HOUSE OF REPRESENTATIVES	H.B. NO.	2181
TWENTY-FIFTH LEGISLATURE, 2010
STATE OF HAWAII

A BILL FOR AN ACT

relating to the employment security law.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that the unprecedented economic downturn that Hawaii faced last year continues into 2010.  As unbelievable as it may seem, the actions of the executive and legislative branches in this past year have only served to lessen what has been a terrible economic impact on the people of Hawaii.  2010 brings only a continued pessimistic outlook, with revenues decreasing for businesses and government alike, and unemployment continuing at near-record highs for the State.

     While a sustained increase in employment would go a long way towards turning the economic fortunes of all in a positive direction, the prolonged economic downturn has created a situation that would create a large disincentive for employers to hire employees.  Under current law, a Hawaii employer pays an average of $90 in unemployment taxes per employee.  That average tax is set to increase to approximately $1,040 per employee in 2010. This is due to the continuing economic downturn and near-record rates of unemployment in the State. The State's Unemployment Insurance fund has been paying out more benefits while taking in less in unemployment insurance taxes, creating a situation where Hawaii will likely follow twenty-four other states as of early November 2009 in borrowing funds from the federal government in order to keep the state unemployment fund solvent.  This would be true even if nothing were done and taxes were allowed to increase by over 1,000 per cent per employee. 

     The legislature further finds that if this continues unabated, employers would be faced with the situation where hiring more employees, or even keeping current employees, would be more expensive and could threaten the very solvency of the business.  The rational decision on the part of employers to lay off workers or not hire new workers would be clearly detrimental to any economic recovery or growth.  Therefore, it is in the best interest of the State to mitigate increases to the unemployment tax rate, even if it means borrowing money from the federal government in the short term to keep the state unemployment insurance fund solvent.

     The purpose of this Act is to mitigate the potential increases in unemployment taxes by altering the taxable wage base formula to reduce the increase in unemployment taxes for calendar years 2010 and 2011.

     SECTION 2.  Section 383-61, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  For the calendar year 1991 only, the term "wages" does not include remuneration in excess of $7,000 paid with respect to employment to an individual by an employer.  For calendar years 2008, and 2009[, and 2010] only, the term "wages" as used in this part does not include remuneration in excess of $13,000 paid with respect to employment to an individual by an employer so long as the balance of the unemployment trust fund does not fall below the adequate reserve fund as specified by section 383-63.  The average annual wage as used in this part shall be computed as provided in subsection (b), provided that such calculation shall be multiplied by .39 for the calendar year 2010 and by .50 for calendar year 2011."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval.

INTRODUCED BY:

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Report Title:

Unemployment insurance

Description:

Mitigates increases in unemployment insurance taxes over the next two years.

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