Politics & Government

Senate unanimously OKs unemployment tax law

TOPEKA — A bill easing the pain for Kansas businesses facing a huge tax increase easily won approval Thursday in the state Senate after its Republican majority backed away from proposed cuts in benefits for jobless workers.

The measure, approved 39-0, rewrites a Kansas law that otherwise would force a $209 million increase this year in taxes businesses pay into a state trust fund that finances unemployment benefits. Record claims last year depleted the fund, and Kansas must borrow from the federal government to pay all this year's claims.

Business owners and groups complained to legislators because firms with little or no history of claims from former workers faced the highest percentage tax increases. The bill would reduce businesses' tax burden by $43 million this year and nearly $64 million in 2011, targeting firms with little or no claims history.

Some GOP senators said the state also must trim benefits to stabilize the unemployment trust fund. They proposed changes that would have cost jobless workers $42 million over two years.

Democratic Gov. Mark Parkinson called those proposals unacceptable. Republicans in both chambers took his statement as a veto threat and worried that the tax relief for businesses would be jeopardized.

During the Senate's debate, Republicans helped strip out the proposals to cut benefits on a voice vote before passing the bill. It returns to the House, which passed it last month in a slightly different form. Leaders expect a quick resolution of both chambers' differences.

"The short-term goal is to help businesses," said Sen. Jean Schodorf, R-Wichita. "The long-term goal is to fix the rest of it."

Parkinson praised the Senate's action, and Senate Minority Leader Anthony Hensley, D-Topeka, called it "a victory for unemployed workers."

Under a 2007 law, the taxes businesses pay to finance the unemployment trust fund fluctuate. If trust fund balances are high, rates drop; if the trust fund is depleted, rates rise again.

The state began 2009 with $568 million in the trust fund and collected $198 million in taxes from 69,500 employers during the year. But it paid $766 million in benefits.

Kansas began borrowing money from the federal government last month, with the total so far at about $15 million.

The state had planned to collect $407 million in taxes from businesses this year, and some legislators feared many firms would stop hiring or lay off workers.

"The outflow of benefits is really killing us here," said Senate Business and Labor Committee Chairwoman Susan Wagle, R-Wichita.

The bill, as endorsed by Wagle's committee, would have frozen the maximum benefit at $423 a week for 2010 and 2011, rather than letting it rise if wages did. Kansas' maximum weekly benefit ranked 25th in the nation last year but was higher than those for Missouri, Nebraska and Oklahoma.