High unemployment and low contributions have battered Missouri’s unemployment trust fund, now projected to carry a $2.6 billion deficit by 2012.
Missouri’s unemployment rate has ballooned to 9.3%, driving the unemployment trust fund into the red by $600 million. The State Department of Labor projects that deficit to grow to $1.5 billion next year, when it projects the unemployment rate will top 10%. In 2011, the unemployment trust fund deficit is expected to grow to $2.6 billion and edge a little higher the following year.
State Labor Director Larry Rebman says addressing the fund must be a top priority of lawmakers next year.
"It’s imperative," says Rebman. "Employers in the state need to come to the table and discuss how we are going to fund this system. It is fully funded by employers and it has been underfunded for decades."
When Rebman talks decades, he means it. Rebman claims Missouri hasn’t properly funded the unemployment trust fund since the 1970s. He says problems began to be systematic by the 80s.
The fund relies on a tax on businesses, enacted by the Federal Unemployment Tax Act (FUTA). Missouri businesses pay a 6.2% tax into the fund. If a state fund maintains a balance, the federal government provides a 5.8% credit to businesses.
Rebman says the trend bothers him, both because of the growing deficit, but also because of the effect such a deficit will have on the ability of businesses to hire in the future.
"This is going to be a drag on employers as we come out of this recession," Rebman says, "and it is very troubling."
For now, the state is forced to keep borrowing money from the federal government to prop up the fund.