The unemployment insurance (UI) is a joint federal-state program that provides workers with temporary and partial benefits during involuntary unemployment. The state collects unemployment taxes from liable employers and distributes benefit payments to eligible claimants. Hawaii’s UI fund balance increased to $532 million at end of 2006 as compared to a little over $200 million 10 years ago, thanks to low unemployment levels in recent years. However, until this year increased fund balances have not resulted in lowered employer’s tax contributions to the UI fund. Hawaii UI tax rates continue to be among the highest in the nation, and the high tax burden is often attributed to making Hawaii one of the least business-friendly states in the U.S.
Desiring to lower the UI tax burden on Hawaii’s businesses, as well as to reduce the UI fund balance and allow businesses to spend the money rather than have it build up, a number of measures relating to the state UI law have been considered in each legislative session since 2005. Using an economic model based on recent trends and future outlook of the state economy, this report examines the impacts of these measures as well as other potential options on employers’ tax payments and fund balances through year 2012.
