Iowa’s unemployment rate has been slowly inching up and that’s put more of a drain on the fund that the state uses to pay unemployment benefits. Iowa Workforce Development spokesperson Kerry Koonce says the state now needs to make an adjustment to charge employers more to cover the unemployment trust fund.
The fund currently has a balance of 508-million dollars, but the state has paid out over $709-million in the last 12 months. Koonce says there’s been a higher number of people on unemployment for a longer period, so on January 1st of 2010 they will change the contribution rate table for employers from table six to table four. There are eight tables with table one having the highest rates of contribution.
Koonce says not every business will have to pay more. She says roughly 56% of the businesses in Iowa will see an increase in their rate, and the amount of increase depends on the number of charges for unemployment in the last five years. Koonce says the Iowa code requires the rate table review once a year to keep the unemployment trust fund solvent.
Koonce says if the unemployment fund runs too low, it could end up costing more money to pay unemployment benefits. Koonce says:”We don’t want to get to the point where we were in the early 80’s when the trust fund actually went into the negative and we had to borrow money from the federal government. Because then we have to pay that back with interest.”
Koonce says there are a lot of variables that will determine the impact on a business. She says if the increase was averaged across all employers, there would be a roughly eight-tenths of a percent increase, and a company with 10,000 employees would have to pay $10,000 more a year. But Koonce says there are nearly 32,000 employers who have a zero contribution rate. Iowa if doing better than other states that never fully recovered from the recession of 2001 and find their unemployment funds depleted.
Eighteen states are currently borrowing from the federal government to cover unemployment benefits. Missouri’s trust fund deficit is two-point-six-billion dollars. Officials in Kansas announced in early August that its unemployment trust fund would be in the red by November and they will have to start borrowing from the federal government.
Florida used up its trust fund on Monday of last week and got a federal loan to fill the gap. One of the provisions of the federal economic stimulus package made federal loans to the trusts funds interest-free through 2011.