Governor Sebelius prompts committee to examine
Kansas unemployment tax rates

Continued economic improvement and declining unemployment have prompted Governor Kathleen Sebelius to call for a state committee to examine Kansas unemployment tax rates. The average unemployment rate for 2005 was 5.1 percent, down from 5.6 percent in 2004. As of November 2006, Kansas recorded more than $615 million in the fund that pays benefits to unemployed workers, the Unemployment Insurance Trust Fund. The balance in the Trust Fund dipped to $218 million in March of 2004.

“The burgeoning health of the Trust Fund is another signal of the steady economic progress we have made over the last three years,” said Governor Sebelius.  “It also presents an opportunity to take a closer look at providing some relief to Kansas businesses who subsidize the fund through unemployment insurance taxes. I would encourage the Council to look at modifying the current UI tax formula and adjusting it downward with the potential of saving Kansas employers approximately $80 million a year in unemployment taxes.”

For most employers, unemployment insurance taxes are experience-based, meaning that, in general, firms that discharge a large number of employees will pay higher tax rates than employers who have fewer layoffs or dismissals. Kansas’ unemployment tax system is designed to reduce tax collections as the Trust Fund balance improves. The Employment Security Advisory Council, chaired by Secretary of Labor Jim Garner, monitors the Unemployment Insurance Trust Fund to ensure that adequate funds exist to pay benefits to all eligible claimants. The Council is also charged with assisting in the development of policies related to the Employment Security Act.

With demand for unemployment payments to workers declining, Governor Sebelius has asked that Garner convene the Council to examine Trust Fund resources and develop recommendations to reduce unemployment tax rates. Payments to unemployment workers fell from $294.4 million in 2004 to $255.7 million in 2005.

“The resilience of Kansas businesses is the basis for our economic recovery.  We should now take advantage of every opportunity to help them remain competitive,” said Sebelius.

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