Yesterday the Senate passed ESSB 5873 by a vote of 48–1. As passed by the Senate, the bill would reduce the unemployment insurance (UI) cap on costs to be recovered by the social tax for 2022 and 2023. (For more background, see here.) In 2021, the social cost factor was limited to 0.5%. Under current law, the limit will rise to 0.75% for 2022 and 0.8% for 2023. Under ESSB 5873, the limit would be 0.5% for 2022 and 0.7% for 2023.

The bill would also ensure that in 2023, no employer with 10 or fewer employees would be in a UI rate class above seven, for purposes of the graduated social cost factor.

As I noted when the bill was introduced, these policies would help lessen the impact of UI tax increases on employers.

The fiscal note for SSB 5873 estimates that it would reduce revenues to the unemployment compensation administration account by $214.0 million in 2021–23 and $29.4 million in 2023–25. Under current law, average UI tax rates are expected to be 1.45% in CY 2022 and 1.56% in CY 2023. If ESSB 5873 is adopted, those average rates are estimated to drop to 1.30% for CY 2022 and 1.51% for CY 2023. Further, the bill would reduce the average tax rate for employers with 10 or fewer employees that are in rate class seven or above from 1.28% to 1.21%.

Note that the bill as passed does not include any provisions related to paid family and medical leave (PFML). When it was introduced, the bill would have used the general fund–state to fund a reduction in PFML premiums. However, as the financial troubles with the PFML program emerged, that provision was stripped from SB 5873.