1

Scenario 15• Allow FUTA credit reduction in 2011 and 2012.• Keep rates for classes 1-12 the same as under

current plan.• Give savings to 13-20 in the form of reduced

rates for 2011 and 2012.• Surcharge on 13-20 to cover extra FUTA costs

for 1-12. Sunsets at end of 2012.• Avoid FUTA reduction beginning in 2013 with

voluntary payments under the normal method. (FUTA returns to net 0.8%)

2

Scenario 15

• Repays loans in May 2016—one year later than legislated plan.

• Marginally higher interest costs but absorbed over additional year.

• Leaves trust fund balance at $0 in 2016 rather than +$200 million.

3

Scenario 15Rate Class 2011 2012 2013 2014 2015 2016

1 $10.31 $11.51 $10.93 $9.96 $10.19 $9.182 $103.83 $94.64 $90.17 $82.87 $76.47 $70.173 $114.70 $104.36 $99.40 $91.25 $84.11 $77.134 $126.78 $115.15 $109.63 $100.62 $92.48 $84.665 $140.20 $127.15 $121.01 $111.01 $101.85 $93.176 $155.11 $140.47 $133.63 $122.52 $112.24 $102.547 $171.68 $155.28 $147.66 $135.40 $123.77 $113.058 $190.09 $171.73 $163.32 $149.65 $136.61 $124.709 $210.54 $190.02 $180.62 $165.41 $150.88 $137.62

10 $233.27 $210.33 $199.94 $183.05 $166.60 $151.9611 $258.52 $232.90 $221.41 $202.56 $184.20 $167.8612 $286.58 $257.98 $245.16 $224.20 $203.81 $185.6113 $503.51 $511.75 $462.42 $422.42 $382.20 $347.4814 $546.43 $549.35 $513.06 $468.58 $423.74 $385.1115 $594.18 $591.12 $569.27 $519.85 $469.90 $427.0016 $647.28 $637.56 $631.67 $576.76 $521.23 $473.4217 $706.19 $689.09 $701.02 $640.04 $578.06 $525.1118 $771.64 $746.46 $778.19 $710.46 $641.37 $582.6219 $844.38 $810.09 $863.82 $788.51 $711.75 $646.3820 $925.28 $880.87 $959.05 $875.42 $789.91 $756.00

State costs plus extra Federal Cost in 2011 & 2012 shown.

4

Scenario 15Rate Class 2011 2012 2013 2014 2015 2016

1 $0.00 $0.00 $0.69 $0.61 $1.09 $0.782 $0.00 $0.00 -$0.02 -$1.64 -$7.09 -$5.683 $0.00 $0.00 -$0.01 -$1.85 -$7.80 -$6.214 $0.00 $0.00 -$0.02 -$2.02 -$8.71 -$7.015 $0.00 $0.00 -$0.03 -$2.23 -$9.65 -$7.756 $0.00 $0.00 -$0.05 -$2.51 -$10.72 -$8.667 $0.00 $0.00 -$0.08 -$2.73 -$11.91 -$9.578 $0.00 $0.00 -$0.03 -$3.02 -$13.22 -$10.619 $0.00 $0.00 -$0.08 -$3.42 -$14.67 -$11.79

10 $0.00 $0.00 -$0.04 -$3.74 -$16.41 -$13.1211 $0.00 $0.00 $0.01 -$4.19 -$18.21 -$14.6212 $0.00 $0.00 -$0.04 -$4.72 -$20.15 -$16.2113 -$39.30 $24.77 -$0.12 -$8.96 -$38.61 -$30.9814 -$56.02 $9.06 -$0.08 -$9.94 -$42.90 -$34.4715 -$74.54 -$8.41 -$0.08 -$11.04 -$47.65 -$38.2616 -$95.08 -$27.77 -$0.14 -$12.32 -$52.89 -$42.6017 -$117.99 -$49.37 -$0.20 -$13.68 -$58.92 -$47.3218 -$143.45 -$73.25 -$0.14 -$15.10 -$65.45 -$52.4819 -$171.71 -$99.90 -$0.19 -$16.88 -$72.68 -$58.3520 -$203.05 -$129.43 -$0.16 -$18.65 -$80.74 -$26.10

Essentially unchanged Savings from repaying 1 yr later

5

Scenario 15

• Main concern is that this leaves the trust fund in essentially the same position we found it in at the beginning of the last recession—no funds.

• Also some concern over ability of agency to predict the employment levels for 2011 in each rate class for purposes of surcharging and crediting (collecting and refunding) FUTA.

6

Risks of Delaying Loan Repayment

• Recessions occurring approximately every 7 years in modern economic history.

• By 2016, if benefits trend up, we’d still be repaying loan and interest from recession 2008-2011.

• Contributions would spike again to prevent further borrowing potentially creating a downward recessionary spiral.

7

2016Scenario 15

• $417m benefits (spikes up $100m)

• $150m continued loan repayment

• $6.0m continued interest payment

• $90m cushion against further FUTA increases.

• Total: $663m• Trust Fund: $0

Current • $317m benefits• $200m trust fund building• Would shift $100m to

spiked benefit charges.

• Total: $517m• Trust Fund: +$159m

Current plan provides better cushion for potentially higher benefits during next recession.

8

Cost Comparison: 2016 Mild RecessionScenario 15 Current Scenario 15 Current Change

0.0656% 0.0600% $9.18 $8.40 $0.780.6784% 0.5417% $94.97 $75.84 $19.130.7471% 0.5953% $104.59 $83.34 $21.260.8234% 0.6547% $115.28 $91.66 $23.620.9083% 0.7208% $127.16 $100.92 $26.241.0025% 0.7942% $140.35 $111.19 $29.161.1072% 0.8758% $155.01 $122.62 $32.401.2236% 0.9665% $171.31 $135.31 $36.001.3529% 1.0672% $189.41 $149.41 $40.001.4966% 1.1791% $209.52 $165.08 $44.441.6562% 1.3035% $231.86 $182.48 $49.381.8335% 1.4416% $256.69 $201.83 $54.873.4531% 2.7033% $483.43 $378.46 $104.973.8301% 2.9970% $536.21 $419.58 $116.634.2490% 3.3233% $594.86 $465.26 $129.594.7144% 3.6859% $660.02 $516.03 $143.995.2316% 4.0888% $732.42 $572.43 $159.995.8062% 4.5364% $812.87 $635.10 $177.776.4447% 5.0338% $902.26 $704.73 $197.527.1541% 5.5865% $1,001.57 $782.10 $219.47

Notice, rates spike up over $300 per worker compared to non-recession projections in slide 4.

9

Anomaly• Approximately 2,800 firms in classes 13-20

with positive 7-year balance.

• Projected tax revenue from firms $44 million

• Projected tax revenue if capped at class 12 $21 million

• Would have to absorb difference. Believe cost savings implemented in 2010/2011 should enable fund to absorb lost revenue from fix.