Add unemployment fund to woes
HARRISBURG, Pa. – The fund that doles out cash benefits to Pennsylvanians who have lost their jobs has cushioned the effect of the recession for untold numbers of state residents, but it has been operating in the red for some time, and the bill is about to come due. Taken on its own, the Unemployment Compensation Trust Fund’s shortfall would represent a massive challenge. To shore it up, Pennsylvania has borrowed $3 billion since March 2009 from the federal government, and starting in January businesses will begin seeing higher taxes to help pay it back.
But add to the picture the recession-caused falloff in state revenues, a broken state budget process, the colossal public pension funding problem and the looming disappearance of federal economic stimulus money, and you can see why more than a few people in Harrisburg have remarked with wonder that anyone would want to be the next governor.
The jobless benefits trust fund ran out of money, in part, because it is fueled by a tax structure that has not been increased since the mid-1980s, even though the workers’ salaries that determine the amount of benefits have risen steadily. The average benefit in Pennsylvania is about $310 a week, and benefits are capped at $564 a week.
A task force set up in December 2008 by Gov. Ed Rendell to look for a solution failed to find a compromise that labor and business could both agree to, and it now appears quite possible that nothing will happen until sometime next year.
All sides agree that any solution will have to entail higher business taxes, a greater payroll contribution from workers, a decrease in the size of unemployment checks, more stringent limits on eligibility, or some combination of those elements.
“Doing nothing is not an option for the long term, because Pennsylvania will be borrowing from the federal government for the foreseeable future in order to continue paying unemployment benefits,” said Patrick T. Beaty, the state Labor and Industry Department’s deputy secretary for unemployment compensation programs.
Beaty said automatic triggers that go into effect in January will cost Pennsylvania businesses about $400 million annually for the next four years. Even after that period is over, Pennsylvania will be on the hook to Uncle Sam for an estimated $7 billion.
“It has to be fixed by the Legislature or we will continue to borrow from the federal government and our employers will continue to pay billions of dollars in additional taxes to repay the loans in additional interest,” Beaty said.
A partial solution may be $273 million in federal stimulus money, but it comes with strings that require legislative changes. A Democratic-sponsored bill in the House would put the state in position to receive the money, with some provisions that simply codify rules that court decisions have already made into policy.
That bill would allow workers to qualify sooner for compensation, let people who are only looking for part-time work qualify, and allow people to receive payments if they quit their jobs for compelling family reasons such as domestic violence, illness or to move because of a spouse’s job.
The Labor Relations Committee is expected to take it up in the coming days, but opponents say the bill ignores needed improvements to the system and would tether the state to future costs that make it far too expensive down the road.
Gene Barr of the Pennsylvania Chamber of Business and Industry said he wants a compromise that offsets the increased costs with money-saving changes, such as forcing recipients to prove they are looking for work and a reduction in benefits for those given severance payments when they are laid off.
“There’s a reason why Pennsylvania spent more money on unemployment compensation benefits in the last two years than any state except California,” Barr said. Pennsylvania is the only state that does not make its beneficiaries actively search for work, although some states with such rules don’t do much to enforce them, Beaty said. It can help when the economy is fairly healthy, but not when there are far more people looking for work than there are job openings, he said.
“Every month there are thousands more that burn through all their entitlements,” said Sharon Dietrich, a lawyer with Community Legal Services in Philadelphia. “It is really hard for me to believe that those people were happily burning through 99 weeks of (benefits) because they thought they’d happily go out and get a job in week 100.”
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Mark Scolforo covers state government for The Associated Press in Harrisburg. He can be reached at mscolforo@ap.org.