Oregon Senator Doug Whitsett Newsletter June 18, 2009

The Governor’s Proposed Oregon Emergency Jobs Program

            Oregon’s unemployment rate rose to 12.4 percent in May, the second highest in the country. In reaction to this, Governor Kulongoski has proposed an Emergency Jobs Program to assist unemployed Oregonians. Provisions for this program have been introduced in House Bill 3500 and contain three components: emergency job creation, retraining for unemployed workers, and benefit extension.  

            The first component of HB 3500 would be the creation of the Oregon Emergency Jobs Program within the Department of Community Colleges and Workforce Development (CCWD) to create temporary employment for unemployed Oregonians. This program is to be funded by diverting a percentage of payroll taxes from the Unemployment Insurance (UI) Trust Fund into the Oregon Emergency Jobs, Training and Support Account.  The money in the UI Trust Fund comes from Oregon employers who give a percentage of the wages they pay employees to provide a reserve of funds for unemployment benefits.  When the money in the UI Trust Fund declines, rates paid by employers increase to replenish the reserves. $50.8 million would be diverted out of the Fund to cover the costs of only this one part of the program. The Governor’s office has estimated that this amount will create 7,100 entry-level jobs for an average of 13 weeks. State agencies are to submit job listings for activities such as wildlife habitat restoration, maintenance of park trails, and warehousing and distribution for state-run programs and services. These jobs are to be distributed statewide proportionate to each county’s share of unemployed, legal workers.

            The second component of the bill is to provide training for high demand occupations. This part of the program is designed to train 3,500 workers per year for the next two years. These training benefits are to go to “distressed workers” who earned 110 percent of the minimum wage before being laid off and choose to enroll in training programs for high demand occupations. The amount to be diverted from the UI Trust Fund for this part of the program is $9.2 million. Unemployment benefits are to be provided during the training. This part of the program will sunset 24 months after passage.

            The last component of HB 3500 is an extension of UI benefits. Oregonians can currently receive up to 79 weeks of unemployment benefits through state and federal fund extensions. It is estimated that 11,000 Oregonians now receiving unemployment benefits are likely to exhaust them this fall. Under this bill, an additional extension program of 13 weeks would be available for individuals after all other federal government extensions are exhausted. The amount to be diverted from the UI Trust Fund for this part of the program is $30 million.

            In total, $90 million will be diverted from the UI Trust Fund to fund the programs in HB 3500.

            The policy used to implement this program raises many concerns, the first and most prominent being the funding source. Employers pay payroll taxes to the Unemployment Insurance fund to create a safety net against layoffs that protects employees, not create temporary jobs. This brings the viability of implementing this bill in accordance with federal law in to question. Our own Legislative Counsel has issued an opinion stating that this plan could force Oregon employers to fall into noncompliance with federal unemployment insurance law. Even if you can reconcile the use of UI funds outside of designated purpose, there are still concerns raised on the nature of the jobs created. Employers would provide the funding for the program with the taxes they pay, and yet under this bill they would not have the opportunity to help create and provide new jobs themselves that could directly benefit their operations. If employers were given the opportunity to use the taxes paid in this way, it is more likely that permanent and gainful positions would be created by this program instead of temporary, low paying positions.

            The way this bill is currently written, the result of this program would be higher rates paid by Oregon companies for the purpose of creating a new government program and increase spending.  Oregonians have already seen that this method of borrowing public money and government spending to create jobs does not work, as exemplified by SB 338, the “Go Oregon” state stimulus plan that the Legislature passed back in February. Through this bill, the government borrowed $177 million to spend primarily on deferred maintenance of state owned buildings and community colleges. This measure promised to create over 3,000 jobs and to date only a little over 100 new jobs have been confirmed as a result.

            Whatever amount that is withdrawn from the UI Trust Fund must be replaced with payroll taxes paid by employers. This means that HB 3500 adds yet another $90 million tax burden to Oregon’s business community. This burden will be in addition to the $823 billion in tax increases that the Legislature passed last week. You should recall that $733 million in taxes came from the passage of HB 2649 and HB 3405, the Revenue Package, and $90 million came from passage of HB 2116, levying a health care premium tax.  The majority of these tax increases will be assumed by Oregon’s small and family owned businesses. These tax increases, as all increased business costs, are passed on to the consumer of business products. Oregon households  

            HB 3500 is still in the House and being considered in committee. Our office would like to hear your input on the issue.

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