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Scenario 15 Allow FUTA credit reduction in 2011 and 2012. Keep rates for classes 1-12 the same as under current plan. Give savings to 13-20 in the form.

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Presentation on theme: "Scenario 15 Allow FUTA credit reduction in 2011 and 2012. Keep rates for classes 1-12 the same as under current plan. Give savings to 13-20 in the form."— Presentation transcript:

1 Scenario 15 Allow FUTA credit reduction in 2011 and Keep rates for classes 1-12 the same as under current plan. Give savings to in the form of reduced rates for 2011 and Surcharge on to cover extra FUTA costs for Sunsets at end of Avoid FUTA reduction beginning in 2013 with voluntary payments under the normal method. (FUTA returns to net 0.8%) 1

2 Scenario 15 Repays loans in May 2016—one year later than legislated plan. Marginally higher interest costs but absorbed over additional year. Leaves trust fund balance at $0 in 2016 rather than +$200 million. 2

3 Scenario 15 Rate Class $10.31$11.51$10.93$9.96$10.19$9.18 2$103.83$94.64$90.17$82.87$76.47$ $114.70$104.36$99.40$91.25$84.11$ $126.78$115.15$109.63$100.62$92.48$ $140.20$127.15$121.01$111.01$101.85$ $155.11$140.47$133.63$122.52$112.24$ $171.68$155.28$147.66$135.40$123.77$ $190.09$171.73$163.32$149.65$136.61$ $210.54$190.02$180.62$165.41$150.88$ $233.27$210.33$199.94$183.05$166.60$ $258.52$232.90$221.41$202.56$184.20$ $286.58$257.98$245.16$224.20$203.81$ $503.51$511.75$462.42$422.42$382.20$ $546.43$549.35$513.06$468.58$423.74$ $594.18$591.12$569.27$519.85$469.90$ $647.28$637.56$631.67$576.76$521.23$ $706.19$689.09$701.02$640.04$578.06$ $771.64$746.46$778.19$710.46$641.37$ $844.38$810.09$863.82$788.51$711.75$ $925.28$880.87$959.05$875.42$789.91$ State costs plus extra Federal Cost in 2011 & 2012 shown. 3

4 Scenario 15 Rate Class $0.00 $0.69$0.61$1.09$0.78 2$0.00 -$0.02-$1.64-$7.09-$5.68 3$0.00 -$0.01-$1.85-$7.80-$6.21 4$0.00 -$0.02-$2.02-$8.71-$7.01 5$0.00 -$0.03-$2.23-$9.65-$7.75 6$0.00 -$0.05-$2.51-$10.72-$8.66 7$0.00 -$0.08-$2.73-$11.91-$9.57 8$0.00 -$0.03-$3.02-$13.22-$ $0.00 -$0.08-$3.42-$14.67-$ $0.00 -$0.04-$3.74-$16.41-$ $0.00 $0.01-$4.19-$18.21-$ $0.00 -$0.04-$4.72-$20.15-$ $39.30$24.77-$0.12-$8.96-$38.61-$ $56.02$9.06-$0.08-$9.94-$42.90-$ $74.54-$8.41-$0.08-$11.04-$47.65-$ $95.08-$27.77-$0.14-$12.32-$52.89-$ $ $49.37-$0.20-$13.68-$58.92-$ $ $73.25-$0.14-$15.10-$65.45-$ $ $99.90-$0.19-$16.88-$72.68-$ $ $ $0.16-$18.65-$80.74-$26.10 Essentially unchangedSavings from repaying 1 yr later 4

5 Scenario 15 Main concern is that this leaves the trust fund in essentially the same position we found it in at the beginning of the last recession—no funds. Also some concern over ability of agency to predict the employment levels for 2011 in each rate class for purposes of surcharging and crediting (collecting and refunding) FUTA. 5

6 Risks of Delaying Loan Repayment Recessions occurring approximately every 7 years in modern economic history. By 2016, if benefits trend up, we’d still be repaying loan and interest from recession Contributions would spike again to prevent further borrowing potentially creating a downward recessionary spiral. 6

7 2016 Scenario 15 $417m benefits (spikes up $100m) $150m continued loan repayment $6.0m continued interest payment $90m cushion against further FUTA increases. Total: $663m Trust Fund: $0 Current $317m benefits $200m trust fund building Would shift $100m to spiked benefit charges. Total: $517m Trust Fund: +$159m 7 Current plan provides better cushion for potentially higher benefits during next recession.

8 Cost Comparison: 2016 Mild Recession Scenario 15 Current Scenario 15Current Change % % $9.18$8.40 $ % % $94.97$75.84 $ % % $104.59$83.34 $ % % $115.28$91.66 $ % % $127.16$ $ % % $140.35$ $ % % $155.01$ $ % % $171.31$ $ % % $189.41$ $ % % $209.52$ $ % % $231.86$ $ % % $256.69$ $ % % $483.43$ $ % % $536.21$ $ % % $594.86$ $ % % $660.02$ $ % % $732.42$ $ % % $812.87$ $ % % $902.26$ $ % % $1,001.57$ $ Notice, rates spike up over $300 per worker compared to non-recession projections in slide 4. 8

9 Anomaly Approximately 2,800 firms in classes with positive 7-year balance. Projected tax revenue from firms $44 million Projected tax revenue if capped at class 12 $21 million Would have to absorb difference. Believe cost savings implemented in 2010/2011 should enable fund to absorb lost revenue from fix. 9


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