Archive for Sunday, February 14, 2010

Businesses grapple with rising unemployment payments

February 14, 2010


State unemployment payments are helping thousands of Kansans make ends meet during this recession. But now business leaders are saying those same payments may make it tougher for Kansans to find a job in the future.

Business owners from across the state are warning that they likely will begin laying people off or leaving open positions unfilled in an effort to pay state unemployment taxes that are increasing, in some cases, by 400 percent or more.

“This is exactly the opposite of what you would ever hope our unemployment system would create,” said Rachelle Colombo, director of legislative affairs for the Kansas Chamber of Commerce.

Here’s what’s going on: The state fund that makes payments to unemployed Kansans is being depleted quickly. In fact, the state is expected to begin borrowing money from the federal government by the end of this month to keep the fund solvent.

As a result, the Kansas Department of Labor has raised the tax rates Kansas businesses must pay to fund the state’s unemployment program. Several Lawrence businesses said they were expecting an increase, but the size of the increase has caught many businesses off-guard.

At Checkers Foods, 2300 La., Jim Lewis said the unemployment taxes for his local grocery store will increase by nearly $19,000, or about 320 percent from a year ago. Because of how the state’s system is structured, Checkers must make the larger payment to the state by April 30.

Lewis already knows what he is going to do. He had two employees recently quit. He said he’s decided not to fill those positions, at least for a while, to make up for the increased payments.

“That’s what people will start doing,” Lewis said. “When someone quits you just don’t rehire. You just suck it up and move on. But that just makes the overall problem worse because that is just fewer jobs for the economy.”

The situation at Checkers isn’t unique. Kathy Toelkes, communications director for the Department of Labor, said the average unemployment tax rate for Kansas businesses has more than doubled in 2010, rising from 2.02 percent in 2009 to 4.37 percent this year.

“Obviously, it is an average, so some increases will be smaller, some will be larger,” Toelkes said.

In some cases, it is much larger. At Lawrence-based Allen Press, the company’s rate has increased by about 450 percent, said Rob Chestnut, the company’s chief financial officer. Chestnut, who also serves as Lawrence’s mayor, recently testified before state legislators asking for changes in the system.

He told legislators the increases were particularly frustrating for companies like his, which have paid far more in unemployment taxes than his company’s employees have received in unemployment benefits.

But he said his main point to lawmakers was the need for a system that creates more predictability about what rates will be in the future.

“We would rather have a steadier rate,” Chestnut said. “That may mean the fund is overfunded at times, but going from 1.2 percent to 5.4 percent can be a real shock, especially when the economy is struggling.”

That hasn’t always been the feeling at the Statehouse, though.

In 2007, amid concern the fund was becoming too large, state legislators passed a law that changed how the Department of Labor must set rates for the unemployment fund.

In essence, the law says that when the fund reaches a point that it can pay out 1.2 years worth of higher-than-average claims, then many businesses automatically will receive cuts to their unemployment tax rates. Those cuts, over the last three years, have ranged from 40 percent to 100 percent for individual businesses, Toelkes said.

In total, $286 million in unemployment tax receipts were forgone because of the rate reductions of the last three years, Toelkes said. Even without the rate reductions, the state still would be facing a shortfall from the increased number of Kansans who are seeking unemployment benefits, she said. She said the state has been paying out about $14 million per week in benefits.

But Toelkes said the 2007 law helped add to the shock factor of the most recent increases because instead of going from a normal rate to an elevated rate, businesses are now going from a reduced rate to an elevated rate.

Benefits at stake

Colombo, with the state chamber, said the 2007 law was a good change, and shouldn’t be blamed for the current shortfall in the fund.

“You have to factor in how many jobs wouldn’t have been created if that $286 million in capital wasn’t available to businesses but rather was sitting in the fund,” she said.

Instead, Colombo said, the shortfall is the result of large increases in the number of unemployed people, and especially the number of higher paid employees who have been forced to file for unemployment.

Toelkes said payouts have been rising dramatically. In June 2009, the system hit a new monthly high by paying out $78 million in benefits. The previous monthly high was $39 million in 2003. The state’s unemployment rate stood at 6.3 percent in December, up from 4.9 percent the previous year.

Colombo said her group is urging legislators to take steps to bring unemployment benefits back in line with reasonable contribution levels from businesses.

One proposal before legislators is to freeze the maximum weekly payment that people on unemployment would receive for two to three years. That would mean as inflation increases, the amount of payments to people on the system would not.

The Kansas Chamber is holding out hope that the Legislature will make some changes soon that will reduce the amount of payments that businesses must make by April 30.

Back at Checkers, Lewis is preparing to pay the full amount, but the increases have left him sour on the system.

“This is upside down,” Lewis said. “This is not what you should be doing to businesses at a time like this.”


kansasmutt 8 years, 4 months ago

As another business owner i say ( Welcome to Kansas ) We are the most business unfriendly state in the nation. This kind of crap is why businesses look elsewhere to grow and not Kansas. Between paying for bogus unneeded schools and paying other extreme tax’s you are so strapped you can’t grow or build a business in Kansas any more. I think a great new law would be this.( All online sales will be taxed 10% as of July 1 2010 .) Mandatory and large fines to those who fail to collect. All buying online should also be taxed at 10% as well. Kansas business looses out on billions due to cheap people who buy online and don’t pay sales tax. I would bet my business looses out on 10s of thousands each year to out of state online purchases, just because people think its a deal , not to pay sales tax. Here is a breakdown of why rent or ownership is so high for a business in Kansas. 1 - School district tax’s are 65% of the payment ( average for a $1,000.00 a month rental charge ) 65% is $650.00 right off the top to pay for schools in the rent. 2 - Insurance is 20% of that $1,000.00 = $200.00 a month . 3 - The other 15% is upkeep , local taxes and maybe a small profit for the owner. If the owner owes on the property being rented , you also have a payment to take out of that. ------------------------------------------------------ People who don’t own a business do not realize what the extreme school taxes do to a business in cost of operation. Commercial property is taxed at a much higher rate than a home. So if your thinking of opening a business in Kansas, look close before you jump in the fire. Missouri is much more business friendly.

Bob_Keeshan 8 years, 4 months ago

Lewis already knows what he is going to do. He had two employees recently quit. He said he’s decided not to fill those positions, at least for a while, to make up for the increased payments.

This, of course, is exactly what the Lawrence School District is currently doing with teaching positions.

When unemployment was low, the Kansas Chamber and their business allies insisted on cutting contributions to the unemployment fund, claiming they didn't need to put money in because unemployment was low.

Now that unemployment is high, the Kansas Chamber and their business allies are insisting on cutting benefits, claiming they don't need to put money into the fund because unemployment is too high.

If that isn't flawed logic, I don't know what is. When times are flush, leave benefits the same and cut contributions? When times are bad, cut benefits and leave contributions the same?

P Allen Macfarlane 8 years, 4 months ago

I've a better idea: how about we all grow up and agree to fulfill our social responsibilities for the good of the order and call it a day. What a bunch of whiners! The help from the government you revile today, you may be needing tomorrow when your fortunes go south.

staff04 8 years, 4 months ago

I agree with Chestnut that there is a problem when businesses pay in more than their employees receive--it should probably be based upon the number of people these employers willfully put out of work and on the unemployment insurance rosters.

Unfortunately, the Kansas CoC has a credibility problem, so I'm glad I read past the opening quote from Columbo. They seldom can be convinced to admit that their activities have social consequences that reach beyond their pockets and resent being held accountable for it.

Flap Doodle 8 years, 4 months ago

How's that hopenchange working out for you?

jumpin_catfish 8 years, 4 months ago

You gotta do what you gotta do! It's just business. I thought the Obamanator was going to saving us all?!

finance 8 years, 4 months ago

kansasmutt (Anonymous) says… "...Welcome to Kansas....Between paying for bogus unneeded schools and paying other extreme tax's [sic] you are so strapped..."

Yeah, right. Low comparative tax burden, under-funded schools, backwoods politics, flat ugly scenery; that's the real choice when considering whether to come to (or leave) Kansas. Difficult choice; or not.

lucy1 8 years, 4 months ago

kansasmutt where do rent? The only thing I have seen is a triple net lease. Where, my rent goes to the land lord and i pay for taxes, insurance, and common area maintenance. Let me know where you are and if any space is open.

Rob When your rates are low, set some money aside for the “rainy day”. Hopefully, it will not rain this hard for some time. But don’t ask the state to do it; they have enough trouble as it is keeping track of our funds. Be it unemployment or water resources. If Allen press is too much, what are you doing downtown?

John Hamm 8 years, 4 months ago

"All buying online should also be taxed at 10% as well. Kansas business looses out on billions due to cheap people who buy online and don’t pay sales tax." Kansasmutt Oh sure tax someone else because you can't compete! What about me - ALL of my sales are out of state (I've made maybe two sales in Kansas in three years) - that's money coming INTO kansas. Now under your "solution" I'd lose sales and generate less income to the state......... You wanna real answer to why many Lawrence residents shop the Internet? I'll give you a good one - because local businesses don't stock! "Well we don't stock those but I can get them for you next week." If I have to wait to get what I want or need I might as well save money while waiting.

Katara 8 years, 4 months ago

kansasmutt (Anonymous) says… All buying online should also be taxed at 10% as well. Kansas business looses out on billions due to cheap people who buy online and don’t pay sales tax. I would bet my business looses out on 10s of thousands each year to out of state online purchases, just because people think its a deal , not to pay sales tax. ~~~~~~~~~~~~~ This is no longer true. Many online retailers are now charging tax on sales. I have paid tax on my last few purchases online. People shop online because the product prices can be cheaper and with free shipping, it can be more convenient. Time is also a factor. One can spend less time shopping online and the online store is always open.

And there is absolutely nothing wrong with shopping for the best price on a product. Perhaps it is your attitude about bargain hunters that is costing you business.

ASBESTOS 8 years, 4 months ago

None of the unemployment. workman's comp. or any of the other "value added" taxes/coverages make any difference anymore. The national trend is to "sub contract" labor, and make it a separate contract, which makes ALL of the laws of business fall and fail.

Any politician gets a rise when there is money they can move around, and the UE trust is no different. Could you imagine if Kansas matched other moderately UE levels of other states??? That would be an increase of a couple of percent, and at least 35% more money needed NOW. Kansas has always been a bankrupt state because everything has been mortgaged long term for the short term. The author has it totally wrong though, California is the WORST for business, and a second would be New York.

As for taxing what is on line that is nuts. Who gets the money the source state or the purchasing state or locale? That is the dumbest thing I have every heard. Besides the internet shopping has no impact on bricks n' mortar that would need the sewers, water supplies, property protection like Fire and Police, and has no need to support infrastructure, because it uses little and what it dos use is already taxed.

kansasmutt 8 years, 4 months ago

lucy1 ) The roads your stuff uses to deliver your goods need repairs, and you pay no sales taxes. The schools need money, and you pay no sales tax. The fire department saves your business from burning, yet you pay no sales taxes. Great for Kansas. XX Most online buyers go for price and give up quality and service. The bottom line is people saving a buck at the states expense. My business is good, but most all businesses in Kansas would do better if online sales were taxed. I have people who buy online think they can come to me to warranty an online purchased item, i think not. I collect tax on every sale and write a check to Kansas every month. Online sales hurt brick and mortar businesses and if they don’t pay sales tax, they are hurting schools, cities and counties. This funnels down to you and me in higher sales taxes and higher state and local taxation in a whole. It cost every Kansan. I bet all the online businesses based in Kansas are being very honest and collecting the 2% tax they are by law to collect and send in. I bet everyone who buys from another state online is happy not to be paying the 8% to keep our schools going , our roads paved and keep the police and fire depts. running. Keep this in mind next time you call 911 and get put on hold because your local PD had to lay off dispatchers to conserve money. I call those who buy online to save $2.00 cheap, yep i do. I call those who sell as a business online, and do not collect sales tax cheaters and thief’s . They are robbing from each & every one of us. You dont have to agree, but this is the way i feel, and most brick and mortar businesses feel.

LadyJ 8 years, 4 months ago

I remember talking to somebody once that worked for the Salvation Army store when it was here. They said they could not collect unemployment because the Salvation Army was not required to pay it. There are probably many businesses that are not required to pay unemployment. Maybe it is time to take a second look at that.

Katara 8 years, 4 months ago

ASBESTOS (Anonymous) says… Besides the internet shopping has no impact on bricks n' mortar that would need the sewers, water supplies, property protection like Fire and Police, and has no need to support infrastructure, because it uses little and what it dos use is already taxed. ~~~~~~~~~~~~~~ This is also incorrect. If you are selling a product online rather than a service, you still will need a brick n' mortar place to keep it - and that will need all the infrastructure.

gccs14r 8 years, 4 months ago

ksmutt should learn how to spell. Maybe his business would be more successful.

finance 8 years, 4 months ago

Internet purchases should be taxed. So should inability to spell. I'd additionally suggest inarticulateness and stupidity should be taxed, but let's not get greedy here. All are embarrassing, but oh so Kansas! You right-wing haranguers deserve each other. Welcome to Little House on the Prairie (oh, that should be Little House in Backwoods Hell).

Liberty275 8 years, 4 months ago

Internet purchases are taxed. Turbo Tax asks me every year if I have bought something online and not paid tax on it. If I say yes and give it the purchase price, it will add the appropriate amount to my tax bill.

Also, you can sell goods on the net without brick and mortar. It's called "drop shipping" and it is a sizable part of all business on the internet.

Bruce Liddel 8 years, 4 months ago

Healthcare_Moocher, I think you are wrong. Those collecting unemployment benefits have already paid the premiums (in the form of reduced pay), and must also demonstrate weekly a sustained effort most reasonably calculated to result in employment (i.e. must look for work). Any recipient who refuses an offer of employment risks losing benefits entirely.

Still, many here have already commented appropriately on government's inability to solve all of our problems. Sounds like a perfect argument for us to fire both the Republican AND the Democrat incumbents. Let's vote for the Libertarian party candidates at the next election. Only a much smaller government will help us now, as we figure out how to save ourselves in spite of government.

kansasmutt 8 years, 4 months ago

Sounds like those who sell online and drop-ship don’t need sewers,police,fire and medical ever. They don’t need to go to the store to buy food, on the roads. They don’t have any kids in school and think they need pay nothing for the schools. Congrats, you have beat the system and screwed the rest of us. You should be proud of yourselves. Your day will come. Just think , you will be hit in an IRS audit for that 2% you fail to pay and when your earnings are looked at you will be hit again with that little thing called interest. Congrats again. My spelling is not relevant on here. You got the point and that is what counts.

imastinker 8 years, 4 months ago

Unemployment is huge - and expensive.

We had a bad year and laid off nearly 3/4 of our workforce last year. This year was a better year, but we discovered it was so expensive to keep employees that we sent the work out to other shops. Granted, it's still good for their business - but our unemployment check was nearly as high as our entire production staff's payroll. How are we supposed to come out of this if we have bills like this?

Punishing the businesses that have been affected most by the recession in the form of higher unemployment taxes is a good was to increase the unemployment even more.

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