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Unemployment creating strain on state

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POSTED: August 24, 2012 12:00 p.m.

Last week, the Georgia Department of Labor announced that the unemployment rate for July was 9.3 percent, marking the 59th month in a row that Georgia’s unemployment rate has exceeded the national average.

Perhaps even more disturbing is the fact that after falling below 9 percent in April for the first time in more than 3 years and either decreasing or holding steady for the previous 10 months, in June the unemployment rate started increasing again.

As of June, only seven states, including Washington, D.C., have a higher unemployment rate than Georgia, with Nevada the highest at 11.6 percent. North Dakota, with a 2.9 percent rate, has the nation’s lowest rate.

On a somewhat brighter note, the number of long-term unemployed — those who have been out of work more than 26 weeks — decreased to 225,400 in July, or around 51 percent of all of those unemployed.

During the great recession that began in 2008, Georgia has not only depleted its unemployment insurance trust fund to pay out benefits, it is also one of 20 states, including the Virgin Islands, that have been required to borrow funds from the federal government to keep its fund solvent. As of Aug.14, Georgia’s outstanding balance owed to the federal government is $742 million.

Because the interest on this loan cannot be paid from the unemployment tax or trust fund, it has to be paid from other state revenues, causing an enormous burden on an already stressed budget. Last year the interest payment exceeded $20 million and is expected to be even higher this year.

In an effort to pay back the loan and prevent the fund from further insolvency, earlier this year the legislature passed SB 347, cutting jobless benefits while increasing unemployment benefits paid by employers. Provisions included in this legislation are:

• Beginning Jan. 1, 2013, employers will be assessed an unemployment insurance tax on the first $9,500 of each employee’s wages, up from the current $8,500.

• In addition to paying unemployment insurance payroll taxes, solvency taxes — called Statewide Reserve Ratio surcharges — are assessed on employers when the balance in the state’s unemployment fund falls below a specified level. The legislation blocks the surcharge on employers from going to 100 percent and keeps it at only 50 percent through Dec. 31, 2013.

• Under previous law, an individual could collect up to 26 weeks of unemployment benefits or one-fourth of the base period wages, whichever is less. This legislation reduces the number of weeks from 26 to a period ranging from 14-20 weeks depending upon how high our unemployment rate is.

With this legislation, Georgia becomes one of 11 states that have cut jobless benefits in the past year by decreasing the duration or level of payouts or by restricting eligibility. Coupled with the slight increase in employer costs, SB 347 offers a balanced approach to controlling this potential financial disaster.

Also earlier this year, the State Labor Commission instituted a rule change, based on current state law, relating to educational private contractors such as school bus drivers, cafeteria workers, crossing guards, etc., who file for seasonal unemployment benefits.

In an attempt to control costs, many school systems have outsourced services such as these to private contractors. While the school systems may have saved money, the unemployment trust fund was making up the difference.

In the early 1970s, Washington ruled that public school teachers, whose salaries are typically paid out over 12 months, were not eligible for unemployment benefits during summer breaks. Teachers, who expect to be back at work in the fall, are not considered laid-off — the main criteria to receive unemployment benefits.

The commission ruled that it was unfair for contractual workers to receive seasonal unemployment benefits when public school system employees do not. After all, private contractual workers have the same probability of returning to work as public school employees do.

Recently, the U.S. Labor Department has ruled the commission’s interpretation to be wrong and demanded it be overturned. The commission in turn, has asked the Georgia Attorney General’s office for guidance.

However this particular scenario plays out, one thing is certain — Georgia’s continued unemployment challenges are creating an enormous amount of strain on the unemployment insurance trust fund.

Sen. Buddy Carter can be reached at 404-656-5109.

 

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