Talk about lousy timing.
Businesses already struggling in this economic downturn now face what could be a crippling blow — a massive increase in their unemployment insurance tax bill.
If nothing is done, that bill will come due in April. The economy will still be in the doldrums, and many businesses may not be able to absorb the full hit — ironically, they could end up laying people off, worsening the problem.

It’s imperative that the Legislature and the Lingle administration develop solutions to ease the shock, by implementing the tax increases more gradually. It will take a new law, and should be a top priority when the Legislature resumes in January.
Ironically, the sharp tax increase comes from a sunset provision in Act 110, which was passed in 2007 to provide businesses with relief from the tax. The act lowered the amount of taxes businesses paid into the Unemployment Insurance Trust Fund, which provides benefits to the jobless. Unemployment benefits were also extended.
It seemed like a good idea at the time. Unemployment was less than 3 percent and the fund was flush with $540 million. Why not let the fund shrink so businesses would have more money to expand and hire?
But the crumbling economy has sent Hawai'i’s unemployment rate soaring, to 7.2 percent in August. The depleted fund has been heavily tapped and is projected to run out of money. Businesses now face a breathtaking increase in the tax — from an average of $90 per employee per year to at least $1,040 — to keep the fund solvent.
In hindsight, of course, it’s apparent the fund should have maintained a healthier balance, to guard against hard times and such a sudden tax burden thrust on businesses at the worst possible time. But that’s the past; it’s time to weigh the options now.
One thing is clear: The fund needs to maintain an adequate minimum reserve. It’s a vital lifeline to the thousands of people who’ve lost their jobs, with even more job losses are expected before the economy recovers.
The state will need to get federal loans to shore up the fund. And businesses will have to pay more, at least until the economy improves.
Policymakers need to find ways to ease that burden. They should consider adjusting the maximum taxable wage base to a figure lower than $37,800, the level to which it’s scheduled to return. The percentage tax rate applied to the base should also be adjusted to a more manageable level.
Also, businesses can help themselves. Those with a good track record for retaining employees can qualify for a lower tax rate by avoiding layoffs.
It’s hoped that a combination of federal funds, an improving economy that puts people back to work, and the resiliency of local businesses will help stabilize the unemployment fund.
Getting to that point will take planning, beginning now.