By Gene Meyer
January 27, 2010

(KansasReporter) TOPEKA, Kan. - Sharply higher unemployment taxes are forcing some Kansas enterprises to lay off or not hire workers, angry employers told Kansas legislators Wednesday.

Among them: Goodwill Industries of Kansas Inc., which cannot afford to hire seven workers for its Wichita area thrift stores because the unemployment insurance taxes are increasing five-fold to $155,000 annually and its income is off $45,000 because of state-mandated Medicaid funding budget cuts, said Emily Compton, the organization's president.

"When Wichita and the state of Kansas are suffering high unemployment, losing these jobs just doesn't make sense," Compton told a Kansas Senate panel.

Compton is among more than a half dozen employers and business groups who, in separate hearings before the Senate Business and Labor and the House Commerce and Labor committees, spoke of how some unexpectedly sharp increases in unemployment insurance premimums that are collected from payroll taxes are seriously hurting their enterprises.

Kansas' unemployment insurance trust fund, rated nineteenth healthiest in the nation less than a year ago, has plunged to near insolvency by recession layoffs and the Kansas Department of Labor expects next month to begin borrowing as much as $750 million from the federal government to continue paying unemployment benefits. In addition, the Department is raising the taxes paid by nearly 70,000 employers in the state to a total $407 million for calendar 2010, from $198 million last year.

"We are in an unprecedented situation," said state Sen. Susan Wagle, a Wichita Republican and business owner who chairs the Business and Labor committee.

Federal unemployment taxes, which are the mechanism through which Kansas and what is expected eventually to be 37 other states' financially strapped unemployment funds are repaid, also are scheduled to rise, from 0.8 percent on the first $7,000 of each workers income to 1.4 percent in 2014, Wagle said. Putting the Kansas fund back on track to repay the expected federal borrowings as fast as possible requires employers now to pay the highest unemployment taxes they've paid since the early 1980s, Wagle said.

Groups including the Kansas Restaurant & Hospitality Association, professional employment agencies and individual business owners also urged both committees to reexamine a web of 51 different rating categories on which precise unemployment premiums are calculated and seek a way to assign what they say would be a fairer share of the increased costs to employers who lay off the most workers.

"These rates now won't help the problem," said Susan Smith, an executive of GLMV Architecture Inc. in Wichita. "They will perpetuate unemployment, the very problem they are designed to help."

GLMV's unemployment premiums are jumping to more than $46,000 this year from just under $6,800 last year, which prompted the architecuture firm to not hire an entry level professional they planned on, Smith said.

"It's the first job we won't create in 2010," she said.