This Fiscal Note is not an official copy and should not be quoted or cited.
This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0922 - Modifies certain provisions relating to employment security
COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. NO. 3884-03
BILL NO. HCS for SCS for SB 922
SUBJECT: Employers, Employees: Employment Security
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS Net Effect on All State Funds
FUND AFFECTED
FY 1999
FY 2000
FY 2001 Unemployment
Compensation Trust Fund
($1,433,000)
$0 to (Unknown)
$0 to (Unknown) Total Estimated
($1,433,000)
$0 to (Unknown)
$0 to (Unknown)
|
ESTIMATED NET EFFECT ON FEDERAL FUNDS | |||
| FUND AFFECTED | FY 1999 | FY 2000 | FY 2001 |
| Federal Funds | $929,578 | $1,000,000 | $1,000,000 |
| Total Estimated
Net Effect on All Federal Funds |
$929,578 | $1,000,000 | $1,000,000 |
|
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 5 pages.
FISCAL ANALYSIS
ASSUMPTION
With regard to proposed changes in Section 288.034 RSMo., officials from the Department of Labor and Industrial Relations (DOL) assume that failure to pass this proposal could result in 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 failure to pass this proposal would 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, Missouri statutes currently do not conform with federal law. Under the Federal Unemployment Act (FUTA), services performed by an individual under the age of 18 in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution are exempt. Missouri statutes incorrectly exclude the services of all individuals under these circumstances and not just those under the age of 18 and incorrectly includes delivery or distribution to any point.
If this proposal is not enacted questions of conformity and compliance would be presented under Section 3306 (c) (15) (a), FUTA.
With regard to proposed changes in Sections 288.090 to 288.290 RSMo., officials from the Department of Labor and Industrial Relations (DOL) assume this proposal could have a fiscal impact on the Unemployment Compensation Trust Fund in FY 1999, but level out after that year. DOL assumes the Unemployment Compensation Trust Fund would decrease by approximately $1,433,000 the first year after the proposal is enacted. The assigned penalty rate causes an employer's annual contribution rate to the Unemployment Compensation Trust Fund to inflate for the following year, then drops substantially to their true rate. The current penalty rate is 5.4%. This proposal would drop the penalty rate to the greater of $100 or 10%, but not to exceed $200 or 20% on aggregate contributions, thus resulting in a smaller increase in the annual contribution rate of delinquent filers. After FY 1999, the penalty rates should balance out making the effect to the Unemployment Compensation Trust Fund negligible.
The proposed legislative changes would require extensive computer programming changes and hardware and software upgrades to the existing system costing approximately $34,461 in FY 1999. Additional costs of $750 for paper and printing educational fliers would also be incurred. Both of these costs would be paid from federal funds.
ASSUMPTION (continued)
The proposed legislation also allows for compliance with federal law to limit the use of funds in the federal unemployment trust for the administration of the unemployment compensation program for a three year period. Changing Missouri law to limit the use of the Unemployment Trust Fund for the administration of the unemployment compensation program for 1999, 2000 and 2001 could increase Federal Funds by $1,000,000 or more each year. The amount of this increase would be calculated and established by the federal government and the use of these funds would follow Missouri's regular appropriation process.
| FISCAL IMPACT - State Government | FY 1999 | FY 2000 | FY 2001 |
| (10 Mo.) | |||
| UNEMPLOYMENT COMPENSATION | |||
| TRUST FUND | |||
| Cost - Department of Labor and | |||
| Industrial Relations (DOL) | |||
| Reduction in contribution rate | ($1,433,000) | $0 to | $0 to |
| due to reduced penalty rates | (Unknown) | (Unknown) | |
| FEDERAL FUNDS | |||
| Income - Department of Labor and | |||
| Industrial Relations (DOL) | |||
| Increase in Federal Unemployment | |||
| Trust Fund | $964,789 | $1,000,000 | $1,000,000 |
| Cost - Department of Labor and | |||
| Industrial Relations (DOL) | |||
| Programming changes, Software | |||
| Hardware, Postage, etc. | ($35,211) | $0 | $0 |
| NET IMPACT TO FEDERAL FUNDS | $929,578 | $1,000,000 | $1,000,000 |
| FISCAL IMPACT - Local Government | FY 1999 | FY 2000 | FY 2001 |
| (10 Mo.) | |||
| $0 | $0 | $0 | |
FISCAL IMPACT - Small Business
With regard to changes proposed in 288.034 RSMo., this proposal would prevent fiscal impact to small businesses. No direct fiscal impact to small businesses would be expected as a result of changes proposed in sections 288.090 to 288.290 RSMo.
DESCRIPTION
With regard to Section 288.034 RSMo., under current employment security law, services performed by persons in the delivery or distribution of newspapers or shopping news, including delivery or distribution to any point for subsequent delivery or distribution, are excluded from the definition of "employment." This proposal narrows this exclusion to delivery or distribution services performed by persons under 18 years of age, and removes from the exclusion delivery or distribution to any point for subsequent delivery or distribution.
With regard to changes proposed to Sections 288.090 to 288.290 RSMo., this proposal would modify how penalties are assessed for failure to file quarterly wage reports on time with the Division of Employment Security. Currently, the Division of Employment Security may terminate an organization's election to make payments in lieu of contributions (reimbursable status) for late reports or payments, and the employer is assigned a contribution rate. Under this act, the Division shall assess a penalty only for late reports, and the penalty equal to the greater of $100 or 10% of the contributions for each month the failure continues, but not to exceed $200 or 20% in the aggregate. This act changes the number of days under which the employer may be charged interest from 15 to 30 days after notification.
This proposal also requires an employer to report W-2 copy A information on magnetic tape or diskette to the Division if the employer is required to report on magnetic tape to the Social
Security Administration.
This proposal also allows for compliance to federal law to limit the use of funds in the federal unemployment trust for the administration of the unemployment compensation program for a three year period.
This legislation is federally mandated by 3306.(c)(15)(A) FUTA, 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
April 15, 1998