Nevada hikes unemployment insurance rate

In a hearing lasting just five minutes, the head of Nevada's Employment Security Division made it official Tuesday, raising the tax businesses must pay for unemployment insurance by a quarter percent.

The new rate of 2.25 percent will generate an estimated $499.6 million in 2013 - about $57 million more than the existing 2 percent rate brought in.

The division expects to pay out some $430 million in benefits.

If those projections hold, the near $70 million difference would be used to reduce the $676 million the state owes the federal government for loans taken to pay unemployment claims during the recession.

"I wish I could say I'm up here in support, but I think I'm up here in understanding," said Trey Abney of the Reno-Sparks Chamber of Commerce.

He said the state has no choice.

Abney was joined by Carole Vilardo of the Nevada Taxpayer's Association and officials of the Las Vegas chamber in conceding the increase is unavoidable.

"I think this is a necessary move," said Vilardo. "Hopefully next year we won't be sitting here in this situation."

Division Administrator Renee Olson said the change will affect 36,262 employers who are rated for their unemployment claims experience. Those businesses with the highest turnover can pay up to 5.4 percent of payroll toward unemployment benefits. Those with good ratings pay much lower rates.

What the overall increase does is move more businesses into a higher bracket. The rating system is designed to reward businesses with low turnover and layoffs with lower rates.

More than 21,000 other employers haven't been in business the four years needed to rate them. They all pay a flat 2.94 percent until they have enough history to be rated in one of 18 different tax tiers.

Nevada had more than $700 million in its trust fund when the recession started but burned through that amount and ran up a debt that a year ago exceeded $700 million in loans from the federal government.

Division Analyst Dave Schmidt said the state must not only pay that off, but pay interest until it does. He estimated the interest at $20 to $24 million a year. It was $23.9 million this calendar year.

To minimize interest payments, he said the state will use its tax receipts of more than $120 million a quarter to pay down the federal debt then borrow back just what it needs to make payments each month.

The increase will raise what the average business pays on behalf of each worker about $67 a year to $605. But, on top of that, there will be a $21 increase in the federal unemployment tax rate to $105 a year. Schmidt said the federal rate will rise by that amount each year that the state is unable to pay down its debt. The added federal tax goes directly toward the state's debt.