Unemployment Comp: Agency's Fate Not So Dire

Charleston Daily Mail, October 05, 2005

Early this year it was estimated that the state's unemployment compensation system could go bankrupt as early as 2008 and no later than 2010 unless changes are made. A new estimate is that it will go bankrupt in 2013.  The new estimate "buys us a couple more years," said Dan Light, director of the Unemployment Compensation Division.

Proposals for fixing the system have ranged from imposing a payroll tax on employees to making benefit changes. Several proposals were considered during the Legislature's regular session in February but none passed. Light said his agency is awaiting direction from Gov. Joe Manchin. "We'll take our direction and go," he said. Manchin spokeswoman Lara Ramsburg said, "If unemployment compensation brings a proposal to the governor that requires action, he would do so at that time. As of yet that has not happened in any formal way, to my knowledge.

"You have to look at everything," she said. "Just like the state's pension debts, there's a certain date we know that becomes more of an issue. You manage before you get into a crisis, but you don't do something prematurely without it being necessary.

"You certainly have to look at all of the factors involved," Ramsburg said. "So we will be working with them (the Unemployment Compensation Division), our financial advisers, and the Legislature to do what makes sense.

"We have several financial issues that are part of a larger picture, and we need to be addressing the larger picture as we go along, and that's what we've been trying to do these first nine months," she said. "It's a step-by-step process."

The unemployment compensation system "is part of the overall outlook for the state, of things we have to be aware of, and we certainly are aware of it," she said. "We will take whatever actions are necessary at the appropriate time."

Karen Price, president of the West Virginia Manufacturers Association, said the trade group and the Business and Industry Council both had unemployment compensation reform on their agendas last year because the system was apparently facing a near-term crisis.

"You have to listen to what the division is telling us," Price said. "If it is not so immediate, it still gives us some opportunity to make some changes."

The manufacturers' group is currently polling its membership and developing its agenda for next year, she said. The Business and Industry Council has a retreat in early November and will refine its agenda then, she said.

Unemployment compensation is an insurance system established to provide maintenance income for individuals who are temporarily unemployed through no fault of their own, either because of a layoff or lack of work, Light said. The Unemployment Compensation Trust Fund has a balance of $200 million and is solvent now.

Employers finance the system by paying insurance premiums. A new employer pays 2.7 percent on the first $8,000 in wages paid to each employee for the first three years. Afterwards, the employer's rate is based on experience. An employer with no claims could pay as little as 1.5 percent on the first $8,000 in wages paid to each employee every year; an employer with a lot of claims could pay a rate as high as 8.5 percent.

The system is heading toward red ink because the $8,000 ceiling on taxable wages has not changed since 1981 but the maximum weekly benefit is automatically adjusted to be 66 2/3rds of the average weekly wage.

The maximum weekly benefit in 1981 was $184. As of Jan. 1, the maximum weekly benefit was $380. "Therein lies the problem," Light said. "There has been no increase on the tax side but a constant increase on the payout side."

Price said, "There are some places where you could tighten up provisions of the unemployment compensation law that would be of benefit to the fund, the employers and the employees."

During the last regular session the manufacturers unsuccessfully tried to change the law so a person who shows up for work under the influence of a drug and gets fired cannot receive unemployment compensation. "Under the current law they can still get paid," Price said.

Price said the manufacturers also would like to see the law changed so striking workers can't receive unemployment benefits.

In November 2003 a state unemployment panel ruled that more than 1,700 members of the United Food and Commercial Workers union who were involved in a two-month-long strike against Kroger in West Virginia could receive up to $350 a week in benefits. The panel said benefits were justified because Kroger had sent employees home and closed stores before the strike started at midnight .

AFL-CIO President Kenney Perdue was out of town Tuesday and AFL-CIO Secretary-Treasurer Larry Matheney was unavailable for comment.

In February, when the unemployment fund seemed to be nearer a crisis, Perdue said the union group wouldn't rule out considering a payroll tax but would not look favorably on cutting the benefits of laid-off workers. Perdue said at the time it would be better to increase the level of employers' contributions.