State's jobless fund expected to run dry

With or without stimulus money, Virginia's unemployment trust fund is withering.

Even if the state had voted to accept an additional $125.5 million in federal money to expand those eligible for unemployment benefits, the fund would still need bolstering.

"That would have enabled us to go longer without going broke and it would also have enabled us to borrow less money" from the federal government, said Donald Lillywhite, a research analyst with the Virginia Employment Commission.

The House of Delegates on Wednesday voted down Gov. Timothy M. Kaine's bid to amend Virginia law to extend jobless benefits to unemployed part-time workers, and to those who are not working, but training for other positions.

The state estimated that about 8,000 jobless part-timers and unemployed people training for work would have been covered under the expanded benefits, Lillywhite said.

As the jobless rate creeps up, the unemployment trust fund pays out more in benefits.

The fund had about $320 million at the end of March and it is currently paying out about $25 million a week, according to Lillywhite. Roughly 90,000 people are drawing an unemployment benefit.

Though the General Assembly rejected the $125.5 million, it approved $62.5 million in stimulus money to extend unemployment benefits for those now eligible by an additional 13 weeks to a maximum of 59 weeks of stipends.

That money will go into the trust fund, which still is expected to run out of money late this year or early next year and trigger borrowing, according to lawmakers.

"Regardless of what happens with stimulus, employer taxes are going to go up dramatically," Lillywhite said.

The average unemployment tax for this year is $95 per employee, and it could jump to $201 per employee by 2011, Lillywhite said.

If the legislature had extended benefits to unemployed part-time workers and for those who are in training, employers could have paid an additional $4.56 per employee per year once the $125.5 million in stimulus funds were exhausted.

Kaine says that amounts to a penny a day. He has said Virginia employers pay the second-lowest annual amount of unemployment taxes in the nation. The next-lowest unemployment tax burden is in South Carolina, where employers pay an average of $148 per year, per worker.

Republicans, most of whom opposed the stimulus funds for expanded unemployment benefits, said the low tax burden has contributed to Virginia's good business climate and attracted jobs to the state.

"It's hard to argue against taking money that would help people who really need it, but taking the money now would hurt Virginia later," said Julia Ciarlo Hammond, Virginia director for the National Federation of Independent Business. "Once the stimulus money runs out in a couple of years, Virginia would have to pass a tax increase to continue funding the extra benefits."

Del. Samuel A. Nixon Jr., R-Chesterfield, was the sponsor of the bill that added $62.5 million in stimulus funds to extend unemployment benefits for those who are now eligible. But he opposed accepting the additional $125.5 million and said it would have acted as a disincentive to hiring part-time workers.

If the money had gone to the unemployment trust fund with no strings attached, the legislature would have approved it, Nixon added.

The chance to take advantage of the federal cash could still return.

George C. Peyton Jr., vice president of government relations for the Virginia Retail Federation, said the group didn't know going into the vote how part-time workers are defined, and there is still some confusion on that point.

"I think if this was brought back in the context of a piece of legislation that could be drafted to identify that the part-time workers in the stimulus money would be permanent part-time workers, then the vote could possibly have a different outcome," he said.

Businesses are concerned about part-time eligibility including seasonal help, such as college students working just over a summer.

Also, the group would want a determination of what would happen when the stimulus money runs out.

Kaine suggested Friday that he could call legislators back into special session if a few delegates change their minds. The House voted 53-46, on an almost straight party-line vote, to reject the funding.

If not this year, the issue could be revisited if Democrats win control of the House of Delegates, House Minority Leader Ward L. Armstrong, D-Henry, said. All 100 House seats are up for election in November.

Virginia is not the only state to turn down the money.

The Republican governors in several states, including Louisiana, Alaska, Texas, South Carolina and Mississippi, say they will reject at least part of the federal unemployment aid.

Contact Olympia Meola at (804) 649-6061 or omeola@timesdispatch.com.

Contact Tyler Whitley at (804) 649-6780 or twhitley@timesdispatch.com.