Friday, July 1, 2005
Contact: Jessica Robinson, (573)751-0290
Blunt Administration Works to Save Tax Credit for Employers
JEFFERSON CITY—Gov. Matt Blunt is working with Department of Labor Director Tom Deuschle to manage federal debt of almost $288 million, which was incurred under former Gov. Bob Holden’s Administration.
The debt dates back to 2003 when the Missouri’s Division of Employment Security began borrowing money from the federal government to pay for unemployment insurance benefits. Now, due to the length of time the Holden Administration allowed the debt to remain unpaid, Missouri is in jeopardy of losing Federal Unemployment Tax Act (FUTA) credits for employers. Losing the credits could cost employers across the state more than $52 million or $21 per employee in January 2006. Total losses could add up to $312 million by 2008.
"While recent economic trends are encouraging, and the state has experienced solid job growth, there are still significant long-term challenges regarding the solvency of the trust fund," Blunt said. "I’ve instructed Director Deuschle to explore ways to manage the debt that does not jeopardize employers or harm taxpayers and that protects Missouri’s workforce."
In an effort to protect FUTA credits, Gov. Blunt sent an Application for Avoidance of Tax Credit Reduction to the Secretary of Labor, Elaine L. Chao. The request outlines the state’s repayment plan beginning with an almost $91,681,944.55 payment made on June 29th.
Three criteria must be met in order for the federal government to accept Missouri’s application. First, Missouri is required to make a payment in the amount of the advances it received from October 1, 2004 through November 9, 2005 and must pay the amount of FUTA tax credit reductions that would become payable if the application for avoidance was not approved. Second, Missouri is required to have sufficient funds in its Unemployment Insurance Trust Fund to pay all benefits when due for the three month period beginning November 1, 2005. Third, Missouri must show a net increase in the solvency of the Unemployment Insurance Trust Fund that equals or exceeds the amount of FUTA tax credit reduction.
The US Department of Labor has until early November to decide whether or not to accept Missouri’s application.
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