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Kentucky struggles with unemployment fund issues

When Kentucky began borrowing money from the federal government in early 2009 to pay benefits to unemployed workers, it was one of the few states requiring help. However, now 32 states are receiving loans from the federal government to pay unemployment benefits, and eight more states are expected to do so by the end of the year, according to The Courier-Journal.

States already owe more than $38 billion—a total that will continue to grow. Most states, such as Kentucky, have approved or considered business tax increases and benefits reductions to try to stabilize their unemployment programs.

In Kentucky, the problems with funding the unemployment program reportedly stem from lawmakers voting in 1998 and 2000 to cut the taxes that businesses pay into the system while also increasing the benefits unemployed workers receive. At the time, Kentucky had an $800 million surplus in its unemployment trust fund. During the next nine years, the state paid out more in benefits than the fund received in taxes. In 2009, Kentucky's benefits exceeded revenue by $732 million, and the state started borrowing from the federal government.

A bipartisan group in Kentucky that included state officials and business and labor leaders created a compromise proposal that would have increased state taxes and cut some benefits. Although the bill easily passed the house, it never left the Senate.

Joe Meyer, acting secretary of Kentucky's Education and Workforce Development Cabinet, says the bill represented "equal contributions from the employer side and employee side" and would have cost businesses less than doing nothing. He says federal officials will start raising taxes on Kentucky businesses in 2012 and continue to increase taxes until Kentucky takes steps to fix its fund.

4/28/2010