Post by blueneck on Dec 29, 2007 7:41:10 GMT -6
From a recent Ohio newspaper article. Dual forces of increased supply of un and underemployed manufacturing and construction workers, along with less businesses contirubuting to the funds are causing problems for state unemployement benefits. This article focusses on Ohio but a similar story could be told in most other surrounding industrial states
THREAT OF GOING BROKE
New blow: State aid to jobless drying up
Employers may have to pay more to unemployment fund
Thursday, December 20, 2007 3:26 AM
By Catherine Candisky
THE COLUMBUS DISPATCH
Click for larger imageOhio's ailing economy has put the state fund that provides benefits to unemployed workers in jeopardy of going broke.
As a result, employers are likely to be asked to pay more in unemployment taxes, and jobless workers could receive reduced benefits.
"The recession has been so long and so deep that the fund has not been able to replenish itself," said Andrew E. Doehrel, president of the Ohio Chamber of Commerce and co-chairman of the Ohio Unemployment Compensation Advisory Council.
"If the fund goes broke, everybody loses."
Since 1999, Ohio's Unemployment Compensation Trust Fund has paid out more in benefits than it collected in unemployment taxes in all years but one.
The fund's balance, as a result, has plunged from $2.3 billion in 2000 to $555.7 million at the end of November. It is projected to drop to $155 million by April, according to the Ohio Department of Job and Family Services.
The agency projects that if a recession similar to one experienced from 2001 to 2004 were to begin in early 2008, the fund would be broke by the end of the year.
The advisory counsel and others familiar with the fund have long voiced concern about its solvency.
Continued job losses, rising energy prices and problems in the housing market recently prompted the Strickland administration to hire a Washington-based research organization to assess the fund and make recommendations for keeping it in the black.
The Urban Institute is expected to issue a report to the state in June.
"The study is to take a close look at the way things are structured and come up with suggestions on what kind of fixes there are," said Dennis Evans, spokesman for the Department of Job and Family Services.
William A. Burga, co-chairman of the advisory counsel and retired president of the Ohio AFL-CIO, said Ohio's economy is mostly to blame.
"The fund is in big trouble," he said. "With the loss of jobs and the business-community losses, the trust fund will have a problem. We just don't know when."
There were 232,755 employers in Ohio in 2000; today, there are 226,808.
"The layoffs were more permanent than temporary," Evans said.
The trust fund is supported by employers who are taxed on the first $9,000 that each employee is paid every year. While the taxable wage base has stayed constant, benefits have increased annually based on the average weekly pay.
"That's one issue that needs to be addressed," Evans said. "More money is being paid out but the tax rate has stayed the same."
Zach Schiller, research director for Cleveland-based Policy Matters Ohio, said Ohio employers for the last decade have paid less than the national average in employment taxes.
In 17 states, the taxable wage base is indexed so it grows along with wages, he noted.
Ohio's unemployment compensation system was last updated after the fund went bankrupt in the 1980s, requiring a federal bailout.
Should Ohio have to borrow again, Doehrel said, the cost to both the state and employers could be high. If the money is not paid back in the same year it is borrowed, Ohio would be required to pay interest from its general revenue fund. Also, employers would lose their federal credit on the unemployment taxes they pay.
"Depending on how bad (it gets), we could be holding up checks or not able to pay checks," Doehrel said.
In April 2006, the advisory counsel issued recommendations to the General Assembly to ease the burden on the system, but lawmakers failed to act on the plan.
Among the proposals: expanding the taxable wage base to the first $9,500 earned; freezing benefits at 2006 levels; and expanding eligibility guidelines to allow more low-wage workers to qualify for benefits.
"This could have been addressed and wasn't," Schiller said.
"It's almost inevitable the system will have to borrow because we waited too long."
ccandisky@dispatch.com
www.dispatch.com/live/content/local_news/stories/2007/12/20/comfund.ART_ART_12-20-07_A1_818R1QT.html?sid=101
THREAT OF GOING BROKE
New blow: State aid to jobless drying up
Employers may have to pay more to unemployment fund
Thursday, December 20, 2007 3:26 AM
By Catherine Candisky
THE COLUMBUS DISPATCH
Click for larger imageOhio's ailing economy has put the state fund that provides benefits to unemployed workers in jeopardy of going broke.
As a result, employers are likely to be asked to pay more in unemployment taxes, and jobless workers could receive reduced benefits.
"The recession has been so long and so deep that the fund has not been able to replenish itself," said Andrew E. Doehrel, president of the Ohio Chamber of Commerce and co-chairman of the Ohio Unemployment Compensation Advisory Council.
"If the fund goes broke, everybody loses."
Since 1999, Ohio's Unemployment Compensation Trust Fund has paid out more in benefits than it collected in unemployment taxes in all years but one.
The fund's balance, as a result, has plunged from $2.3 billion in 2000 to $555.7 million at the end of November. It is projected to drop to $155 million by April, according to the Ohio Department of Job and Family Services.
The agency projects that if a recession similar to one experienced from 2001 to 2004 were to begin in early 2008, the fund would be broke by the end of the year.
The advisory counsel and others familiar with the fund have long voiced concern about its solvency.
Continued job losses, rising energy prices and problems in the housing market recently prompted the Strickland administration to hire a Washington-based research organization to assess the fund and make recommendations for keeping it in the black.
The Urban Institute is expected to issue a report to the state in June.
"The study is to take a close look at the way things are structured and come up with suggestions on what kind of fixes there are," said Dennis Evans, spokesman for the Department of Job and Family Services.
William A. Burga, co-chairman of the advisory counsel and retired president of the Ohio AFL-CIO, said Ohio's economy is mostly to blame.
"The fund is in big trouble," he said. "With the loss of jobs and the business-community losses, the trust fund will have a problem. We just don't know when."
There were 232,755 employers in Ohio in 2000; today, there are 226,808.
"The layoffs were more permanent than temporary," Evans said.
The trust fund is supported by employers who are taxed on the first $9,000 that each employee is paid every year. While the taxable wage base has stayed constant, benefits have increased annually based on the average weekly pay.
"That's one issue that needs to be addressed," Evans said. "More money is being paid out but the tax rate has stayed the same."
Zach Schiller, research director for Cleveland-based Policy Matters Ohio, said Ohio employers for the last decade have paid less than the national average in employment taxes.
In 17 states, the taxable wage base is indexed so it grows along with wages, he noted.
Ohio's unemployment compensation system was last updated after the fund went bankrupt in the 1980s, requiring a federal bailout.
Should Ohio have to borrow again, Doehrel said, the cost to both the state and employers could be high. If the money is not paid back in the same year it is borrowed, Ohio would be required to pay interest from its general revenue fund. Also, employers would lose their federal credit on the unemployment taxes they pay.
"Depending on how bad (it gets), we could be holding up checks or not able to pay checks," Doehrel said.
In April 2006, the advisory counsel issued recommendations to the General Assembly to ease the burden on the system, but lawmakers failed to act on the plan.
Among the proposals: expanding the taxable wage base to the first $9,500 earned; freezing benefits at 2006 levels; and expanding eligibility guidelines to allow more low-wage workers to qualify for benefits.
"This could have been addressed and wasn't," Schiller said.
"It's almost inevitable the system will have to borrow because we waited too long."
ccandisky@dispatch.com
www.dispatch.com/live/content/local_news/stories/2007/12/20/comfund.ART_ART_12-20-07_A1_818R1QT.html?sid=101