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GOP leaders question whether struggling businesses could still face unemployment tax increase

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Republican leaders have raised concerns that the state unemployment office isn’t following new unemployment payment laws created last month, which could mean increased taxes for employers already struggling due to the COVID-19 outbreak.

The latest issue adds to mounting criticism from state Republicans over how Democratic Gov. Tony Evers and the Department of Workforce Development have responded to unprecedented unemployment claims across Wisconsin amid the pandemic. At the same time, Democrats argue GOP legislation over the last several years has only exacerbated the problem.

In a Thursday letter to Evers, Assembly Speaker Robin Vos, R-Rochester, and Senate Majority Leader Scott Fitzgerald, R-Juneau, said DWD has not provided its plan to abide by a new law created in April requiring that unemployment claims specifically related to the COVID-19 outbreak not be charged to an employer’s unemployment insurance account for the remainder of the year.

The state Unemployment Insurance Trust Fund is filled through payroll taxes on employers and used to provide temporary benefits for qualifying workers who lose their job. The amount an employer pays in taxes is directly tied to how much that business draws upon the fund.

Vos and Fitzgerald said in the letter the provision was meant to mitigate large tax increases on employers most impacted by COVID-19. The new law also aims to prevent employers from having to pay higher taxes as a result of pandemic-related layoffs or furloughs.

“The outrageous decision to break the law is made worse by the fact that in so doing, the department is making it even harder for the employers impacted by the health crisis to get their businesses open and bring their employees back to work,” Vos and Fitzgerald said in the letter.

The Republican leaders asked that DWD immediately correct the issue. The new law calls for COVID-19-related unemployment claims to be charged to the balancing account, which is supplemented by interest on the trust fund and a solvency tax paid by employers.

Evers’ office and DWD did not respond to requests for comment on Thursday.

More pain?

Susan Quam, executive vice president of the Wisconsin Restaurant Association, said increased payroll taxes would only further harm an already struggling food and beverage industry.

“Our operators are very concerned about that,” Quam said. “If they are going to see a tax increase ... it’s almost like, how much more salt can we pour in the wound?”

Businesses across the state were forced to close down or limit services in March after Evers’ “safer at home” order. The order was struck down earlier this month by the state Supreme Court, but some local orders, including in Dane County, have continued to limit business activity.

Jobless wave

The state’s unemployment fund balance was sitting at nearly $2 billion earlier this year, up from less than $600 million in 2007, before the last recession hit.

However, skyrocketing unemployment claims have begun to drain the fund, which could be exhausted by October if the current rate of about 300,000 claims a week continues, according to DWD.

The fund, which sat at more than $1.8 billion earlier this month, would last until Jan. 3 if payable claims drop to 170,000 per week and, if weekly payable claims were reduced to 85,000, the fund would be depleted by Sept. 19, 2021.

The state can borrow from the federal government if the state trust fund is exhausted, as was done during the Great Recession, but Quam said the state coffers still must be refilled.

“At some point this fund has to be replenished, so how is it going to be replenished?” Quam said. “We don’t want to see tax increases on the very employers who are hurting the most.”

Quam said the issue still could be rectified before June 30 tax calculations are made, but said she was not aware of any formal proposal as of Thursday.

Waiting for weeks

During a Wednesday Senate committee meeting, DWD Secretary Caleb Frostman came under fire from Republican lawmakers who said it is unacceptable that some Wisconsinites have had to wait weeks to receive their unemployment benefit payments.

Frostman said on Wednesday it could be as late as October before the state catches up with a backlog of unpaid unemployment claims. DWD officials say staffing needs and an antiquated unemployment program have provided major bottlenecks when it comes to processing the crush of claims arising from the COVID-19 shutdowns.

As of Monday, just over 728,000 of the approximately 2.4 million claims received between March 15 and May 23 remained unpaid. About 11% of those claims have been denied and unemployment claims can be filed weekly, so the total number of claims doesn’t directly translate to how many people have filed for unemployment.

DWD last week reported Wisconsin lost 385,900 private-sector jobs from March to April, and the unemployment rate shot up from 3.1% to 14.1%. On Wednesday, DWD announced the unemployment rate in the Madison metropolitan area in April was 11.1%. Rates in cities around the state ranged from 9.9% in Fitchburg to 21.1% in Superior. In Iron and Menominee counties, the rate reached 26.2%.

However, Democratic lawmakers have said the Republican-led Legislature has failed to replace the decades-old unemployment insurance system that has been blamed in part for the delayed processing of claims. The GOP majority also has passed tighter unemployment eligibility rules over the years that adds to the adjudication process and creates delays, DWD officials have said.

Additionally, the state’s unemployment fund missed out on roughly $25 million in federal reimbursements last month due to the Legislature’s delayed passage of a waiver of the one-week waiting period.

“Our operators are very concerned ... If they are going to see a tax increase ... it’s almost like, how much more salt can we pour in the wound?” Susan Quam, executive vice president, Wisconsin Restaurant Association

"Our operators are very concerned ... If they are going to see a tax increase ... it’s almost like, how much more salt can we pour in the wound?”

Susan Quam, executive vice president, Wisconsin Restaurant Association


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