The Senate Commerce Committee heard testimony from Labor Commissioner James Neely regarding the status of Tennessee’s unemployment trust fund and the potential effect of stimulus money coming to the state as a result of the American Recovery and Reinvestment Act. Neely urged committee members to act to shore up the fund or face the possibility of borrowing from the federal government if it becomes insolvent. Neely predicts the state unemployment fund will be broke in just over a year if things continue to deteriorate at the current rate.
Tennessee’s statewide unemployment rate for January was 8.6 percent and is estimated to have risen to more than nine percent. Neely said rural communities have been particularly affected by the recession. Cities have a more diverse workforce, many of which are service-oriented, a sector of the job market that has not taken as hard a hit as manufacturing and other jobs found in rural areas.
Due to the rise in unemployed workers, Tennessee’s unemployment fund has decreased from $609 million last July to its current level of $269 million. The federal government has urged Tennessee to have $1.2 billion in the unemployment trust fund to weather the three-year cycle prognosticators say it will take before an economic recovery occurs. Neely said the administration is drafting legislation that proposes increasing the taxable wage base employers pay to cover the unemployment benefits of laid-off workers from $7,000 to $9,000. They are also proposing an increase in the premium rates by .6 percent.
The plan would generate $220 million in revenues, a level which Neely says would keep Tennessee from going into the red and borrowing from the federal government at interest rates of up to 25 percent. He said borrowing money from the federal government would result in a costly surcharge to employers in addition to increasing taxes to keep the fund solvent.... read the rest of the story by Subscribing now.