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Date:September 23, 2009
Contact:Public Relations @ (225) 342-3035

LWC Statement on Unemployment Insurance Trust Fund Projection

BATON ROUGE – The Louisiana Workforce Commission today released the following statement on the Revenue Estimating Conference’s forecast that indicates that the Unemployment Trust Fund, from which unemployment claims are paid out, will decline to $1.083 billion by Aug. 31, 2010. Under Louisiana law, this forecast will require maximum benefits to decrease from $284 per week to $247 per week for claims filed beginning Jan. 1, 2010. Additionally, today’s REC forecast will raise the current employer tax on the first $7,000 of wages for each employee to $7,700 per employee, starting Jan. 1.

Estimates provided by the Louisiana Workforce Commission and accepted by the Revenue Estimating Conference indicate that the Unemployment Trust Fund, from which unemployment claims are paid out, will decline to $1.083 billion by August 31, 2010. Louisiana law requires that benefits be curtailed and business taxes increased at certain intervals below $1.4 billion.

“We have the third strongest trust fund in the country as a result of sound fiscal management and we need to continue to manage the fund in a responsible fashion. These measures are there to ensure that the fund can continue to pay benefits to unemployed workers during leaner economic times. We know the funds in 22 other states have gone broke and those states are borrowing money to pay benefits. Not only will those states have to pay back that money with even higher taxes when their economies turn around, but they also will have to replenish their funds,” LWC Executive Director Curt Eysink said.

Pressure on the fund is a result of increases in the number of unemployed workers receiving payments since last fall. For instance, the number of people paid benefits has increased to about 60,000 per week from about 24,000 during the week before Hurricane Gustav struck a year ago. Payments from the fund peaked last month and have started to decline since then. The projection adopted by the Revenue Estimating Conference is based on the payments from the fund returning to normal levels over the next two years. As unemployment reduces over time and the fund strengthens, thresholds in the law will mean that taxes will go down and benefits will increase again.

Eysink said, “We anticipated earlier this year that the state unemployment trust fund could drop below $1 billion and that the receipt of short-term stimulus funds would not change that downward trend, and, in fact, accepting the stimulus funds would have further increased payments out of the fund. Accepting the stimulus money also would have further increased business taxes, which the federal government said could not be avoided.”

Jim Patterson, vice president of the Louisiana Association of Business and Industry, reiterated the importance of not accepting the federal stimulus funds.

“It still does not make sense to accept a one-time payment in exchange for a permanent increase in costs,” Patterson said. “Businesses paid the taxes that the federal government would use to fund the stimulus payment, and our businesses’ taxes would go up again if Louisiana accepted that payment. That is a double hit against businesses that does nothing to stimulate the economy.”

Renee Baker, the National Federation of Independent Business’ state director for Louisiana, said, “If the state had expanded unemployment benefits in order to collect the federal stimulus money, then the situation with the trust fund would be worse than it already is. We all hope the economy improves soon, and this tax increase can be dialed back as soon as possible.” NFIB/Louisiana is the state’s leading small business association.

Another impact of the thresholds, in light of the REC’s forecast today, will be a decrease in the assessment on businesses for the Incumbent Worker Training Program, a program that provides funds to businesses offering training to their employees seeking advancement. The total assessment for IWTP will decline from a maximum of $35 million to $20 million. However, this will have an offsetting effect on the increase in taxes resulting from higher unemployment. Guidelines put in place for IWTP recently will ensure that the program targets training for high-demand jobs that support business growth and increases in employees’ wages.

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