Maryland must borrow $300M to keep unemployment trust afloat 

Posted: 7:21 pm Tue, January 19, 2010
By Nicholas Sohr
Daily Record Business Writer

ANNAPOLIS — Maryland will need to borrow up to $300 million from the federal government to keep its floundering Unemployment Insurance Trust Fund afloat, state business regulators told a panel of legislators Tuesday.

The fund that pays out weekly benefits to unemployed workers has been battered by the economic downturn, which has forced businesses to trim payrolls and state residents to look to the government for help.

The taxes paid by businesses every year to fill the fund shot from the second-lowest level in 2009 to the highest – “Table F” – in 2010.

“When you’re in Table F, you would hope you would be coming out of the recession the following year. But, unfortunately, we’re not in that position,” said Julie Squire, an assistant secretary of the Department of Labor, Licensing and Regulation, at a Senate Finance Committee meeting.

Marylanders have been filing more unemployment claims since 2007 and spending longer among the ranks of the jobless as the state and national unemployment rates remain at elevated levels.

DLLR received 416,300 initial claims for unemployment benefits in 2009, an increase of more than one-third over the fewer than 300,000 filed in 2008, and nearly double the total in 2007. In 2008, 35,389 people exhausted the 26 weeks worth of benefits available to them, compared to 93,347 last year.

The fund was shelling out about $23 million every week in March. Weekly payments had retreated to about $20 million in December, but not enough to ease the pressure on the fund. There was about $95 million in the account at the most recent check, Squire said.

“The claim volume is unprecedented,” she said. “Unemployment insurance is now taking the place of wages for many people out there who are really desperate at this time.”

Squire said the state would open the federal line of credit by the end of April for an interest-free infusion into the fund. Most unemployment insurance taxes are paid in the first quarter because they are calculated on the first $8,500 of each employee’s annual pay.

“We anticipate with spring around the corner, the construction industry gearing up, we’ll be able to pay it back this year,” Squire said.

Gov. Martin O’Malley is also looking to federal stimulus dollars to prop up the unemployment trust fund. His legislative agenda includes tweaks to the state’s unemployment rules to capture $126.8 million made available to the state by the economic stimulus passed last year.

The bill would change the time period during which benefit seekers report their income, allow workers laid off from part-time jobs to collect benefits and double the 26-week period in which people can collect benefits while enrolled in job training.

DLLR officials estimate the changes would add about $20 million in benefit payments annually.

O’Malley’s plan would put $83 million to reducing businesses’ 2010 tax obligations and cut the interest rate on late payments. DLLR is also gearing up to work with businesses on payment plans.

Business groups and Republican legislators oppose the plan, saying it sacrifices the long-term health of the fund for a short-term fix by opening the already stressed system to more claims

“It liberalizes the eligibility,” said Tom S. Saquella, president of the Maryland Retailers Association. “We already have one of the most liberal policies in the country.”

Saquella and other business interests are pushing for reductions to unemployment benefits in other areas, like adding a “waiting week” that would require a laid-off employee to delay filing for benefits after losing his or her job. They argue the expansion of the benefits will keep taxes higher for longer.

Taxes are determined annually based on the amount of money in the fund as of Sept. 30 of the prior year.

With $301 million in the fund last Sept. 30, taxes jumped at least 300 percent for every business in the state. The minimum rate in 2010 is $187 per employee, compared to $51 last year. The 2010 rates top out at $1,147.50 per employee.

The administration’s proposal would lower the minimum rate to $153, and the high end to $1,096.50.

“If we pass no legislation whatsoever, employers will continue paying an extra $34 per year per employee,” said Sen. Thomas M. Middleton, a Democrat and chairman of the Finance Committee.