This is a tale of two governors and the importance they place on every state’s largest job-generator, small businesses.
One governor, Idaho’s Brad Little, believes having that generator well-oiled is the best way to aid his state’s recovery from the COVID-19-induced economic crisis afflicting every state in the nation. Neighboring state Gov. Jay Inslee of Washington doesn’t share Little’s priority.
When Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, allocating $2 trillion in economic relief for the nation, most of the attention, understandably, was on getting employees and families the money. The CARES Act also set aside $150 billion in a Coronavirus Relief Fund and gave state, local, and tribal governments some latitude on how to spend it.
Every employer must pay an unemployment insurance tax to the state on every employee he or she has. The money is collected into a trust fund and disbursed when economies take natural dips and people file for unemployment.
Prior to the coronavirus, most states’ trust funds were adequately funded and prepared to handle normal recessionary periods. Not anymore. The massive unemployment created by COVID-19 is draining most every states’ UI trust funds in deep, frequent gulps.
This has left policymakers everywhere with the unenviable choice of either boosting unemployment insurance taxes on businesses immensely, borrowing from the federal government, or a combination of both.
Idaho has taken a different approach from most of its western and coastal neighbors, one in stark contrast to, as an example, Washington state.
“To help shore up the [UI Trust] fund, and possibly lower the increase businesses will take, the state should tap into some of its … CARES Act money to ‘backfill’ the fund,” testified Julia Gorton of the Washington Hospitality Association before the Labor and Workforce Standards Committee of the Washington House of Representatives, according to an article in The Spokesman-Review of Spokane.
Every business has been hit by the pandemic, but Gorton said the hospitality industry has been especially hard hit, citing 6,000 closed restaurants and 185,000 lost jobs in her state alone.
Governor Inslee’s response? According to the article, after saying he “hadn’t thought seriously about” using CARES money to shore up his state’s trust fund, he then added, “We have so many other claims on the CARES funding … So I doubt that would be an appropriate use or a necessary use of those funds at the moment.”
On October 1, the Washington Employment Security Department [ESD] issued sobering news, “Per federal law, the state must request an advance from the federal government if it projects the UI trust fund cannot pay three months of benefits, which is projected to occur in the first quarter of 2021.”
Idaho took a different tack. Gov. Brad Little ordered some CARES money thrown into the state’s UI trust fund, “Without today’s transfer, businesses would have to pay nearly double in unemployment insurance taxes next year to keep the Idaho Unemployment Insurance Trust Fund solvent moving forward,” a news release from his office explained. “The move is intended to encourage more hiring by preventing tax increases for businesses of more than $300 per employee that could have occurred if Governor Little had not taken decisive action now.”
Meanwhile, back in Washington state, a post on the NFIB Washington webpage put it starkly, “Contrary to the department’s [ESD] Wednesday press release claiming it would be ‘saving’ employers $200 million, the September forecast confirms what NFIB and others in the state’s business community have been expecting, at least an $800 million unemployment insurance (UI) tax hike for 2021, with additional tax increases to follow.”
Long after our national crisis has passed, it will forever be an interesting academic study to see which governor’s action better spurred his state’s economic recovery. Idaho small businesses are putting their money on Governor Little.
Suzanne Budge is the Idaho state director for NFIB.