Md. bosses must refill jobless-pay trust fund

$93.50-a-worker surcharge to hit employers next year

October 24, 2003|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Maryland employers will have to pay an extra $93.50 per worker next year to shore up the state's unemployment insurance trust fund as increased jobless claims continue to outstrip contributions, state officials said yesterday.

The 1.1 percent surcharge will kick in automatically in January because the trust fund fell below the state-required threshold of $822.6 million. As of Sept. 30, the fund had a balance of $646.1 million. The state Department of Labor, Licensing and Regulation will soon send employers formal notices about the surcharge, which is likely to continue for the next several years.

Thomas Wendel, executive director of the Maryland Office of Unemployment Insurance, anticipates a 1.2 percent surcharge in 2005 and said the additional tax may need to be levied for the foreseeable future.

That's because the $192 million that the surcharge will produce for the jobless benefits program next year won't be enough to make up the gap. So much money "leaks out" of the fund every year - whenever employers aren't required to reimburse the state for benefits paid to unemployed workers - that the additional tax next year will add only $20 million or $30 million to the trust fund, Wendel said.

"We'll start informing all the businesses of where we are and what's going on," said Liz Williams, spokeswoman for the state labor department. "The surcharge ... is required by Maryland law to maintain the solvency of the Maryland unemployment insurance trust fund, which has been depleted because of recent increases in unemployment insurance claims."

Still, Maryland's unemployment rate - which has hovered around 4.5 percent this year - is one of the lowest in the nation. Wendel said the larger problem is "chronic underfunding," and a task force has been asked to consider an overhaul of the program.

"You've got to do something to get more money in," he said at the task force's most recent meeting, last week in Annapolis. About a third of the benefits paid out every year - or $160 million - is "leakage," Wendel said. For instance, when people leave one job for another and are laid off from their new position several months later, the new employer is charged for its share of the 26-week unemployment benefits, and the state covers the rest.

At the last task force meeting, a panel of workers' advocates urged members to recommend raising the base tax rate to infuse the fund with more money, which they said would allow more generous benefits and make surcharges less likely in tough economic times.

The average unemployment insurance tax rate equates to about 0.3 percent of all wages, compared with the nationwide average of 0.5 percent, said Patrick Lester, senior policy analyst for the Maryland Budget & Tax Policy Institute. "Overall, our taxes are pretty low, and the benefits are pretty low compared to other states," Lester said by phone.

Keith Wilkerson, a baker in Morgan State University's cafeteria and a local union leader, told the task force that the maximum benefit of $310 a week isn't enough to cover the cost of necessities such as rent and food. "We need a change, and we need change bad," he said.

But a group representing employers told the task force that it's the wrong time because businesses are already alarmed about the surcharge.

"We think we're not in a position today to even negotiate increased benefits," said Ellen Valentino, state director for the National Federation of Independent Businesses. "I can tell you that most small businesses [are] in `operation dollar stretch' right now and will be impacted fairly heavily by the surcharge."

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