(Host) As the Legislature struggles to balance the state budget, it also hopes to address a growing deficit in the state’s unemployment insurance trust fund.
But negotiations between lawmakers and the Douglas Administration broke down this week. Both sides say they hope to reach a compromise this year, before the fund deficit gets worse.
VPR’s John Dillon reports:
(Dillon) Economists predict the state’s unemployment rate will swell to 9 percent as the recession continues.
For the thousands of people who are out of work, the unemployment fund helps pay the bills for at least 26 weeks.
But Vermont’s fund is in the red – the deficit will reach about $50 million by year’s end. That means the state has to borrow money from the federal government so people can still collect benefits.
But the feds eventually have to be paid back. So the Douglas administration and legislative leaders hope to work out a fix to raise more money.
The talks stalled this week. Senate President Peter Shumlin says the Douglas administration proposal would have reduced benefits and raised taxes on businesses by $66 million.
(Shumlin) "We’re looking at two problems. One is that the administration wants to reduce benefits to the unemployed at a time when we have more unemployed than at any time in Vermont‘s recent history. Second, then the governor wants to raise taxes on businesses that are struggling to stay alive. And we just think that’s the wrong medicine."
(Dillon) Vermont businesses now pay unemployment tax on the first $8,000 of a worker’s wages. That base rate hasn’t been raised in about 20 years. Shumlin said the legislature wants to raise it in stages, from $8,000 to $10,000 next year and $11,000 the following year.
(Shumlin) "What the governor wanted to do was raise that cap originally to $18,000. That would have doubled taxes on businesses at a time they can’t take that kind of pressure."
(Dillon) Labor Commissioner Patricia Moulton Powden said the administration would settle for a smaller tax increase. But she said the state also needs to look at trimming benefits.
(Powden) "The governor and we feel pretty strong that has to include a balanced approach. Still that includes some modest taxable wage base increases and some modest benefit adjustments, recognizing that we have to talk about both the income and expense side of this equation."
(Dillon) Powden says benefits have to be on the table, because Vermont is fairly generous to the unemployed. For example, she said people who get fired for misconduct can still collect benefits. And she says it’s possible to get unemployment after only six weeks on the job.
(Powden) "And we recognize it’s an important safety net for Vermonters, but we also have to look at what we can afford. And clearly with the trust fund getting to the point where we have to borrow, we can’t afford to maintain the same level of benefits."
(Dillon) Powden said the administration could accept an interim fix to the unemployment system while the more difficult questions of benefits and taxes are tackled by a summer study committee.
For VPR News, I’m John Dillon in Montpelier.