What started as a program to fund on-the-job training and literacy in the workplace has lost more than $500,000 annually over the last five years to a state imposed tax. Now, legislation has been introduced at the General Assembly that would eliminate the controversial tax.
The Job Development Fund, created in 1989 through a diversion of the unemployment insurance paid for by companies in the state and with a budget of more than $7 million a year, has lost more than 7 percent of its revenues to the state’s indirect cost recovery tax.
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”When it was created, the rationale of taking money held in trust for unemployment was that money spent wisely on job training would reduce unemployment,” said Kip Bergstrom, executive director of the Rhode Island Economic Policy Council. “Labor unions and businesses went along with that. The 7 percent was a budgeting balancing maneuver. It was expedient at the time, but a lot of folks, including myself think it’s wrong to pay the general state overhead by taking money out of an employment trust fund.”
As a result, for the third-straight year, the Rhode Island Economic Policy Council, the Rhode Island Technology Council, the AFL-CIO and the Human Resource Investment Council are looking to the General Assembly to put that money back with the passage of the Workforce Opportunity Act of 2000.
The bill, sponsored by Sen. William Irons, a Democrat from East Providence, is currently before the Senate Finance Committee, and would repeal the 7 percent indirect cost recovery tax that has been taken from the Workforce Development Fund over the last six years. Rep. Paul E. Moura, a Democrat from Providence has proposed similar legislation in the House Finance Committee.
“In 1994 the tax was imposed because of a state budget crisis,” said George Nee, secretary/treasure of the AFL-CIO. “That crisis is over and we feel strongly that the whole thing should be repealed.”
According to Dennis Bouchard, director of operations at HRIC, the fund is the only source of revenue for the organization, which was designed to train the state’s incumbent work force.
Bouchard said the organization’s funding comes from a restricted account in which monies are added on a monthly basis. Thirteen percent of those funds are allotted for the organization’s operating budget and Bouchard said other monies, not needed immediately are invested.
Still, Bouchard said, the additional funding is needed. Removing the 7 percent tax would allow the organization to specifically target what it calls a “crisis” in Rhode Island – adult literacy.
”We could take every last dollar and put it into adult literacy, and it still wouldn’t be enough,” he said. “At a time in our history, people could go to work with relatively low literacy skills and get by. Then the key to their success was dependability and productivity; it wasn’t important to the employer for the individual to have fairly high literacy skills. But today, those kinds of jobs are being replaced by high-skill, high performance jobs. There is a correlation between job skills and the bar is being raised to a higher level that requires whole competency skills.”
Bergstrom agreed. “I think it’s smart to target the money,” he said. “There is clearly an unmet need that this would go a ways towards filling – an issue that many consider very urgent.”
But getting the monies back hasn’t been easy, and no one is completely certain that it will happen during this legislative season. The initial cost recovery act taxes a number of organizations, some of which have gotten relief, while other like HRIC are still working on it.
”Once money gets from point A to point B, it is always difficult to get it back,” Nee said. “There was a legitimate, real budgetary crisis when this gimmick was put through. But that crisis is over, and we feel very strongly that the whole thing should be repealed.”
This is the third version of the legislation, and according to Rick Kovar, director of the Rhode Island Technology Council, everything but the removal of the tax has been dropped.
”The bill originally contained a number of things related to workforce development,” he said. “But at this point we have conceded that we feel this is a very important issue. We sacrificed parts of the bill to focus on HRIC. They are a state of the art human resources organization and they have done a very good job.”
If the legislation doesn’t pass this year, Kovar said, additions might be made to it. In addition, he said, with the support of HRIC, RITECH is planning to introduce its own legislative package.
”Part of the legislative process is to educate the General Assembly,” he said. “Bringing the HRIC bill to the front is part of that process. To get the legislator to understand, and educate them on the importance of where this money should go is a top priority right now.”
