By Paul Snyder
Wisconsin’s unemployment insurance budget has slipped into the red and is projected to be more than $2 billion in debt in each of the next four years.
To avoid that crisis, state lawmakers are working on a bill, to be introduced in spring, that would offer possibilities to stem the bleeding.
But there will not be a quick fix or a painless solution, said James Buchen, vice president of Wisconsin Manufacturers & Commerce. “This is going to have to be figured out over a period of years.”
“It would be too much of a shock to the system,” he said, “to try putting something in place that would solve everything.”
The Assembly Committee on Labor on Tuesday discussed the solvency of the unemployment insurance budget. The news is not good, said Hal Bergan, an administrator in the Wisconsin Department of Workforce Development’s Division of Unemployment Insurance.
The state Legislature in 2008 decided for the first time since the 1980s to adjust businesses’ taxable wage base, which is the maximum amount of wages subject to the unemployment insurance tax. The tax funnels money into the unemployment insurance budget.
The move incrementally bumped the taxable wage base from $10,500 in 2008 to $14,000 in 2013 and was designed to close projected shortfalls in the unemployment insurance budget.
But the stock market collapse and ensuing recession in 2008 led to higher layoffs and pushed the state deeper into debt.
It was not anticipated, said state Rep. Mark Honadel, R-South Milwaukee.
“If not for the recession,” he said, “we probably would have fixed our own problem.”
Instead, Wisconsin is now one of 25 states borrowing money from the federal government to cover unemployment claims. As of last week, Wisconsin had borrowed $734.2 million this year.
Bergan said states are projected to have borrowed $90 billion for unemployment payments by 2012.
To get Wisconsin out of the borrowing hole, Buchen said, all ideas must be on the table, and that includes further increases to taxable wage rates and cutting benefits when workers don’t need them.
Cutting unemployment benefits in a state with so many unemployed construction workers is going to pose problems, said Tom Fisher, president and business manager of the Wisconsin Laborers’ District Council.
“We’ve got a lot of seasonal workers that count on unemployment to get them through the winter months,” he said. “I don’t know how you can change the plan with the way it’s structured today and protect extended benefits, but we’ve got to protect them.”
Honadel, who said drastic changes may be needed, proposed that employees set up a tax-free account that siphons 5 percent of their earnings into an individual unemployment budget.
Yet other committee members, including Chairwoman Christine Sinicki, D-Milwaukee, scoffed at the idea, calling it an unfair tax on employees who could lose their job through no fault of their own.
It’s that type of back and forth that lawmakers expect as they work with DWD’s Unemployment Insurance Advisory Council during the next few months to chart a course for Wisconsin to get back into the black.
“Maybe it’s time,” Honadel said, “that Wisconsin thinks way outside the box.”