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Pa. plots strategy for unemployment fund

In a pivotal meeting in Harrisburg today, business, labor, and government leaders will try to reach consensus on how to prop up the state's battered unemployment-compensation trust fund.

In a pivotal meeting in Harrisburg today, business, labor, and government leaders will try to reach consensus on how to prop up the state's battered unemployment-compensation trust fund.

It's broke.

So far this year, the state has borrowed $483 million from the federal government to make payments to laid-off workers.

In Pennsylvania, initial claims for benefits rose 7,538 to 43,805 for the week ended April 11, the U.S. Labor Department reported.

"If we don't solve this problem, we could be on the hook for quite a bit of money to the feds," said Rick Bloomingdale, secretary-treasurer of the Pennsylvania Federation of the AFL-CIO and a member of the Unemployment Investment Advisory Council meeting today.

The state's Labor and Industry Department projects that it will need to borrow an additional $1 billion this year.

In Pennsylvania, two issues are coinciding: The trust fund's dilapidated condition and a possibility of its getting a $273 million infusion from the federal stimulus package.

But, the federal money comes with conditions that have led Virginia and Utah to turn it down.

The key condition requires states to provide unemployment benefits for a wider array of workers.

In general, to qualify for any unemployment insurance, workers had to be part of the labor force - meaning they had to have earned enough money and worked enough time. Definitions of enough vary by state.

In New Jersey, workers need to clock sufficient time in four of the last five quarters - not counting the quarter when the person lost the job.

In Pennsylvania, officials do not count the quarter when the job was lost, and they also don't count the quarter right before it, leaving more workers unqualified.

"It's a problem for the last-hired, first-fired type of worker, said John Dodds, director of the Philadelphia Unemployment Project. Young, seasonal, and low-wage workers are the most affected.

To get its $273 million in federal funds, Pennsylvania would have to pass legislation to make its system like New Jersey's - a move that would cost $70 million in 2010 as an additional 29,000 people gained coverage. After that, it would be about an additional $65 million a year for the next four years, or more than $300 million over five years.

Because New Jersey had already qualified more unemployed workers, it became the first state to receive a federal infusion to its fund of $207 million.

In Pennsylvania, no bills on regulation changes are pending. Legislators are awaiting recommendations from the advisory council.

"It doesn't make sense to spend $300 million to get $273 million," said Kevin Shivers, who heads the Pennsylvania chapter of the National Federation of Independent Business, representing 14,000 owners of small businesses. "Why make our system more unstable to collect onetime dollars?"

Dodds disagrees: Unemployment is high, people are suffering, and the federal money will help the economy, while easing the pain for more laid-off workers.

"It's a very targeted kind of stimulus," said Dodds, "because they'll take that money and use it right away to buy shoes or groceries. It'll stay in the local economy."

Gov. Rendell supports changing the rules to get the money, spokesman Barry Ciccocioppo said. Each dollar in benefits contributes $1.40 to the economy, he said.

Whatever the commission recommends about the stimulus money will not resolve the state fund's underlying problem, said Patrick Beaty, deputy secretary of the state's Labor Department.

"To some extent it is because of the current recession we're in, but our trust would have drifted into insolvency because it has pretty significant structural problems in the way it is financed," he said.

In Pennsylvania and New Jersey, workers contribute to the fund. So do employers.

In New Jersey, employers pay a tax on the first $28,900 a worker earns each year and that $28,900 base adjusts for inflation.

By contrast, Pennsylvania employers pay a tax on the first $8,000 of a worker's annual wage. That base wage has not gone up since 1984, even though both salaries and unemployment payments have risen considerably since then.

Beaty said he was optimistic that the commission would come to some resolutions, even though labor and business did not always agree.

"They [the commission] are already grappling with the solvency issue - and we took the opportunity to ask them to look at the stimulus bill," Beaty said.

"I think there is an awareness that they all share about the seriousness of the problem and the importance of finding a solution."

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