Daily Independent (Ashland, KY)


September 11, 2009

No good options — 09/13/09

Unemployment fund deficit may force a business tax hike

As if state government did not already have enough economic headaches comes the not-too-surprising news that the state’s fund that pays unemployment benefits is gushing red ink.

Like most other states, Kentucky currently is borrowing money from the federal government to continue providing assistance to unemployed residents, but barring an economic recovery that includes the creation or restoration of thousands of jobs, the federal unemployment tax on businesses could be automatically increased to start paying back what the state owes the federal government.

With scores of small businesses in this state already eliminating jobs and making other costs in a continuing struggle to survive, an increase in taxes is about the last thing they need. In fact, forcing businesses to pay more to the government is a sure way of curtailing an already weak economic recovery.

Last week Gov. Steve Beshear sent a letter to Kentucky’s congressional delegation asking them to support an extension of emergency unemployment benefits. The emergency benefits are for people who have exhausted tradition unemployment benefits without finding a job. Beshear said almost 123,000 people in Kentucky have claimed emergency unemployment benefits in the past year. The number continues to grow by between 800 and 1,200 each week, the governor said.

Meanwhile, a task force the governor appointed to recommend how to shore up the state’s unemployment insurance trust fund was told things aren’t expected to get much better any time soon.

Kentucky’s unemployment rate stands at 11 percent, according to July data, and averaged 10.1 percent for each month of 2009. Unemployment is up in all 120 Kentucky counties.

Kentucky’s unemployment trust fund indebtedness is likely to grow, Dr. Wayne Vroman of the Urban Institute told the task force last week. It could find itself short by as much as $1 billion over the next several years. The state takes in about $700,000 in taxes annually on employers but has been paying out around $1.2 billion in benefits since the prolonged economic downturn began.

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