FRANKFORT — While there are signs of improvement in the economy, do not tell that to almost 123,000 people in Kentucky who have had to claim emergency unemployment benefits in the past year.
Those are benefits for those who exhausted traditional unemployment benefits without finding a job. According to Gov. Steve Beshear’s office, between 800 and 1,200 Kentuckians exhaust those benefits each week.
On Wednesday, Beshear sent a letter to Kentucky’s congressional delegation asking them to support an extension of emergency benefits. And a task force he appointed to recommend how to shore up the state’s unemployment insurance trust fund was told on the same day things are not going to get much better any time soon.
Kentucky’s unemployment rate stands at 11 percent, according to July data, and averaged 10.1 percent for each month of 2009. And unemployment is up in all 120 Kentucky counties. The national unemployment rate stood at 9.7 percent in August.
“We have an awful lot of people out of work and they need this assistance,” said task force Chair Helen Mountjoy, Beshear’s Secretary of the Education and Workforce Development.
Kentucky — like many other states — has had to borrow money from the federal government to keep up with benefit demands. As of Aug. 31, Mountjoy said, the state owes the feds $366,700 million.
But the state’s trust fund indebtedness is likely to grow, according to Dr. Wayne Vroman of the Urban Institute. He told the task force Wednesday by teleconference that the state could find itself short by as much as $1 billion over the next several years.
That is because the state takes in about $700,000 in taxes annually on employers but has been paying out around $1.2 billion in benefits since the prolonged economic downturn began. Kentucky must pay back the federal debt — or the Federal Unemployment Tax on employers automatically increases to pay back the federal government.
Vroman said an optimistic scenario shows unemployment rates beginning to decline next year and falling to 5 percent in 2015. But even that rosy forecast would leave the state’s trust fund short by $400 million in 2015 and $100 million by 2020. A more pessimistic model would put the unemployment rate at 8.2 percent in 2015 and down only to 6.3 percent in 2020 which would leave the trust fund $1 billion short.
One alternative would be to increase the taxable wage base on which employers pay taxes. Presently, Kentucky taxes only on the first $8,000 of wages, the lowest of surrounding states. In comparison, Tennessee and Ohio tax the first $9,000, Indiana the first $9,500 and Illinois and Missouri the first $12,000. West Virginia taxes the first $12,000, but that will go back down to $9,000 when certain benchmarks are met.
Increasing those taxes, however, adds to business expenses and places additional pressures on retaining or hiring employees.
Still, Mountjoy said, the state cannot wait out the problem because it continues to pay out more in benefits than it takes in and will likely do so for some time. And if it does not pay back the federal loans, employers’ federal taxes will increase anyway.
“Doing nothing and hoping for a good outcome is not an option,” she said.
The task force is to send its recommendations to the governor by the end of October.
Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. The Richmond Register is a CNHI newspaper.
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