An assessment on every employee, which the state Department of Employment estimates to be about $25 a head and which is due on July 31, is catching most of the employers who must pay it by surprise, as the state’s leading small-business association lobbies for more time.
“The Legislature and state officials have known about this fee for months,” said Randi Thompson, Nevada state director for the National Federation of Independent Business. “But the businesses that have to pay it only get a one-month notice.”
On May 28 the Legislature passed Assembly Bill 482 to put an assessment on every employee in Nevada. Money from it will go to pay off the $17 million in interest Nevada owes the federal government for the more than $800 million it borrowed to pay unemployment benefits for the last few years. The payment is due to the federal government by September 30, but employers have to pay it by July 31.
“If the Legislature had passed this bill in a timely manner, businesses could have had few months to at least budget for the fee that could cost them thousands of dollars,” said Thompson. “Businesses are not the state’s ATM machines! They cannot dispense cash at a moment’s notice.”
According to Thompson, legislators and the state Department of Employment knew the fee would be due July 31, but the bill was not heard until May 20 and didn’t pass until May 28. Gov. Brian Sandoval signed into law June 2. It wasn’t’ until June 22 that the state starting notifying employers about the fee, saying to watch for a letter before the end of June telling them what they’ll owe. Businesses that don’t pay the fee by July 31 are subject to a 1-percent penalty for every month they are late.
If Nevada fails to make the interest payments, employers are at risk of losing their full offset credit against the Federal Unemployment Tax — so paying off the interest will help employers in the long run. But the last-minute assessment is going to impact businesses immediately.
“I just don’t understand how the Legislature can throw this burden onto a business and say you have one month to pay a huge bill or get a penalty,” said Jim Annis, owner of the Applied Companies in Reno. “So I’m assessed the fee, but I have to go back to our 2012 clients and try to collect it, if they are still around. I’m not sure how I can do that, and I sure can’t do it in one month.”
NFIB will be sending a letter to Frank Woodbeck, the director of the Department of Employment, Training and Rehabilitation for Nevada, as well as Sen. Debbie Smith, chairwoman of the Interim Finance Committee, asking that the penalty be waived until September 1, because businesses are only getting one month to pay the fee before the fine kicks in.
The other issue affecting employees is the remaining $560 million that the state still owes the federal government. If Nevada continues to have an outstanding federal unemployment loan, it is at risk of triggering a seldom-used, additional federal increase, the Benefit Cost Ratio add-on.
Once a state remains in a borrowing mode for five years, the federal government effectively takes control of the rate setting and rate structure until the entire loan is paid off, which in Nevada’s case could be many years. So the Legislature passed Senate Bill 515 to allow the state to pursue private financing of the debt with a bond. The bill will require annual assessments over the next few years to pay off the bond.
“I understand the need to use a bond to pay off this debt, as that will help employers in the long run,” said Thompson. “But the state better give businesses a lot more notice about the next assessment so they can plan and budget for it. Government needs to understand what it takes to run a business, and budgeting is a critical component.”