Meanwhile State Unemployment Drops To 8.9% -- Prospects Improve for Federal Emergency Extended Benefits

 Members of the State Senate and House Labor Committees seek answers to their questions on the 2011 UI rate increase.

By The Editors

Washington State Wire

State legislators were stunned on Tuesday to hear that even though Washington State is one of the ten highest-cost states, the average employer unemployment insurance tax is projected to go from 2.39 percent this year to 3.36 percent in 2011.  Combined with an increase in the taxable wage base, it means that employers will see around a 42 percent increase in unemployment insurance costs.

Of course, individual employers will see different increases depending on their experience rating. Nonetheless this increase could not be happening at a worse time for employers struggling to recover.

The projections came during a presentation at a joint meeting of the State Senate and House Labor Committees in Olympia.  Rates will begin to go down after 2011, returning to current levels around 2014.  This prompted several legislators to ask if the 2011 increase could be lowered by “smoothing” it into later years.

Unlike workers’ compensation rates, which give the state some discretion, unemployment insurance rates are governed by a statutory formula that was last revised by the Legislature in 2009.  As a result, the Employment Security Department staff, led by Commissioner Karen Lee, explained to the committee members that any change to the 2011 rates would need to pass the Legislature by the beginning of February.

Department To Request More Costs In 2011

Surprisingly, the agency is looking to propose legislation next year that will increase unemployment insurance costs.  In order to meet the requirements for a one-time federal allocation of $98 million, the department wants to permanently expand benefit costs, either by liberalizing retraining benefits or expanding part-time worker benefits.

Before proposing new costs in a state that already pays the second highest average benefit in the nation, it’s time to look for a more balanced package that will improve the system and at the same time keep Washington state competitive.  "Smoothing" the rate increase alone is not enough.

 ESD Asst. Commissioner Joel Sacks, Deputy Director Neil Gorrell, and Commissioner Karen Lee

Department Kicks Into High Gear As Employment Remains 17,000 Below Last Year

On Thursday, the Employment Security Department announced that the state unemployment rate fell for the third straight month from 9.2 percent in May to 8.9 percent in June.  Nonetheless, employment was still down 0.6 percent from a year ago compared with only a little over 0.1 percent nationally.

The department is doing an excellent job utilizing a variety of programs to get the unemployed back to work.  WorkSource offices appear to be helping the unemployed return to work faster.  Aggressive marketing by the Department has encouraged employers to use the Shared Work Program in lieu of terminating employees, and there has been a 130 percent increase in participation.  The backlog on processing Re-Training Benefit Program applications has been eliminated and participation has increased four-fold since 2008.

While applauding the department’s accomplishments, we must also exercise caution.  Politicians in particular love to speak in glowing terms of the importance of well-intentioned programs like retraining – an “investment in our workers.”  One would hope that naiveté would be gone by now. 

Most of us remember the same praise year after year in the 1990’s, when one state report after another told us just how great our retraining programs were.  Finally in 1997 a bipartisan group of legislators pushed through a real third-party performance audit of the dislocated worker retraining program.  The results were staggering: For every worker who gained from retraining there was one who lost ground on net earnings.  “The program achieved a negative return on the state’s investment.”

            On Tuesday, one Senator, Republican Curtis King, asked about outcomes, and the department acknowledged that they do not track these.  But to be fair, that is the job of the state Workforce Training & Education Board, and the Joint Legislative Audit & Review Committee.

The bigger point here is that we need to move beyond the glowing rhetoric and in-house studies that characterize state government programs today.  We need to recognize that government can be as flawed as any other public or private institution with incentives and disincentives that will always seek to undermine the stated mission.   And without the competition of the marketplace, it becomes even more important to drop the rhetoric and demand real accountability.

Federal UI Benefits To Be Reauthorized

The good news for the unemployed is that the log jam in Congress appears to have broken up and federal emergency extended benefits are expected to be reauthorized in the next two weeks.  That will mean 53 weeks of extended benefits, paid for by the federal government, for qualified claimants.  However, more than 13,000 Washington State unemployed workers have already used all of their benefits.