LINCOLN — Growing joblessness in Nebraska and Iowa is taxing state unemployment benefit funds at record levels, slowing the issuance of some checks in one state and promising to require increases in premiums for businesses next year.
The unemployment rate in Nebraska hit 5.0 percent last month, a 24-year high, and climbed to 6.2 percent in Iowa, the highest in 22 years.
While at least 16 states have had to borrow money to keep their unemployment insurance funds afloat, the Nebraska and Iowa funds are healthy for now, officials said.
But a Nebraska official said rising unemployment, as well as jobless benefit payouts that have nearly tripled, is sure to result in higher rates for employers, who finance the unemployment insurance fund.
The Midlands might be dealing with these issues for a while if predictions of a slow recovery are accurate, said Cathy Lang, director of the Nebraska Department of Labor.
“We want to remain optimistic and hope that we’ve hit the bottom of this recession and we can watch the recovery, but all of the experts tell us that the unemployment rates will not recover as quickly as the economy,” Lang said.
An increased cost for businesses is probably coming in Iowa, too. But the Hawkeye state, unlike Nebraska, expanded its unemployment benefits this year so that it qualified for federal stimulus funds.
The $70 million from the federal Unemployment Insurance Modernization Act not only padded Iowa’s fund for paying jobless benefits, but it also allowed the state to hire 50 more state workers to handle the rush of claims, which is 2½ times higher than a year ago.
“With this volume, we need more people,” said Joe Bervid, legal counsel for the unemployment insurance division of the Iowa Department of Workforce Development.
The new workers have helped Iowa meet a federal standard for processing such claims, while Nebraska is lagging just behind that standard.
The federal standard is handling 87 percent of initial claims within 14 to 21 days. Iowa’s batting average over the past three months has been 87.8 percent, while Nebraska’s rate is 83.5 percent.
In Nebraska, whether to accept $43.6 million in federal stimulus funds for unemployment insurance became a political hot potato.
A leading Democrat, State Sen. Steve Lathrop of Omaha, charged that Republican Gov. Dave Heineman was “ducking” the issue by failing to seek legislation to accept the stimulus money. Heineman countered that Lathrop had the power to introduce such a bill.
A spokeswoman for the governor said recently that Heineman is seeking more information on the issue but would not likely support something that raised costs for businesses.
The Legislature didn’t consider the program this spring in part because the state’s business community had not decided whether taking the funds would hurt or help businesses.
The Nebraska Chamber of Commerce and Industry is still reviewing the program and watching what other states are doing.
“It’s not off the table entirely,” said Ron Sedlacek, a lobbyist for the chamber.
But businesses are leery of upsetting what is now a stable and predictable system in exchange for changes that could, in the long run, increase their costs for unemployment insurance.
The issue likely will be raised again in the next session — states have until 2011 to decide whether to seek the federal stimulus funds.
A Nebraska Labor Department analysis concluded earlier this year that the state could accept the money with only a modest expansion in costs and benefits.
Nebraska and Iowa have had the luxury of debating that issue while not facing a crisis in their unemployment insurance funds.
A recent New York Times article indicated that 16 states have been forced to borrow money to pay unemployment benefits because the recession has exhausted their state trust funds.
“They’re telling us that 30 to 35 states will be in trouble before this is over,” said Bervid, the Iowa official.
Unemployment funds in Nebraska and Iowa are being tapped at unprecedented rates.
In Nebraska, $15.9 million was paid out of the state fund to unemployed Nebraskans in May, compared with $5.4 million in May 2008.
In Iowa, the amount paid out in state jobless benefits climbed from $25 million in June 2008 to $62.7 million this June.
Lang said the Nebraska fund is healthy because of increased contributions adopted after the last recession in 2002.
“In 2005, there were periods of time when fund balance did approach alarming levels,” Lang said. But the increased employer premiums, she said, have done their job.
As of July 17, the state unemployment trust fund balance stood at $222.5 million. That is $59.7 million less than a year ago, a reflection of the increased demand for benefits.
Iowa’s trust fund stands at $483 million. The state also has a $150 million reserve fund.
Nebraska and Iowa officials said the record-high demand for benefits, plus increases in joblessness, no doubt will require businesses to pay increased premiums into the fund next year. Those rates are now being reviewed and will be announced later this year.
“The strain on the system has been, obviously, dramatic,” said Ron Joyce, benefits administrator for the Nebraska Labor Department.
Joyce said more than 70 workers are staffing the Nebraska claim center to handle the crush of applications.
He urged people seeking jobless benefits to avoid the busiest days — Monday and Tuesday — or apply for benefits online to obtain the promptest service.
Contact the writer:
402-473-9584, paul.hammel@owh.com
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