Loan keeps unemployment fund afloat

SANDPOINT — Month after month of skyrocketing unemployment has taken a toll on Idaho, and now the state is taking the unprecedented step of borrowing from the federal government to keep its unemployment insurance trust fund afloat.

Thanks in part to 2005 legislation meant to reform the unemployment insurance program, the state’s insurance trust now carries a target balance of approximately half of what it was prior to the reform. One month before the recession hit — November 2007 — Idaho had a total of $318 million earmarked for unemployment insurance, but record insurance payouts and an historic jobless rate — topping out at 9.4 percent in July — has steadily drained the sytem. By the end of May, the funds had dwindled to $43 million, with much more money going out than coming in, according to the Idaho Department of Labor.

The state began borrowing money from the federal government in June to keep the program solvent, taking a sum of $45 million to cover June and July. Idaho will continue to borrow as needed, and could owe the government as much as $190 million by the time the recession is over, according to Bob Fick of the Idaho Department of Labor. Fick said the loans, which are interest free, will likely be paid back by the end of 2010 using the states tax revenue.

The problem, according to Fick, is that most experts believed a recession of this size and scope was unlikely, which led to the 2005 reforms.

“I think that when the labor and business and policy makers sat down and reached the consensus that they did on the bill that passed in 2005, they believed, as a lot of people believed — economists and otherwise — that the economy had evolved to the point that recessions would be shallower and shorter than they had been historically. Clearly, that hasn’t been the case,” he said.

When the Legislature returns to Boise in January, lawmakers will have an opportunity to tweak the insurance program, which would likely result in higher taxes for business owners. Sen. Shawn Keough, R-Sandpoint, said she will explore all options that could help alleviate the state’s monetary strain.

“I think we do have an obligation to take a look at the system, the unemployment system and all of our systems, to see what we can do to weather another storm like this without severe consequences to either the taxpayers or the state government services that people have come to expect,” she said.

While she knows that difficult decisions will have to be made, Keough said there is a fine line between helping the unemployed and hurting business owners by raising taxes.

“Idaho does not want to be in a position where we’re putting employers out of business,” she said. “But, at that same time, we do have an obligation to try to assist the unemployed.”