the plan, because it would make the state eligible for federal cash that he would then use to lower unemployment taxes by about $83 million. Opponents of the move have gained the attention of key lawmakers, and supporters disagree with much of the business agenda.

Del. Dereck Davis, D-Prince George’s, chairman of the House Economic Matters Committee, said he didn’t know what could happen to the bill. It could pass as a compromise, he said. It could potentially even wait until next year, because the federal money would remain on the table.

But he said it is too early to handicap it.

“There are very real issues raised by the business community, and a number of my colleagues are very sympathetic to those issues that have been raised,” Davis said. “So I would say everything’s on the table at this point. We could pass the bill, we could amend it, and even, yes, it could be tabled until next year.”

Without the alternative base period, the state wouldn’t be able to get the federal cash, but businesses say they can live without the aid. Ellen Valentino, Maryland director of the National Federation of Independent Business, said putting the bill on hold for a year might allow for a better resolution

“This does not have to be done this year” she said. “At this point in time, I wonder if the best course of action isn’t to take a pause.”

Business advocates are more concerned about the long-term cost of the bill, which would add about $20 million per year in liability for the unemployment fund. They say the tax cut would likely be temporary, but the long-term cost would linger.

Both Davis and Senate Finance Committee Chairman Thomas “Mac” Middleton, D-Charles, say they’re willing to look at ways to offset the cost of the legislation to the unemployment fund. Some of those options, proposed by the Maryland Chamber of Commerce, include a week-long waiting period before unemployed workers can apply for benefits.

The chamber also proposed an elimination of “sick claims,” which allow unemployed workers to take a break from seeking work if they are ill. One of the more controversial moves proposed by the group is an elimination of the $8 per week credit that the unemployed get per dependent.

Labor groups and other bill supporters won’t support those moves — at least not all of them — which will make negotiating difficult.

“I think the governor is being very fair to both business and workers,” said Ernie Grecco, president of the Baltimore AFL-CIO. He said he would not accept a reduction to the dependent benefit, and pointed out that it is only effective for workers who don’t get the maximum benefit of $410 per week already.

Many bill supporters argue that the federal government will require the alternative base period at some point anyway, so the state should take the money while it can. But that’s not softening the business lobby’s push. They say the fund’s liabilities need to be scaled back anyway, so they’re going to push for the benefit reductions with or without the change in how benefits are calculated.