Drop in unemployment trust fund triggers tax increase on La. business, decrease in benefits

La. unemployment taxes to rise, benefits to drop

BATON ROUGE, La. — A rise in the ranks of Louisiana’s unemployed will force business taxes to increase and state benefits for jobless workers to shrink next year, moves designed to keep the state’s unemployment trust fund from being drained.

The adjustment to begin Jan. 1 was triggered Wednesday when the Revenue Estimating Conference, which forecasts state income and fund balances, agreed to projections that show a drop in the unemployment fund balance.

“The unemployment rate is putting pressure on the trust fund. The pressure on the trust fund has resulted in us hitting a couple of triggers which decrease benefits and increase taxes to ensure the trust fund stabilizes,” said Curt Eysink, executive director of the Louisiana Workforce Commission, the state’s labor department.

Maximum benefits available to those who apply for unemployment after Jan. 1 will drop from $284 per week to $247. At the same time, employers will pay taxes on the first $7,700 in earnings per employee, rather than the first $7,000. They also will lose a 10 percent credit they had been receiving against their unemployment taxes, Eysink said.

Louisiana law requires any dip below certain benchmarks to force an increase in the unemployment taxes calculated on businesses and a decrease in the benefits given to the jobless. The law was put in place to keep the unemployment fund from going bankrupt.

The fund, which stands at $1.3 billion, had dropped from nearly $1.5 billion a year earlier as a significant uptick in Louisiana’s number of unemployed siphoned more money out of the fund than businesses were replenishing with their tax dollars. The trust fund was projected Wednesday to dip to less than $1.1 billion by August 2010.

The state paid out $418 million in benefits and claims from September 2008 to August 2009, compared to $195 million for the same period a year earlier, according to labor department data. Eysink said the number of people currently receiving benefits was more than double that in the same time last year.

Louisiana’s unemployment rate stands at 7.4 percent, compared to the national rate of 9.7 percent. But not all who are counted as unemployed are eligible for benefits from the state, and some have depleted the 26 weeks of state benefits allowed, Eysink said.

The draw on the trust fund seems to have peaked, however, and should begin to lessen in the coming months because people have exhausted their available state unemployment benefits, workforce commission officials told the Revenue Estimating Conference.

The law governing Louisiana’s unemployment trust fund was established after the fund went bankrupt in the mid-1980s, said House Speaker Jim Tucker, a member of the Revenue Estimating Conference. At the time, the state had to borrow money from the federal government to continue to pay unemployment claims.

Eysink said at least 21 states’ unemployment funds have gone bankrupt during the recession, and those states are now borrowing federal money to pay benefits.