For the first time in five years, Hawaii businesses will see their unemployment tax bill go down thanks to progress made in replenishing the trust fund used to pay jobless benefits.

The average annual payment per employee will drop to an estimated $591 next year from $887 in 2013, a decline of nearly 35 percent, officials from the state Department of Labor and Industrial Relations announced Thursday.

The average tax payment, which was as low as $100 in 2009, soared in subsequent years as the state boosted tax collections to pay benefits for the tens of thousands of workers who tapped the fund after losing their jobs during and after the 2008-2009 recession. The taxes flowing into the fund, combined with a reduction in benefits paid out, will allow the department to cut employer contributions next year for the first time since 2009.

"That’s fantastic news," said Jim Sharp, chief executive officer of Aloha State Sales, a stone countertop installation company with about 25 employees.

Sharp said his total unemployment tax bill, which jumped from $7,000 in 2007 to $36,000, is one of the reasons he has been reluctant to increase his staff, even though business is picking up.

"The unemployment tax is a real big deal. Not only that, but workers’ comp rates," he said.

"In 2007 business was great, then the recession hit. Business got more competitive and it was harder to get sales. Then on top of it, our taxes went up and compounded things. It was like someone put the needle in and twisted it."

The state began a series of aggressive tax increases in 2010 after the trust fund ran out of money. The fund’s insolvency meant the state had to borrow $183 million from the federal government to pay unemployment benefits.

The increased employer contributions boosted the trust fund balance to $104 million by the end of 2012. The balance is projected to rise to $285 million by the end of this year and to $379 million by the end of 2014.

Businesses were taxed on the first $39,600 of each employee’s wages in 2013. That cap will rise to $40,400 in 2014.

The size of the fund balance is one of the factors the labor department uses to set rates in an eight-tier employer contribution schedule, with "A" designating the lowest contribution rate and "H" marking the highest rate.

The projected increase in the fund balance by the end of this year allowed the department to drop two notches on the rate schedule from "G" to "E." Continued growth of the trust fund will allow the department to continue reducing the rate schedule in the future, Gov. Neil Abercrombie said at a news conference to announce the reduction in next year’s unemployment tax bill.

"We do feel very strongly that we’re on the right path, and I think the business folks agree as well," Abercrombie said. "If we can keep on the same path, we believe that the schedule, by nature of the progress, will continue to decline."

Officials from both the Chamber of Commerce of Hawaii and the Hawaii Employers Council welcomed the announcement.

"For our members every dollar counts, and this is a significant amount of savings," said Sherry Menor-McNamara, the chamber’s president and CEO.

Clayton Kamida, president of the employers council, said the tax cut is large enough to have a real effect on businesses’ bottom lines. "It’s a great thing for Hawaii employers. It’s going to help employers potentially hire more and invest more. Overall, it’s big win," he said.

The council, with about 800 member businesses, provides professional services to management in human resources and labor relations, employment law, research and supervisory and management training.

The amount of money flowing out of the unemployment insurance fund has slowed significantly as the number of people collecting benefits has dropped in recent years because of improvements in the labor market. The unemployment rate fell to 4.4 percent in November after peaking at 7.1 percent in the summer of 2009. The number of residents collecting unemployment benefits for the first time has fallen to about 1,600 a week from 2,500 a week during the same span.