SB 0682 - Fiscal Note

Fiscal Note - SB 0682 - Allows reimbursable employers to pay benefits not chargeable from contribution account

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3252-01

BILL NO. SB 682

SUBJECT: Unemployment Compensation

TYPE: Original

DATE: January 22, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Unemployment Compensation Trust Fund **	(Unknown)	(Unknown)	(Unknown)
Total Estimated Net Effect on All State Funds	(Unknown)	(Unknown)	(Unknown)

* * This is not a State Fund. Monies are administered by the DOL.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Administrative Funds	($0 or $33,300,000)	($0 or $40,000,000)	($0 or $40,000,000)
Total Estimated Net Effect on All Federal Funds	($0 or $33,300,000)*	($0 or $40,000,000)*	($0 or $40,000,000)*

* Subject to compliance issues with the USDOL.

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

The Department of Labor and Industrial Relations (DOL) assume this proposal could cause substantial economic loss to contributing employers and a conformity issue with the Federal Unemployment Tax Act (FUTA). If Missouri's Employment Security Law is out of conformity with Federal law, there could be a loss of certification for FUTA and a loss in federal unemployment tax credits for all contributing employers. The estimated amount of lost FUTA credits to Missouri employers could be more than $700 million annually. Oversight assumes passage of this proposal could result in the loss of $0 or $40 million in federal funds for the administration of the DOL, depending on the determination of noncompliance with federal law.

According to the position taken by the United States Department of Labor, as a condition of employers in the State (Missouri) receiving credit against the Federal unemployment tax, an employer in reimbursement status must reimburse 100 percent of all benefit costs attributable to service with that employer. Section 3309 (a) (1), FUTA, does not contain any exception to this requirement, it does not permit any factors concerning the entity's current or prior status to be taken into account in adjusting the reimbursement due.

Therefore, under this proposal, "any employer, governmental entity or nonprofit organization" must reimburse the full amounts of benefits attributable to services performed in its employ during the period for which the reimbursement option has been elected. If this proposal is enacted and given effect in any circumstances, questions of conformity and compliance would be presented under Section 3304 (a) (6) (B), FUTA.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
UNEMPLOYMENT COMPENSATION
TRUST FUND
Cost - Department of Labor and Industrial
Relations
Loss of Employment Security
Contributions	(Unknown)	(Unknown)	(Unknown)
FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
(Continued)	(10 Mo.)
FEDERAL FUNDS
Cost - Department of Labor and Industrial
Relations
Loss of Administrative funds	($0 or	($0 or	($0 or
	$33,300,000)	$40,000,000)	$40,000,000)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	$0	$0	$0

FISCAL IMPACT - Small Business

Small businesses would expect to be fiscally impacted to the extent that Missouri's Employment Security Law falls out of conformity with Federal law, thus resulting in a loss of FUTA tax credits for contributing employers.

DESCRIPTION

This proposal provides for a reimbursable employer, who was formerly a contributing employer with an account balance, to use the former account balance to pay any unemployment benefits not chargeable.

This legislation is not federally mandated, would not duplicate any other program and would not require additional improvements or rental space.

SOURCES OF INFORMATION

Department of Labor and Industrial Relations

United States Department of Labor

Jeanne Jarrett, CPA

Director

January 22, 1998