Maryland State Senator Cheryl Kagan this week sent a letter to Governor Larry Hogan urging equitable treatment for local governments and nonprofits categorized as “reimbursing employers” amid the COVID-19 pandemic.

Under federal and state laws, local governments, as well as nonprofit organizations (those exempt under section 501(c)(3) of the tax code) have the option to self-insure rather than paying the employer tax rate to the State Unemployment Trust Fund.

These entities are considered “reimbursing employers” as opposed to “rate-payers,” and may elect to finance their unemployment insurance (UI) costs by reimbursing the state for benefits charged against their accounts, in lieu of paying quarterly UI  taxes.

Unlike other employers, for whom the cost of unemployment liabilities will be delayed until April 2021, local governments and nonprofits are expected to pay these fees now, without delay.

From the letter:

Local governments in Maryland will be adversely affected by impending UI payments for lost employees. The pandemic is leading to increased expenditures as well as decreased revenues, causing a fiscal strain on county and municipal budgets. Assistance in the form of deferred liability or State subsidies would ease a portion of their budget crunch.

The disastrous economic and social conditions resulting from the Coronavirus have been unprecedented. Nonprofit organizations and local governments are on the front line of providing health care, mental health support, disability assistance, food distribution, senior care, and other services critical to the health and safety of Marylanders.

…

As the pandemic continues, despite the various economic relief programs, these entities may need to consider staff furloughs and possibly layoffs.  As “reimbursers,” reducing staff will be another serious threat to service levels because of the immediate additional costs of unemployment liability charges.

The letter was co-signed by Senators Brian Feldman, Katie Fry Hester, Jim Rosapepe, and Mary Washington. MACo, the Maryland Municipal League (MML), and Maryland Nonprofits also endorsed the letter.

Useful Links

Nonprofit and Local Government Unemployment Letter to Gov. Hogan– April 29, 2020