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LABOR NEWS |
| By Rod Chapel, Director Missouri Department of Labor and Industrial Relations |
For release the week of: December 4, 2006
Governor Blunt Avoids Over $100 Million Tax Increase for Missouri Employers
There is great news to share with employers throughout the state regarding their federal unemployment taxes. On November 27th, the U.S. Department of Labor (USDOL) gave approval to Governor Matt Blunt’s application for avoidance of $102.8 million in federal tax reductions given to all Missouri employers. The avoidance saves Missouri employers from paying approximately $42 per employee in 2007.
Governor Blunt made the request earlier this year to help manage a debt of $288 million, which was incurred during 2003 and 2004. The state began borrowing money from the federal government in 2003 to pay for unemployment insurance benefits. Due to the length of time the state borrowed money from the federal government without repayment, Missouri was in jeopardy of losing Federal Unemployment Tax Act (FUTA) credits for its employers. A similar request by Gov. Blunt last year saved employers $50 million in 2006 taxes.
Missouri had to meet several requirements in order to receive approval from the USDOL. A main component of the requirement was the possession of sufficient funds by the state to pay unemployment benefits without federal borrowing form November 1, 2006 through January 31, 2007.
Legislative changes made during 2004 and 2006, as well as an improving economy, are two key factors which influenced the positive impact to the Unemployment Compensation Trust Fund. Missouri’s economy has consistently improved over the last year and a half and this approval will continue to allow for growth in Missouri companies. Since January 2005, Missouri has added more than 38,000 new jobs and this avoidance will preserve the progression Missouri has experienced.
The improved economy also has contributed to a decline in the number of unemployment insurance claims filed. Over the past year, Missouri has experienced a four percent decrease in the number of initial and 11 percent decrease in weekly unemployment claims filed.
Under Governor Blunt’s leadership, Missouri has repaid nearly $153 million over the last two years toward a debt incurred under a previous administration. Estimated projections show the remaining debt will be paid by the end of 2007, avoiding any further potential federal credit reductions for Missouri employers.
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