E-mail Story
Print Friendly Front Page 
opinion guest_columns
Thursday, March 24, 2011
Jobless Fund Solvency Key to Avoiding Meltdown
By Jeff Parker And Beverlee J. Mcclure
Manpower Regional Director of New Mexico and Inland Northwest President & CEO, Association of Commerce & Industry
The term "jobless recovery" is the new buzzword economists are using to describe the nation's current situation. National unemployment remains high, currently at 8.9 percent for February with New Mexico's unemployment at 8.8 percent, up two consecutive months in a row. Nationally, 8.75 million jobs were lost in 2008 and 2009; only 1 million jobs were regained in 2010. As decisions are made concerning the unemployment financing crisis, the government must balance restoring solvency and encouraging an employment recovery. New Mexico is no exception.
We have made some unwise choices in the past in regard to our Unemployment Insurance Fund. In 2003, the state froze employers' contribution to the UI at a newly created schedule that actually lowered the rate. In addition to adding a Schedule 0, new benefits were added to the state's unemployment benefit package. Then, in 2008, the Legislature voted to divert 50 percent of all employer contributions to the UI to a workforce-training fund. The diversion of funds, the lowered schedule and the additional benefits, combined with the increased unemployment, have now put New Mexico's UI fund in jeopardy.
In fact, Legislative Finance Committee analysts predict that if nothing is done, the fund will be insolvent as early as November of this year. Why should an employer care? Because when the fund goes insolvent, the state must automatically raise all employers to the highest level of Schedule 6, resulting in a 350 percent tax increase.
Additionally, the state will no longer be eligible for federal workforce training and economic development funds. The state will have to borrow money from the federal government, and for every quarter that the loan is not repaid, the federal UI tax rate will rise.
We are not unique. Other states also have to meet this challenge. In fact, 32 states are already insolvent. States like Indiana have a 9.4 percent unemployment tax plus a 12 percent surtax to repay their federal loan due to insolvency. Recently California had to raid its disability fund to repay its loan to the federal government. Employers in New York received an invoice payable to the state within 30 days that represented a percentage of their payroll to repay their federal loan. Keeping our fund solvent is a competitive advantage to bringing new companies and jobs to New Mexico.
Last year legislation was passed that removed some of the additional benefits and moved employers to Schedule 1. Unfortunately, this was not enough. HB59, passed this session, rolls back $120 million in benefits beginning July 1 and moves employers temporarily to Schedule 3 beginning January 1, 2012. An increase? Absolutely. But a much lower increase than that which will occur if Gov. Susana Martinez vetoes this bill. In fact, she has stated that she will indeed veto this bill, meaning that employers in New Mexico must brace themselves for a 350 percent increase when our fund goes insolvent.
HB59 is good compromise, the best of a worse case, in that it rolls back benefits, minimizing the increase to employers. Even at the federal level, measures are being taken to shore up the Federal Unemployment Trust Fund. Federal and state trust funds must be replenished in anticipation of a slow recovery. New Mexico's fund must be funded adequately to avoid penalties and interest from the federal government.
This is a problem that Gov. Martinez inherited, but not one that she cannot fix. It will take courage on all our parts to protect the solvency of our fund. It took courage for the Legislature to pass this legislation and courage for the business community to lobby for the removal of benefits and the temporary increase. We now hope that Gov. Martinez shows the same courage and signs this important piece of legislation.
You also can send comments via our comment form
|
|
