State Government
News
Unemployment
Insurance Rates Likely Will Double Next Year
By Steve Tuttle
Employers
should expect significant increases in unemployment insurance (UI)
premiums next year as the state moves to replenish the fund that pays
benefits to workers who lost their jobs in recent months. Many
companies will see their premiums more than double, officials with the
N.C. Employment Security Commission said.
The increase in UI premiums will reverse a trend in which the rates
were repeatedly slashed during the boom years of the 1990s when
unemployment fell to historic lows. As a result of those cuts, which
were strongly backed by NCCBI, many companies now pay very little or
nothing in UI premiums.
The ESC said recently that the state’s seasonally adjusted
unemployment rate had ballooned to 6.3 percent in December — the
highest it’s been since 1984 — and that only $503 million remained
in the state’s UI trust fund. As recently as a year ago the fund
held more than $1 billion in UI premiums paid by employers. A 1999
state law automatically triggers a process of raising UI rates if the
fund drops below $800 million.
The process of raising UI rates will begin in August during the
state’s annual review of the health of the UI trust fund. If the
fund has less than $800 million then, higher rates automatically will
be in effect for the UI payments due at the end of the first quarter
of 2003. At a minimum, the law’s triggering mechanism will cancel
the 50 percent reduction in UI rates implemented in 1999.
Two other factors will influence how high the rates will go. First,
the annual review will set new “experience ratings” for employers
based on how many workers they have laid off over the past year. This
“experience rating” sets higher rates for companies whose laid-off
workers have drawn the most in benefits from the fund. Second, the
annual review also will assess the health of the separate Worker
Training Trust Fund, a $200 million pool of money supported by UI
premiums. Interest earned from that trust fund pays for some workforce
training programs. Current law specifies that if the Worker Training
Trust Fund drops below $200 million, a 20 percent surcharge will be
assessed on UI premiums until the fund returns to its minimum level.
ESC official David Clegg said it seems inevitable that the larger UI
trust fund will be below $800 million in August when the rate-setting
process begins. It’s also very possible, he said, that the state
will have to dip into the Worker Training Trust Fund to remain solvent
until the second quarter of 2003, when higher UI premiums paid by
employers begin refilling the fund.
Clegg said the average employer’s UI premium now is .04 percent of
salaries paid. If the scenarios above play out, he said the average UI
premium would rise to .08 percent of salaries for the 2003 first
quarter, plus a 20 percent surcharge on top of that.
The reason that the UI trust fund has dropped so dramatically, Clegg
said, is that a high percentage of jobless workers are qualifying for
the maximum $396 weekly benefit check. “This is a middle class
recession, there are many claimants who have lost high-paying jobs,”
Clegg added. Also, a high percentage of those who have lost jobs are
remaining in the state to find new work, and not moving to other
states, he said.
Easley Axes Spending: The General Assembly apparently will not have to
convene a special budget-balancing session this month after Gov. Mike
Easley used his emergency powers to seize nearly $900 million in funds
from other accounts to close a budget shortfall. It was the
governor’s second budget crisis in as many years.
A proclamation signed by the governor directs state agencies to cut
their current budgets by 3 percent — a reduction that’s on top of
the 4 percent cut he ordered last fall. However, he said the public
schools would be spared any cuts. Reduced spending by state agencies
will save an estimated $356 million, the governor said.
Easley also seized $313 million in the state’s Rainy Day Fund;
withheld $114 million in local revenue sharing funds; froze $112
million in repairs and renovations funds; withheld payment of $95
million in inventory taxes earmarked for city and county governments;
transferred $80 million from the Highway Fund to the General Fund, and
withheld substantial amounts from three other trust funds.
In all, the governor said his moves would free up $1.2 billion, more
than enough to close a budget deficit that officials said might
approach $900 million by the end of the fiscal year.
Blue Cross Conversion: State Attorney General Roy Cooper has filed
articles of incorporation and bylaws for the Health Care Foundation
for North Carolina, the charitable foundation that will receive an
estimated $1 billion worth of BCBSNC stock when it converts to a
for-profit company.
A committee has been formed to find 11 board members for the
foundation. Cooper will select the 11 initial foundation board members
from a list of 22 candidates submitted by a nominating committee. The
nominating committee includes the following:
 Appointed by NCCBI: Leslie
Bevacqua, NCCBI vice president of governmental affairs; Carla DuPuy,
chair of NCCBI’s Health Care Committee and an employee of Crescent
Resources; Smedes York, the president of York Properties in Raleigh
and a former NCCBI chairman.
Appointed by the N.C.
Center for Nonprofits: Mary Mountcastle, president of the Center for
Community Self-Help; Patricia Smith, executive director of the
Community Foundation of Western North Carolina; Jane Kendall,
president of the N.C. Center for Nonprofits.
Appointed by the UNC Board
of Governors: Bert Collins, president and CEO of N.C. Mutual Life
Insurance Co.; Dr. Nancy Chescheir of UNC-Chapel Hill; Craig Souza,
president of the N.C. Health Care Facilities Association.
Appointed by the N.C.
Medical Society: Robert Seligson, executive vice president and CEO of
the N.C. Medical Society.
Appointed by the N.C.
Hospital Association: Bill Pully, president of the N.C. Hospital
Association.
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