With the economy in a crisis and state unemployment on the rise, the Department of Workforce Development announced Tuesday the state unemployment insurance fund may run dry by the end of 2008.
According to DWD spokesperson Dick Jones, the number of unemployment claims remained flat until March, when it began to skyrocket. Now, the number of people being paid is running 30 percent ahead of last year’s numbers.
“National economy is in deep turmoil and affecting all states,” Jones said. “Wisconsin compared to a number of other states is holding its own, but we are affected nonetheless, and it’s having an impact on unemployment funds as a result the claims for insurance.”
Due to this increase, the balance of the unemployment reserve fund is dwindling. The current balance of the fund is now $396 million, down from a high of $558 million at the beginning of the year. If the numbers continue to drop, it would mean trouble for the fund.
“We estimate that we have sufficient funds to play claims through the end of the year,” Jones said. “Early next year, at our current rate of claims, we anticipate a shortage of funds.”
One of the options being considered as a last resort is borrowing from the federal unemployment insurance fund, created specifically for these situations. The last time Wisconsin had to do this was in the 1980s.
However, according to Dan Petersen, vice president of finance at Madison-based construction company J.H. Findorff & Son Inc., the Unemployment Insurance Advisory Council is looking into other alternatives.
“In addition to looking at federal funding, we’re looking at private funding from banks that might be just as good of a fund and not carry all the restrictions,” Petersen said.
The UI Advisory Council was created with the unemployment insurance program to help make suggestions to maintain it.
“The idea was to have the people that pay into the system and the people that draw from it come into agreement over policy changes to the system and ask the Legislature to go along with it,” said James Buchen, vice president for government relations for the Wisconsin Manufacturers and Commerce, another member of the UI Advisory Council.
According to Petersen, the council looks at the number of applicants for unemployment, keeps an eye on the fund balance and reviews notifications from General Motors, Harley Davidson and other companies that have recently had to shut down production, bringing unemployment in Wisconsin.
“Our principle function is to make suggestions that will be submitted to legislatures for their approval that change unemployment laws,” Petersen said.
This includes new legislation passed in March that will increase the amount of wages subject to taxation by employers starting in 2009, and growing in increments until 2013. This will help bring more money into the depleting unemployment insurance fund.
However, despite the economic problems, Jones stressed no one will lose their benefits.
For those who are receiving unemployment now, there will be no interruption,” Jones said. “And for those who may be laid off in the weeks ahead, unemployment will be available.”
