Our Unemployment Debt

Published December 7, 2012

The report by the legislature’s Revenue Laws Study Commission is troublesome on several fronts – mostly because doesn’t solve the long-term problem. We incurred this 2.4 billion dollar debt for four reasons.

  1. Because our economy was strong and employment high the state’s unemployment trust fund account accrued a large surplus. At the urging of business and others we agreed to reduce the amount employers pay into the fund, never dreaming it would be totally depleted.
  2. For whatever the reason our politicians decided to grant more benefits to those unemployed over a longer period than our neighboring states.
  3. Our state was hard hit in the recession that occurred after the turn of the century and encountered even larger layoffs in the Great Recession, unemployment unimagined by most politicians.
  4. When the massive layoffs began our state failed to respond quickly and decisively to halt the drain on the trust fund. This could have come from higher unemployment taxes and some reduction in benefits.

The Revenue Laws Commission correctly agreed this billion dollar debt should not be borrowed. If we had pursued that course of action all taxpayers in this state would have helped in repaying it. They weren’t responsible for incurring the debt and shouldn’t bear the responsibility for having to pay it off. Further, it isn’t wise borrow money which might prevent us from doing so at a later date.

That said, I’m not sure their solution is fair to all concerned. Our benefits were probably too rich, given our economy. But neither were our employers paying their part. It feels as if the unemployed are bearing more of the brunt than employers, but there’s no question both should contribute toward paying off the debt.

We do have problems with the Revenue Laws procedure. This lengthy document was presented and approved with little discussion. It amounts to a major overhaul of our unemployment system. Need we remind the current Republican leadership they ran on a platform of transparency in government? We agree the system needs overhauling but we also agree to the need for open and honest debate. We hope that will come from the legislation sure to be drafted in the early part of this session.

We hope that discussion will include a solution to prevent this from happening again. While we do not need to accumulate too large a surplus in the unemployment trust fund neither do we want it depleted quickly without resultant action. After the trust fund has once again established a high and reasonable surplus we need to establish a fast, automatic re-set on employer contributions so that the moment it drops below that level employers’ contributions are increased to restore the balance.

Let’s learn from this experience and be proactive to see it doesn’t happen again.