Kentucky struggles with unemployment payments

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April 30, 2009

By RONNIE ELLIS The Glasgow Daily Times Thu Apr 30, 2009, 10:59 AM CDT

FRANKFORT — Jobless rates rose in all 120 counties from March 2008 through March of this year reaching 9.8 percent. Meanwhile, Kentucky’s unemployment insurance trust fund is “currently bankrupt,” according to Helen Mountjoy, Secretary of the Education and Workforce Development Cabinet.

That doesn’t mean the unemployed won’t receive benefits – Kentucky depleted its unemployment insurance trust fund in payouts but went to the federal government for a line of credit, receiving $185 million in the first quarter and another $204 million to cover the second quarter.

The state has paid out $245 million of the $389 million it got from the feds but it’s facing some decisions about how to shore up the fund. In 2008, Kentucky processed 219,243 new claims but in the first three months of 2009, it processed 82,333. If that rate continues, the state will see nearly a 50 percent increase for the year.

Kentucky taxes employers on the first $8,000 of income and most employers will have reached that maximum point before or by the middle of the year. So, with unemployment rising and revenues slowing and the state already in debt to the federal government, a time of reckoning is in sight.

A task force appointed by Gov. Steve Beshear is considering both short term adjustments and long term fixes for the system. The state must decide if it wants to change the way it calculates benefits in order to secure an additional $30 million from the federal stimulus plan.

Currently, benefits are calculated on the first four quarters of wages during the most recent five quarters. The state can choose two options to qualify for the money. It can calculate benefits on the most recent four quarters – which would typically produce higher earnings – or continue using the first four of the last five but allow those who don’t meet income eligibility levels to use just the most recent four quarters.

The cost to the state, Mountjoy said, would range between $9 million to a high of $13 million annually but would not immediately impact the tax rate of employers.

Either method would require legislative action and Mountjoy said the task force hopes to recommend one option or the other by June. There has been speculation of a special session some time in June, and she said if that happens, Beshear would be able to add the changes to the agenda for the special session.

The task force will continue meeting after June, “looking at the system of unemployment insurance in Kentucky – the one that is currently bankrupt – and make recommendations to the governor and General Assembly to make it solvent and stable,” Mountjoy said.

Ultimately, she said, there are only so many options to do that. Those include cutting benefits to those drawing unemployment, taxing employees as well as employers to fund the system, increasing the tax paid by employers – or some combination of those. She pointed out the $8,000 limit on taxable wages was established in 1982 and represented half of the average Kentucky wage at the time. Now that amount is around 25 percent of the average wage.

“It’s impossible for us to fix our system based solely on decreasing benefits and it would be impossible to fix our system solely by increasing the tax on employers,” Mountjoy said.

Tuesday, the state released unemployment figures for the state and by county. Fayette County had the lowest rate at 7.4 percent. The highest unemployment rate of 18.1 percent is in Menifee County which is in the district represented by state Rep. John Will Stacy, D-West :Liberty.

“What can they do? You just hope someone will come in and spend some money and create some kind of economy there,” Stacy said.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com.

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