The Honorable Larry Craig
U.S. Senate
520 Hart Senate Office Building
Washington, D.C. 20510
Feb. 12, 2008
Dear Senator Craig,
As you know, Idaho's economy has been one of the nation's strongest. But our state's economy has been slowing since last September. The result is an intensifying demand for unemployment insurance benefits - a demand that the U.S. Department of Labor has been unable to finance despite its legal obligation to provide states with the resources necessary to efficiently and effectively administer the program.
We need Congress to match the funding levels for state administration of the Unemployment Insurance Program with the increase in the average weekly insured unemployment as recommended by the Congressional Budget Office and adopted by Congress. Failure to do this is, in effect, a tax increase on employers. Unemployment tax rates in Idaho and in most states are based on trust fund reserves. The more we pay out in erroneous benefits and the less we collect in owed taxes, the more tax rates will increase to restore the reserve to adequate levels. There is simply no other alternative.
From September through December, Idaho's unemployment rate jumped three-quarters of a point from a record low 2.3 percent to 3 percent. The number of workers without jobs skyrocketed 10,000, a 78-percent increase from 12,800 to 22,800. Since 2008 began, the number of weeks of unemployment benefits paid out has been 30 percent higher than a year ago, and the total weekly payout - now exceeding $5.5 million - has exceeded the high-water mark of 2003 for the last four weeks.
In the face of these circumstances, the U.S. Department of Labor has informed Idaho - and all the states - that it will be providing only 32 percent of the money needed to meet this escalating workload. For Idaho, that is a reduction of at least $1 million in this fiscal year on top of the $800,000 the U.S. Department of Labor cut from the $15 million base operating grant earlier this year. That $1 million reduction was the result of Congress changing the U.S. Department of Labor's estimate of average weekly insured unemployment to a higher number provided by the Congressional Budget Office without adding resources to fund the higher workload. As a result, workload above the base level is only partially funded-the cause of the 32 percent funding level. The Idaho Department of Labor already has cut 100 positions in the last two years to cope with federal reductions in the unemployment insurance administrative grants and other employment and training programs. Additional positions will need to be eliminated to cope with this new $1 million cut in spite of the fact that unemployment is increasing.
This inadequate support comes as the federal government took in $5.6 billion in federal unemployment insurance taxes from the nation's employers but sent back to the states only $3.5 billion to run the nation's employment security programs. This is happening at a time when balances in the federal loan and extended benefit accounts exceed $30 billion, nearly double the balances three years earlier and enough to fund the program for several decades based on actual experience over the past 20 years.
The Idaho Department of Labor's commitment to timely issuance of unemployment benefits is exceptional. Even under this mounting workload that measure of performance continues to be met. Our state received the federal Pinnacle Award for the best overall unemployment insurance operation in the nation in 2007. Central office staff is stepping in to help the local offices facing the heaviest traffic in unemployment claims, but they are doing so now at the expense of other administrative tasks. This action will cause the U.S. Department of Labor to reduce funds in future years for those administrative tasks. In addition, this action - in concert with Idaho's staff reductions mentioned earlier - is diverting efforts from fraud detection and nonpayment of taxes to the processing of benefit payments. Accuracy in claims allowance likely will slide as limited staff is forced to handle more and more cases. Millions of dollars in undeserved benefits or unpaid taxes hang in the balance.
In conclusion, we need your help! In more than 13 years as director, I have never seen such inadequate support for programs that are so important to our employees and businesses. The amount of benefits paid out last week to more than 22,000 people - an increase of 35 percent over 2007 - reached nearly $5.7 million, up 47 percent from the same week in 2007. During the first week of October, by comparison, benefits totaling less than $1.5 million were paid to fewer than 6,000 workers. At this rate, it will be difficult to administer this program by cutting staff at the same time our workload is dramatically increasing.
Please know of our gratitude for all you've done for us and for your continued support.
Sincerely,
Roger B. Madsen
Director
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