Unemployment windfall will keep Missouri fund afloat -- for now

Friday, March 15, 2002

JEFFERSON CITY, Mo. -- A federal economic stimulus bill will result in a $161 million windfall for Missouri's unemployment trust fund -- enough to keep it from going broke before the end of this year.

Even so, the state fund that pays unemployment benefits is expected to become insolvent sometime in 2003, said Gracia Backer, director of the state Employment Security Division.

"This is an extraordinary distribution," Backer said Thursday. "It will get us through the end of this calendar year, but it is absolutely just a Band-Aid."

The legislation signed recently by President Bush includes federal money to extend unemployment benefits an additional 13 weeks beyond their typical cutoff. It also includes the distribution of surplus federal unemployment funds under a 1954 law.

It's that second, less-publicized category that is resulting in $8 billion of unemployment payments to states, including Missouri's share, Backer said.

Without the federal money, Missouri's Unemployment Compensation Trust Fund was expected to be $26 million in the hole by the end of 2002, Backer said, and at least $238 million in the red by the end of 2003.

The fund collects unemployment contributions from employers and pays benefits to people who lost their jobs.

Time for solutions

A report in January by State Auditor Claire McCaskill also projected the fund to become insolvent. If that happens, the state would borrow money from the federal government to keep paying benefits, which likely would increase employer costs, the audit said.

"Although the money is not a permanent fix to the problem that our audit revealed ... it will provide a longer period for lawmakers and the business community to consider solutions," McCaskill said in a statement Thursday.

Her audit had recommended the Legislature increase tax rates charged to employers and delete provisions allowing some employers to avoid the taxes.

It also recommended an increase in the taxable wage base that would be indexed to average wages.

The Legislature has not acted on those recommendations.

Although the full $161 million from the federal government will be deposited into Missouri's unemployment trust fund, some of it could be appropriated for the administrative expenses of the Employment Security Division and state workforce development office.

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