Ivey using $300M of CARES Act money to fund unemployment system to keep taxes from rising
Governor Kay Ivey on Thursday announced that $300 million of Alabama’s CARES Act money will now go towards funding Alabama’s Unemployment Insurance Trust Fund, a move she says will stop the taxes on employers that normally fund the unemployment system from skyrocketing.
“[W]e acted on this so as to not create a burden for our employers that could result in business closures and layoffs of hard-working Alabamians,” the governor stated in a release on Thursday.
According to the governor’s office, “without the transfer of the money, unemployment insurance tax rates for employers would increase by 508%, representing a rise in the ‘shared costs’ tax rate from 0.65% to 3.95%.”
“By adding the $300 million, this increase will be reduced to 200%, representing a new tax rate of 1.95%,” the office added.
A more thorough explanation of “shared costs” and how they affect employers in Alabama is available here.
“I agree with Governor Ivey that this is a necessary allocation of CARES Act funds in order to mitigate the impact of increased taxes on Alabama’s businesses,” said Alabama Department of Labor Secretary Fitzgerald Washington in a statement.
The CARES Act is the massive stimulus bill passed by the federal government in March to help America stave off the effects of the coronavirus pandemic. Alabama was granted $1.9 billion to spend as that state saw fit as part of the legislation.
The Alabama Legislature approved Ivey’s initial plan for the money in the middle of May.
The $300 million to help fund the unemployment system was not in that initial plan, which required a special notification to legislative leaders, and the cuts from the other sections made to create the new pool of money have not yet been publicized.
ALDailyNews reported on Wednesday that the money “will come from several allocations to other agencies and organizations.”
“The reallocation of these critical funds is vital in keeping unemployment taxes low, allowing Alabama businesses every opportunity to remain open as they return to business as usual,” commented Business Council of Alabama President Katie Boyd Britt.
Britt added, “I commend Governor Ivey for looking out for our state’s small businesses and for taking this important step to ensure our employers are in place to overcome this pandemic and be successful down the road.”