Auditor raises concerns about unemployment insurance fund

JEFFERSON CITY, Mo. -- A report by State Auditor Claire McCaskill lends support to Gov. Bob Holden's veto of a bill that would have allowed Missouri to issue up to $100 million in bonds to bolster the trust fund that pays unemployment benefits.

However, McCaskill's audit released Friday also raises questions about a state law that allows Missourians to receive jobless benefits even if they test positive for off-the-clock drug use -- a situation Republicans and business groups have fought for years.

The audit comes as McCaskill is considering a challenge to Holden in the 2004 Democratic primary for governor.

Holden said he vetoed the bonding bill because it would have plunged the state further into debt and could have threatened the state's good bond rating. Lawmakers could consider whether to override Holden's veto during a session that begins Wednesday.

McCaskill's audit said that if the bill went into effect, employers would end up paying about $34 million more than by financing the full unemployment trust fund insolvency through the U.S. Department of Labor.

Federal law requires states to borrow money to prevent a disruption in unemployment benefits. The money used to shore up the fund then has to be paid back over time through taxes on employers.

State money flow

McCaskill's audit, a follow-up to an earlier one, again raised concerns about the insolvency of the state unemployment fund and recommended that lawmakers consider other proposals to try to repair the system.

Last month, officials at the state Labor Department said Missouri will likely have to borrow an additional $120 million from the federal government to pay benefits due during the rest of this year. The money would come on top of $61 million already borrowed by the state this year to temporarily shore up the unemployment insurance trust fund.

McCaskill's audit, however, seems to support arguments that businesses should not have to pay into the unemployment fund for workers who have been dismissed for drug use, whether it was on the job or not.

Currently, Missourians fired for drug-related reasons can receive unemployment benefits so long as their drug use did not occur on the job or was not deemed safety sensitive.

Of 18 states polled by auditors, 14 deny unemployment benefits to those who failed a pre-employment drug test, no matter the circumstance. Seventeen of those states either deny or reduce unemployment benefits for failure of a random drug test, the audit said.

But the audit was quick to note that Missouri courts have upheld the current system, and that officials at the state Department of Labor and Industrial Relations would continue to enforce the current law until it is changed.

The audit also estimated that 1 percent of the $476 million paid in unemployment benefits in 2001 went to Missourians who had received drug-related discharges from their jobs.

Republican-backed bills that have tried to change the current system have run into stiff opposition from labor groups and have failed to become law.

The Labor Department said in its response to the audit that it is making attempts to address issues that do not involve legislative changes.

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On the Net

State Auditor: www.auditor.state.mo.us