More on the unemployment increase bill.

I talked to Mark Veradian at the Employment Security Department this week. My question: Republicans have said that the unemployment trust fund is among the largest in the nation — at $4.1 billion — because they say the tax rate for employers is too high. So, how high is it?

Mark says, “It is difficult to compare Washington’s unemployment tax with other states, as taxing systems vary dramatically. The health of our trust fund is a combination of factors, and the rate is only a very small piece of that. A big part of the health of our trust fund has to do with our taxable wage base (the salary point at which we stop collecting taxes on an individual worker), the relatively high wages in the state compared to others, and the fact that $4 billion collects considerable interest.

“The U.S. Department of Labor uses the average tax rate as a percentage of total wages as one measure to compare states UI taxing systems. As of last year, Washington was tied for 5th using this measure. However, Michigan was ranked 4th, and their trust fund has been depleted. This illustrates why this measure isn’t particularly useful in describing the relative health of a state’s trust fund.”

OK. So, now that the House and Senate have passed the increase in unemployment benefits and the extra 13-week emergency benefits have kicked in, how will that affect the trust fund balance? Will it dip below the 15 months’ reserve that legislators aim to keep? Will it decrease to below 12 months, the level recommended by the federal government? Or 7 months — the level at which tax rates automatically go up?

(Why does it matter? Because if the trust fund dips below those rates, it would be difficult to cut the tax rate to employers.)

Mark says: “Using data from the state’s Economic and Revenue Forecast Council, ESD forecasts include a worst-case scenario modeled after a 1980s-style recession with a sustained high unemployment rate. This scenario assumes passage of HB 1906 and the continuation of the recently-triggered extended benefits program. Under this worst-case scenario, the Washington Unemployment Trust Fund would drop to $1.6 billion, or 8.6 months of benefits, in 2011.”

More information:
Here is where you can read what you need to know about the bill if you’re unemployed.

Here is where you can read more about how the increased benefit will affect the balance of the unemployment trust fund.

Tags: unemployment