Md. employers likely face two years of surcharges

Task force fails to settle shortfall in jobless fund

January 14, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Maryland businesses appear to be stuck with a surcharge for at least the next two years to boost the state's ailing Unemployment Insurance Trust Fund.

A state task force studying the unemployment insurance program decided yesterday to put off recommendations for structural changes until the 2005 legislative session.

Members said they needed more time to examine the delicate balance of adjusting tax and benefit payments.

This year Maryland employers will have to pay a 1.1 percent surcharge - an extra $93.50 per worker - to shore up the trust fund as benefits continue to outstrip contributions to the trust fund. But program officials say the problem is more about chronic under-funding than the soft job market.

The 1.1 percent surcharge kicked in automatically this month because the trust fund fell below the state-required threshold of $822.6 million in September. Right now the fund has a balance of about $585 million. The first payment with the surcharge is due with the employers' April 30 quarterly payment.

Without future structural changes, "you're going to be in an almost perpetual surcharge," said Thomas Wendel, executive director of the Maryland Office of Unemployment Insurance, who anticipates a 1.2 percent surcharge in 2005.

In November, about 120,700 Marylanders were out of work, 3,700 more than in October, pushing the state's unemployment rate up a notch to 4.2 percent, according to the latest state unemployment report.

Though the surcharge will produce $192.5 million this year that won't be enough to make up the gap because too much money "leaks out" of the fund. For instance, when people leave one job for another and are laid off from their new positions several months later, the new employer pays only the share of the 26-week benefit it's liable for. The state picks up the rest.

As a result of "leaks" like this, the additional tax will add only $20 million or $30 million to the trust fund this year, Wendel said.

The task force has been discussing whether to plug leaks, raise the base tax rate, reduce benefits or take several actions. At the same time members have debated whether to increase jobless benefits, which have been falling further and further below the goal of 50 percent of the average weekly wage. The maximum now is $310 a week as opposed to the $368 goal.

"This is not an easy process," said Del. Ann Marie Doory, the Baltimore Democrat who co-chairs the task force. "There will be real benefit to continuing our discussions."

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