Jobless fund's outlook steadies

Lower surcharge likely next year in Maryland

Less cost to employers

Changes still needed, state task force is told

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

A drop in jobless-benefit claims means employers will likely pay a lower tax surcharge next year to bolster Maryland's unemployment insurance trust fund, state officials said yesterday.

Thanks to the pickup in the economy, the state is now projecting a 0.8 percent surcharge for 2005, which would cost companies an extra $68 per worker for the year. That's significantly below both the 1.1 percent - or $93.50 per worker - that employers are currently paying and the 1.2 percent the state had expected for 2005.

The surcharge was imposed in January after the unemployment fund balance, drained by recession-fueled jobless claims, fell below the state-mandated level.

But a task force charged with recommending fixes for the unemployment insurance program was told yesterday that, despite the brighter forecast, changes are still needed.

"We should not be having surcharges during times of 4 percent unemployment," said Thomas Wendel, assistant secretary for unemployment insurance at the state Department of Labor, Licensing and Regulation.

About 117,000 Marylanders were unemployed in May - some 13,000 fewer than a year earlier. The state's 4 percent jobless rate compared well with unemployment nationwide - 5.6 percent.

As a result, the state unemployment insurance trust fund is paying out $1.25 million less a week in benefits now than at the same time last year, Wendel said.

"Employment in the state of Maryland is good, but long-term we need to solve the [trust fund] problem," said James D. Fielder Jr., state secretary of labor.

Del. Ann Marie Doory, co-chair of the task force and a Baltimore Democrat, said she hoped the group would hammer out proposals by mid-November.

Members were originally supposed to suggest reforms to the General Assembly by last December but wanted more time to debate the best ways to bring more money into the fund.

The group is also arguing about the idea of raising benefit levels - now less than half the average weekly wage in Maryland - or extending them to unemployed workers who aren't eligible now, such as part-timers.

The fund had a total of $692.5 million at the end of last month, Wendel said. A surcharge will be levied next year if the balance doesn't rise to the required $831.9 million by Sept. 30, and he expects the fund will end up $132 million short.

The fund is inadequate because too much money "leaks" out. When businesses close, the unemployment insurance program can't recoup the cost of paying benefits to those laid-off workers. In other cases, 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 for which it is liable and the fund picks up the rest.

The task force has debated whether to plug the leaks, raise the base tax rate, reduce benefits or take other actions to shore up the fund, and it didn't come any closer to resolution yesterday.

An employer's base tax rate increases the more workers it lays off, with a cap of 7.5 percent. The state said that raising the cap would be one way to plug a leak. But some task force members worried about the impact on layoff-prone industries such as manufacturing.

"Manufacturing is already under incredible stress," said Del. John G. Trueschler, a Baltimore County Republican.

Maurice Emsellem, policy director of the National Employment Law Project in New York, said by telephone yesterday that Maryland's tax rate is simply too low, but its fund is "pretty solvent" compared with the rest of the nation.

Several states have had to borrow money to keep their funds alive, a much more dire step than a surtax.

"There are a lot of states that have implemented surcharges in the last couple years," Emsellem said.

Ronald L. Adler, who represents the Maryland Chamber of Commerce on the task force, said there's no question that change must come.

"There should not be a surtax," he said. "It's good there's an improvement, but we still have work to do."

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