Pay back is tough

Pay back is tough, no doubt about it, and Pennsylvania's businesses are already paying extra to help bring the state's unemployment compensation fund into solvency. The average cost per employee is $544, which includes $56.20 to pay back the federal government for the $3.8 billion it has loaned Pennsylvania to keep jobless benefits flowing. By 2018, if the debt isn't repaid, that $56.20 will grow to an extra $190 a month.

So why is the state's fund in this fix?


Ah, that depends on one's perspective. You can read more about it in my article in Friday's Philadelphia Inquirer. Gail Carmack, the unemployed paralegal pictured here, is hoping the legislators working on the problem will find a way to allow her benefits to continue.

Sharon Dietrich, an employment lawyer for Community Legal Services, and an advocate for unemployed, says the state's fund is in a jam because businesses have not paid their fair share over the years. Right now, she said, businesses pay fees based on the first $8,000 of wages -- a base rate established in the early 1980s. Other states, she said, use higher base rates. "If it had been tied to inflation, it would be up over $20,000. What I find so outrageous is that they want to take it all from the unemployed. It's outrageous to think that the way to fix this is to cut the money from the unemployed people who can least afford it."

What's really outrageous, said Sam Denisco, director of government affairs for Pennsylvania's Chamber of Business and Industry, is the high benefit paid to the unemployed. "Our rate is the highest in the nation." Yes, the base rate may be low, but the way that rate is taxed is not, he said. Meanwhile, he said, beneficiaries are getting very generous benefits.

Businesses, he said, can't afford to pay anything more. "Employers are struggling to pay all their taxes and fees," he said. The more they pay, the less likely they are to hire.

In late December, 2008 and early January, 2009. just before Pennsylvania's fund first drifted into insolvency, representatives of business, labor and the unemployed tried to negotiate a plan that Republican Senator John Gordner described as a "three-legged stool." Gordner, who represents several northern counties and chairs the Senate's Labor and Industry committee, sat in on the negotiations. The contemplated plan would have required businesses to pay more and also would have required employees to contribute. (Employees are now kicking in a small amount of money right now because, under the rules, when the fund goes broke, those currently employed have to ante up. Usually, they don't contribute.) There would also be cuts in benefits for the unemployed. 

Businesses prefer the stronger fix being offered in House Bill 916, introduced by Rep. Scott Perry. Gordner's Senate Bill 1030 follows more along the line of the negotiations, but does not include any increases for businesses or any permanent increases for employees. Like the House Bill, it finds savings by cutting benefits to the unemployed, only it cuts less of them, and therefore saves less money.

There is some urgency. If the state doesn't do something, a related set of benefits, funded by the federal government will go away by June 11, even as state gets deeper and deeper in debt. If the state doesn't act by June 11, 45,000 unemployed Pennsylvanians, or nearly one in 10, will lose a set of benefits immediately. 

Gordner agrees that his bill doesn't include all the "three-legged stool" measures that he would like. But, he said, his version did pass out of committee unanimously and he's hoping that the Assembly as a whole will favor his approach over the one promulgated in House Bill 916.

"Frankly," he said,  "I put together a modest proposal that allows us to get the extended benefits and make some changes in savings to allow the bill to get to the governor by June 11."