KUAR Features
(2009-11-23)
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Half of all states have had to borrow money for benefits from the federal government this year. A recent report shows Arkansas's trust fund with the second-lowest balance in the country.
Each state manages its own unemployment trust fund, paid for by employers through unemployment insurance taxes. In June of 2008, there were warning signs that Arkansas's fund was inadequate. At the time, Kimberly Friedman, spokesperson for the Department of Workforce Services, denied that the trust fund had a problem.
"Our trust fund is actually healthy right now, and we don't anticipate running out of money at all," Friedman said then. "If we stopped collecting money at this point, we would have enough money in our reserve to cover benefits for seven to eight months."
But that calculation was based on a normal recession, not on the kind of job loss that's been seen this year. Now Friedman has something different to say.
"We try our best to prepare, but we don't have a crystal ball for, that we can look at and predict and know what's going to happen in the future," Friedman says. "We didn't know we were going to be impacted like this with the recession. We didn't know our unemployment rate was going to be as high as it is."
In Arkansas, the newly unemployed have been drawing down the fund a lot faster than employers can refill it. The amount being paid out has almost doubled from one year ago. On March 9th, the state's trust fund balance had reached zero, and had to start getting advances from the federal government.
The state has borrowed about 155 million dollars so far. Other states have borrowed much more than that.
At the job services center in south Little Rock, people line up early to file for unemployment. The process lately has been taking up to seven hours. Eric Terrell says he worked a construction job for three years, until he was laid off recently. Terrell says he has a wife and son to support, and the unemployment insurance will be a big help.
"It won't make ends meet, but it'll help me out a little bit where it's needed." says Terrell.
Friedman says there's no danger of people going without the benefits they deserve. But she says there's no telling how much more the state will need to borrow. And that has businesses worried.
"Something has got to give, in order to continue to fund the unemployment benefits that we have in the state," says Randy Zook, the President of the state Chamber of Commerce.
2011 is when states are scheduled to start paying the interest on the unemployment loans. But there's no guarantee that Arkansas's fund will be digging itself out of the hole by then. Zook worries that the only option will be to tax employers even more.
"It will add cost to businesses," says Zook. "And businesses, especially small businesses, in today's environment are having a very difficult time."
State government has already made one change. The legislature earlier this year expanded the taxable base. So starting in January, employers will pay unemployment insurance tax on the first twelve thousand dollars a worker makes, up from ten thousand. That increase will add about fifty million dollars to the fund each year - enough, state officials hope, to at least cover what's being paid out.
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