Utah Unemployment Trust Fund could go broke in 2011

SALT LAKE CITY — Utah's Unemployment Trust Fund is down almost $500 million from two years ago, and legislators learned Wednesday that the fund may go broke as early as the fall of 2011 if the state continues to pay out more than it collects.

The fund became insolvent in 1982 and 1983, when the state had to borrow federal money to fund unemployment claims. The unemployment funds in 35 other states are now insolvent, and those states are relying on interest-free federal loans to pay benefits.

Utah lawmakers who gathered at the Capitol for the workforce services legislative interim report were handed a chart showing skyrocketing unemployment benefits paid out statewide beginning in 2008 and continuing to the present.

Early that year, benefits paid out were less than $150 million, and unemployment taxes collected were just over $150 million. But as the recession took hold, the state paid out $415 million in 2009. Projections show the state will pay out that much again in both 2010 and 2011, compared to only $100 million annually from 2005 to 2007.

At the same time, employers are paying less into the unemployment fund because their taxable payrolls have declined.

Bill Starks, the state's unemployment insurance director, said Utah pays $321 per week to the average unemployed worker — a rate that is 18th highest in the nation. He said every $1 reduction per worker per week would save the fund $1 million annually in 2012 and 2013.

Tom Bingham of the Utah Manufacturers Association told lawmakers the business community is working to help find solutions. "The employer community is willing to increase (contributions) as long as there is a commensurate reduction in benefits."

The state Department of Workforce Services is boosting its attempts to detect and collect overpayments, and it has developed a plan to pay employers a wage subsidy of $2,000 for each worker now collecting unemployment who is re-hired, up to a limit of 2,500 workers statewide.

When asked by committee chairman Rep. Steve Mascaro, R-West Jordan, if the fund will run out of money next fall, Starks declined to answer, saying legislators will have to grapple with how to deal with the issue in January.

Options include modifying current tax statutes that define the funding levels of the trust fund, particularly the mandated reserve levels; cutting the weekly benefit amount; raising unemployment taxes; or doing nothing and depending on interest-free federal loans, as other states are now doing.

In a written statement responding to questions about the fund's future, Starks said it is "unlikely that any statutory changes on either benefit reductions or tax increases could be made early enough to prevent the trust fund from becoming insolvent — however, it would reduce the amount of insolvency."

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