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The Honolulu Advertiser
Posted on: Thursday, May 4, 2006

Bill favors newly unemployed

By Dan Nakaso
Advertiser Staff Writer

The state House and Senate have approved a compromise bill that temporarily cuts the amount of money that businesses must pay into the state's unemployment insurance fund for two years, but also provides the newly unemployed with extras such as 30 weeks of unemployment benefits the highest of any state.

When it began its journey through the legislative session, Senate Bill 2190 was considered a temporary, business-friendly measure as Hawai'i continues to enjoy the lowest unemployment rate in the country.

Hawai'i's Unemployment Trust Fund has swelled to $457 million because of continuing low unemployment, and SB2190 originally was designed to reduce the amount of money that businesses would have to pay into the fund for three years. It was supported by Republicans, businesses, the Chamber of Commerce of Hawai'i and Gov. Linda Lingle's administration.

In its final form, SB2190 now leans toward people who file for unemployment insurance, said Rep. Anne Stevens, R-23rd (Waikiki, Ala Moana, Kaka'ako).

"I believe the scale in this case has now tipped toward the employees," Stevens said. "It is very generous."

As amended and passed by both houses, SB2190:

  • Gives businesses a "tax holiday" in 2007 and 2008 instead of the three years that were originally proposed. The "tax holiday" would require businesses to pay taxes only on the first $7,000 worth of employees' salaries, rather than on the first $34,000 of each employee's salaries. By some estimates, the two-year reduction would save businesses a total of $165 million.

  • Prohibits employees who were fired for "willful and wanton" misconduct from receiving unemployment benefits.

    For workers, SB2190:

  • Increases the time they can receive unemployment benefits from 26 weeks to 30 weeks the most generous in the nation. The average person in Hawai'i currently receives benefits for 14 weeks.

  • Raises the amount of benefits that employees receive, from 70 percent of their old wages to 80 percent.

  • Increases the size of salaries that part-time workers can earn from $50 to $150 per week and still be entitled to unemployment benefits.

    "It increases costs overall and will raise costs for employers ultimately," said Shawn Carbrey, director of client care for Altres-HR, which outsources human resources employees to more than 350 businesses with 10 or fewer employees.

    "For small business, it's creating more of a burden," Carbrey said. "As we all know, the vast majority of businesses in Hawai'i are small businesses."

    Jim Tollefson, president of the Chamber of Commerce of Hawai'i, said the chamber will encourage Lingle to veto the measure.

    The bill's close vote in the House 28 to 21 suggests that a Lingle veto would not be overridden, Tollefson said. Lingle's office did not respond to requests seeking her position on SB2190.

    "Out of 21 'no' votes, 14 were Democrats," said Rep. Kirk Caldwell, D-24th, (Manoa), chairman of the House Labor Committee, which passed the original version. "It's very unusual to have so many Democrats voting against a bill that was moved by the House and the Senate, which are both controlled by Democrats. It tells you that people are bothered. We wanted a clean bill that would just give a tax holiday for businesses. A holiday comes to an end, but some of these enhancements don't."

    Among Democrats' concerns was the proposal to raise the amount of benefits to 80 percent of an employee's previous salary, Caldwell said.

    "Some thought that 80 percent is awfully close to 100 percent and that's too high," Caldwell said.

    The state Department of Labor and Industrial Relations also will recommend a Lingle veto, partly because the new bill will require the Unemployment Trust Fund to spend 18 percent more beginning with $85 million next year, according to department spokesman James Hardway.

    "The measure provides a temporary tax relief and tax savings for the first two years," Hardway said, "but it also adds extra burdens permanently."

    Reach Dan Nakaso at dnakaso@honoluluadvertiser.com.