Changes to the state's unemployment insurance law that take effect Tuesday should help both Hawai'i employers and their workers.

The new legislation is one of about a dozen that will kick in on New Year's Day.

Another law could make more people eligible for the state rent supplement program and allow recipients to receive more. A third law will give a refundable food and excise tax credit to lower-income earners for the 2008 tax year.

Officials with the state Department of Labor and Industrial Relations said Hawai'i businesses and other employers will save an estimated $151 million over the next three years as a result of House Bill 1500, now Act 110. The legislation reduces the unemployment insurance tax paid by employers by as much as 61 percent, by lowering the contributions they make into the Unemployment Compensation Trust Fund for calendar year 2008.

Both business and labor groups supported the legislation, said James Hardway, a special assistant in the Department of Labor and Industrial Relations. There is a $562 million surplus in the unemployment insurance fund largely because of the state's low unemployment rate over the past several years. While generating an estimated $150 million annually in taxes and interest payments over the past two years, the fund has only been paying out about $95 million per year.

The legislation also provides increased benefits temporarily to the state's unemployed population by increasing the amount of maximum weekly benefits they may receive, from 70 percent to 75 percent of the state average weekly wage. The department estimates the amount of benefits paid out of the trust fund will increase by 4 percent, or $4 million annually. The provision will end at the end of 2010, according to the language in the law.

It also increases unemployment benefits for people who work part time. But they still would receive less than people who do not work at all.

That provision, a permanent one, will increase the annual payout from the trust fund by 3 percent, or $3 million, annually.

A fourth provision of the bill requires that the reserve level of the trust fund be calculated based on 12 months, rather than 18 months of highest benefit cost rate.

"This common-sense approach to tax relief will benefit Hawai'i's unemployed, our workers, businesses and community while maintaining the important safety that the (unemployment insurance) trust fund was established for," state Labor Director Darwin Ching said in a written statement.

Ching applauded state business and labor organizations, as well as predecessor Nelson Befitel, for working three years with the agency and the Legislature to craft the measure.

Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), said lawmakers felt comfortable enough with the surplus to provide the relief to employers and workers, although some lawmakers have been concerned about the possibility of an economic downturn. "I think the Legislature came up with a compromise position that everybody could live with," she said.

RENT SUPPLEMENTS

A second new law authorizes the Hawai'i Public Housing Authority to increase rent supplements paid out to qualifying families for the first time since 1988. Since then, the maximum monthly supplement has been $160, said Linda Smith, Gov. Linda Lingle's senior policy adviser.

"This would give these families a little bit more subsidy for them to be able to make their rent payments," Smith said. "This is a program that helps people stay in their existing apartments where they have a gap between their income and the ability to pay their rent."

The legislation also increases the number of families eligible for the program by expanding participation to include those making up to 95 percent of annual median income as determined by the U.S. Department of Housing and Urban Development. The authority, however, must still give preference to qualified tenants making 80 percent of the median or less.

Hanabusa said the legislation will provide some relief, but that the larger issue is still being able to provide an adequate supply of rental housing for those who need it.

"It begs the issue of whether or not we have inventory available, but whatever helps get people into housing is helpful," she said.

REFUNDABLE TAX CREDIT

A third new law increases the refundable food and excise tax credit in the 2008 tax year for those with an adjusted gross income of up to $50,000, a benefit they will receive when they do their taxes in 2009.

The credit is as much as $85 per exemption for those making less than $5,000 adjusted gross income, and as little as $25 for those with an adjustable gross income of between $40,000 and $50,000.

"The idea was we take care of the people who need it the most," Hanabusa said.

Reach Gordon Y.K. Pang at gpang@honoluluadvertiser.com.

Make a difference. Donate to The Advertiser Christmas Fund.