AUGUSTA, Maine — Maine’s unemployment rate is following the national trend with more Mainers out of work, but the state is not following the trend that has 32 states with inadequate reserves in their unemployment trust funds, some in the red and borrowing from the federal government.
“We are told we have the fourth-best trust fund in the nation,” Labor Commissioner Laura Fortman said last week. “We have reserves to cover 18 months of benefits in an economic downturn.”
Those reserves total about $460 million and are funded by a tax on employers. By the end of 2008, Maine employers will have paid an estimated $89.5 million into the fund. Unlike some states, Maine’s UI fund is paid for entirely by employers.
Fortman said Maine is in good shape today because of a fundamental change in Maine’s UI tax structure that was hammered out nearly a decade ago by lawmakers, business representatives and labor groups.
“We were constantly on the verge of insolvency, which is what most states are experiencing today,” Fortman said. “We looked at the problem, tackled it head-on, and moved to a system that spread out businesses over 20 different slots.”
That “array” system assesses the unemployment tax based not only on the type of employer, but also on how frequently they have used the trust fund. As a result, revenue to the trust fund has been more stable and resulted in the reserves being well above the national average.
“It was not easy to reach this agreement, not at all,” said Peter Gore, a lobbyist with the Maine Chamber of Commerce. “Both sides had to give, and they did.”
In a rare moment of agreement for the parties, Maine AFL-CIO President Ed Gorham said, the reform package was a true compromise. He also agreed the changes made last year improved on the original compromise.
“It helps workers get the skills they need for a new job and back to work,” he said.
It establishes a $3 million Competitive Skills Scholarship program to help pay the costs of retraining laid-off workers, and it fills the gap between federal aid programs and what is needed for some job training efforts.
That program and the continuation of the payment of benefits to part-time workers are funded by a reduction in the reserves in the Unemployment Trust fund. Maine had been keeping 21 months of benefits in reserve; that was reduced to 18 months.
While Maine’s trust fund is sound, the trend plaguing other states of an increasing demand on the system — which has states such as Massachusetts, New York and Texas borrowing — is also being felt in Maine. In December 2007, both Maine and the nation had a peak in payroll employment. Since then, 605,000 jobs have been lost nationally, with 2,900 lost in Maine.
The average benefit was about $267 for the 6,598 Mainers receiving benefits for the week of Sept. 6. In addition, 3,803 Mainers were getting federally paid extended unemployment benefits because they had exhausted their 26 weeks of state benefits.
Another important measure of demand on the UI fund is how many people are making their first request for unemployment benefits. Initial claims were 1,071 the week of Sept. 6, up 44 percent from the first week of September 2007.
Maine’s unemployment rate for July, the most recent month available, was 5.4 percent, up from 4.8 percent in July 2007.
But even with the increased claims, Fortman said, the system is able to handle any expected increase in unemployment.
“The fund is in very good shape,” she said. “We believe it can handle what we expect for demands.”
But the health of the fund also makes it a target. Gorham said his organization has been clear they want an expansion of who is covered under the system and the size of the benefit.
“Seasonal workers are not covered and we think they should be covered,” he said. “The fund has a healthy balance and we have been clear it should be used to help workers.”
Gorham believes there are many ways to structure an increase in benefits, from raising the maximum amount to increasing the allowance for dependents.
Gore worries the trust fund balance will be a target for lawmakers who are facing a budget shortfall. He said that while the fund is healthy, that could change if the recession gets worse and unemployment rates rise dramatically.
“Maine employers can’t afford to have an increase in taxes when they are looking at laying off workers,” he said. “We are very concerned about any efforts to expand benefits.”