A 14-page motion that was unveiled and voted on in the Joint Finance Committee today would make sweeping changes to the state’s unemployment insurance (UI) laws. Rep. Cory Mason called the motion, which was approved on a party-line vote of 12-4, an abuse of the budget process and an “end run” around the UI Advisory Council.

The measures contained in the motion were reviewed and rejected by the advisory council, which recommended an alternative set of proposals that will be considered by the legislature as separate legislation. In the past, legislators almost always took the advice of the Council, which is comprised equally of employee and employer representatives; however, the current majority party no longer supports the consensus approach of developing compromise legislation, which has been the Council’s methodology for many decades. I think much of the motion goes into the category of policy changes that don’t belong in the budget. It’s not that those changes don’t have any fiscal effect, but for some of them the fiscal impact appears to be negligible and including them in the budget precludes giving them careful legislative review and provides little or no opportunity for public debate.

Some parts of the motion do have very significant fiscal impacts. For example, it contains a provision authorizing the use of up to $30 million GPR to pay interest on loans from the federal government to cover unemployment payments. The goal of that expenditure is to help get the state’s UI Trust Fund debt to the federal government below a threshold that triggers penalties for all employers. I have mixed feelings about that proposal, but using the current surplus for a one-time purpose like that, which should yield savings for employers over the longer term, is more fiscally responsible than many of the other proposed uses of the surplus.

To my surprise, the motion doesn’t just include a long list of changes that will tighten employee benefits; it also increases UI taxes for some employers. A tax increase of $49 million during the biennium will fall on businesses that draw more heavily on the UI fund because they lay off workers more frequently (primarily businesses in the manufacturing and construction sectors). For a number of different reasons, I think making those businesses contribute a larger share of UI financing is probably a good idea, but I agree with Rep. Mason’s statement that “it at least deserves a public hearing.”

The proposal contains a broad range of changes relating to eligibility for UI benefits, including
changes relating to work search, voluntary termination of work, and standards for determining misconduct and “substantial fault.” Those changes are expected to save the UI Trust Fund $14.1 million in 2013-14 and $23.1 million in 2014-15.

The straight party line vote on the motion is one more indication that the long-honored practice of deferring to the advisory council has been tossed aside. That will make UI taxes and policy far more volatile in the future, as it shifts with the political winds.

You can read more about the debate on the motion in the WisPolitics Budget Blog.

Jon Peacock