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Florida's jobless benefits money dwindles as claims climb

In just five months, the state's trust fund for paying unemployment benefits has shrunk in half.

And the problem is getting worse as Florida's unemployment quickly ratchets up. In the past 10 days alone, the balance in the unemployment compensation insurance trust fund tumbled from $1 billion to $860 million.

At this rate, the fund will likely require an injection of federal money this year to stay solvent. A long-term fix could mean decreased benefits, stricter qualifying rules or higher taxes for employers statewide who pay into the fund.

Florida is still in better fiscal shape than nearly a dozen other states that have already turned to the federal government for interest-free credit lines to shore up their depleted unemployment trust funds. Still, insolvency looms.

"Florida has just moved into one of the states we're worried about," said Andrew Stettner, deputy director of the National Employment Law Project, an advocacy group for low-wage workers that tracks unemployment benefits data. "It wasn't before."

Florida's fund was supposed to be self sustaining. Employers are taxed every quarter on the first $7,000 in wages per employee; wages above that level aren't taxed. Rates are set each fall and become effective in January.

Frank Williams, who heads research within the Florida Department of Revenue, anticipates the fund balance will fall enough to automatically trigger a higher unemployment tax rate for next year. But he acknowledged a quicker fix may be needed in coming months.

"If we stay on this pace right now, it'd probably be sometime in the fall that we'd have to look at doing something" to shore up the fund, said Robby Cunningham, spokesman for the Florida Agency for Workforce Innovation, which oversees unemployment benefits. "The biggest message I want to impart is there's no way that people won't receive benefits."

So far 11 states have turned to the federal government for a lifeline, including California, Michigan, New York, Ohio, Indiana, both Carolinas and, most recently Rhode Island. Shy of federal intervention, Florida could choose the less likely option of borrowing money from another trust fund within the state, Williams said.

Among the wild cards that could buy Florida some time: Under the stimulus package, Florida is eligible for nearly $450 million in additional federal dollars to prop up the trust fund if it meets certain criteria. The conditions could increase payments for workers who lost lower paying jobs.

Two-way squeeze

Florida's unemployment fund is being squeezed from both sides: More people are applying for unemployment benefits at the same time fewer companies are paying unemployment taxes to keep the fund solvent. Between the third and fourth quarter alone, Florida had a net loss of 8,000 of its roughly 500,0000 businesses.

"We typically register 16,000 new businesses every quarter," said Jim Evers, general tax administration program director within the Florida Department of Revenue. "You can (see) how many are going out to get that net loss.''

Meanwhile, unemployment statewide reached a 16-year high of 8.6 percent in January and many economists predict it will reach the double digits before the recession ends. Over the past year, Florida has lost more than 355,000 jobs and more than a half-million people are currently receiving unemployment insurance benefits.

Any federal line of credit is viewed as a temporary solution. Other states with funds in worse shape than Florida's already are weighing either raising employer taxes, tightening eligibility or cutting benefits.

Indiana, for instance, is on track to owe the federal government $1.2 billion by year-end to shore up its bankrupt unemployment insurance fund. The head of Indiana's chamber of commerce earlier predicted companies could see their unemployment insurance taxes go up at least 300 percent if lawmakers there seek an immediate fix.

In Florida, either raising taxes or cutting benefits would both be a hard sell politically.

A handful of bills covering unemployment compensation have been introduced so far in the state's legislative session. One of them, from Sen. Mike Bennett, R-Bradenton, calls for random drug screenings for those seeking unemployment benefits.

Stettner of the National Employment Law Project said Florida's problem runs deeper than a quick fix to curtail payments from the fund.

The revenue model Florida uses, Stettner contends, is flawed on its face. Florida is among a minority of states that cap unemployment taxes at the first $7,000 of wages per worker.

That means during boom times, there's no boost from higher wages to inflate the trust fund. And during down times, when employers are cutting jobs or closing down, the fund has less money coming in to stay afloat.

Florida's jobless benefits money dwindles as claims climb 03/11/09 [Last modified: Thursday, March 12, 2009 6:43am]
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