Editor’s note: Please see the video at the end of this post.
The trust fund the state uses to pay out unemployment benefits is not solvent yet, but is well on its way, Gov. Peter Shumlin said Monday.
Using a laptop computer and wireless Internet connection outside state offices in Montpelier, Shumlin hit “send” on a $54 million transfer from Vermont’s Unemployment Trust Fund to the U.S. Department of Labor’s Employment and Training Administration.
The transaction is the final payment in a $77.7 million federal loan the state took out in 2010. The repayment comes two years ahead of schedule.
The final payment on the loan leaves about $50 million in the trust fund. Officials Monday estimated it will take a few years to build it up to the target figure of $160 million.
In the meantime, the state will save money on interest for the loan, and employers will see a $21 per employee annual tax reduction.
Policymakers passed legislation in 2010 that tweaked the way the fund both gathers and doles out money. Employers had to pay in a little more, while employees could take out a bit less.
Shumlin and Tom Torti, CEO of the Lake Champlain Regional Chamber of Commerce, praised legislators at the press conference for sticking to the “share the pain” strategy, even amid calls this spring to boost worker benefits. It was “not the time,” Torti said.
Bill Driscoll of Associated Industries of Vermont celebrated the repayment as “the first great milestone,” but pointed out that the Unemployment Insurance Trust Fund is years away from being fully funded.
“Two things got us into this mess,” Shumlin said. The Great Recession, he said, generated a flood of layoffs and high demand for benefits. Vermont’s depletion of UI Funds was hardly unique. Twenty other states still have not paid back the money they borrowed for the same reason during the recession, according to a news release from the governor’s office.
The second factor, Shumlin said, was the fact that businesses hadn’t paid enough into the fund. The state didn’t increase the employer contribution rate for two decades. That lag in the rate made the recession’s impact on the fund a “double whammy.”
As the fund continues to rebuild, some of the 2010 reforms will be gradually lifted.
Shumlin said there will be:
• a gradual reduction in the employer contribution rate;
• a thaw in the maximum weekly benefits for workers, which currently are frozen at $425;
• a gradual reduction in the taxable wage base, meaning that employers will have to pay the unemployment tax on less of the wages they pay.
Policymakers already tapped $5 million from the fund to cover the UI Disaster Relief program, which gave businesses a break on their tax rates after layoffs caused by natural disasters in 2011.
