Insuring the jobless

January 28, 1991

Especially in hard times, unemployment insurance becomes an important part of the social safety net. But as Maryland faces an economic downturn, there are worrisome signs that the state's trust fund for unemployment insurance is not as healthy as it should be.

Even though the fund is solvent, it has become increasingly dependent on a fall-back provision that allows the state to levy a surcharge on employers. The fund is also susceptible to a significant amount of "leakage" from provisions that allow employers to avoid paying for discharged workers if they left their jobs voluntarily or were fired for gross misconduct. This "non-charging" provision cost the fund $43 million last year and contributed significantly to the fact that employers now face their first surcharge since 1986.

To shore up the fund, the administration is proposing some alternatives to the General Assembly. One, an increase of .2 percent in tax rates charged to employers, will no doubt meet stiff opposition. But there's a strong alternative to a tax hike -- the elimination of the non-charging provision.

This move would work best if it were combined with a proposed administrative change that would levy charges only on the worker's most recent employer, rather than the current practice of apportioning the cost over all past employers. Together, these changes would eliminate the need for a tax increase while ensuring that employers are not charged unfairly for workers who left their jobs voluntarily or who were discharged for misconduct.

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