RICHMOND, Va. (AP) - State officials announced a temporary policy change Tuesday that will provide about $200 million in payroll tax relief next year to Virginia businesses that laid off workers amid the pandemic.
Under an executive order from Gov. Ralph Northam, the Virginia Employment Commission won’t be counting layoffs that took place in April, May or June against businesses when calculating unemployment insurance tax rates for 2021, Northam’s office announced.
“We’ve been working to figure out, how do we crunch those numbers to hold businesses harmless, specifically the ones that have struggled, our restaurants, lodging, hospitality,” Megan Healy, Northam’s chief workforce development advisor, said in an interview.
Without the change to what’s called the experience tax, about 10,000 more businesses than last year would have had to pay the full amount of about $600 per year per employee, according to Healy.
The impact of the tax relief to the state’s unemployment insurance trust fund, which pays the benefits, will be partly offset by about $210 million in federal stimulus money that lawmakers and Northam directed to the fund earlier this year during a special session.
But Healy said the fund is running at a $110 million deficit as of this week and it is “still up in the air” exactly how that will be repaid, especially with a new incoming presidential administration. She said the state is hoping for some kind of federal relief to put toward the deficit.
The fund started the year with a balance near $1.5 billion. But it was depleted amid the unprecedented surge in applications for benefits and began borrowing from the federal government.
Nicole Riley, Virginia state director for the National Federation of Independent Business, said Northam’s decision would relieve some of the financial pressure on employers and ultimately make it easier for them to put people back to work.
“This is a big relief for Virginia’s small businesses,” Riley said in a statement. “Our members understand the importance of following the rules and protocols necessary for stopping the spread of the deadly coronavirus, but these restrictions come at a tremendous cost. Workers were let go, and some businesses that planned to close temporarily have closed for good.”
Approximately 1.4 million people have filed for unemployment benefits this year, more than 10 times the number of claims that were filed in 2019, the governor’s office said. The crush of applications and demands of implementing new assistance programs has strained Virginia’s unemployment system.
The state recently announced it would begin paying out benefits to applicants who were stuck in a monthslong backlog after having their application flagged for some type of issue that necessitated a staff review. But the employment commission has warned that the adjudication process will continue and if it is found that a recipient was not due the money, they will have to pay it back.
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