Vermont's unemployment fund being stretched thin by layoffs

(Host) As more people lose their jobs in Vermont, the fund that pays for unemployment benefits is getting stretched thin.

State officials say companies may have to pay more - and benefits for the jobless may have to be reduced - to keep the fund solvent.

VPR's John Dillon reports:

(Dillon) The state economist predicts that Vermont's unemployment rate will rise to almost 8 percent by mid-2010.

That means more people will collect unemployment benefits, which usually last for 26 weeks.

But the fund that covers those benefits is paying out more than it collects from employers. Governor Jim Douglas says the Legislature will have to deal with the issue.

(Douglas) "The demand for benefits is increasing in this era of high unemployment. So it's very possible that we'll have to ask employers around the state - unless we get a lot of assistance from Uncle Sam - to make additional contributions there."

(Dillon) The amount that companies pay into the fund is based on a percentage of the first $8,000 that employees earn.

Labor Commissioner Patricia Moulton Powden says that base rate hasn't been adjusted for over 20 years.

(Powden) "And yet we have made adjustments to the benefits that we pay out. So it's not sustainable to keep the level of income to the fund level yet the benefits and outgo from the fund has been increasing. And so looking at the taxable wage base is an option to increase the contributions to the fund. And then another option may be to try to make some adjustments in the benefits payments."

(Dillon) The fund in Vermont is paying out about $35 million more a year than it takes in. If the fund runs out of money, states can borrow from the federal government.

According to Powden, unemployment benefits in Vermont are fairly generous compared to other states.

(Powden) "And that's a good thing. We want to make sure we provide benefits to people during an economic downturn. But maybe we need to bring some of those expenses more in line with averages around the country."

(Dillon) Chris Barbieri of the Vermont Chamber of Commerce will be following the issue in the Legislature. He says many companies in Vermont are on the edge financially.

(Barbieri) "So it's going to be, I think, a juggling act to be sure that we are paying benefits that are needed to be paid to the unemployed and at the same we're keeping in mind the burdens currently on the employer community, which include also the minimum wage increase which occurred yesterday."

(Dillon) Powden says Vermont's fund is actually in pretty good shape compared to some other states. She says some state funds already have deficits.

For VPR News, I'm John Dillon in Montpelier.