More demand shrinks state’s unemployment fund

    Delaware’s Unemployment Compensation Trust Fund has hit a more than 10-year low, but the state is actually holding up well compared to funds nationwide.
 
   Tom MacPherson, director of the state’s Division of Unemployment Insurance, said as the number of unemployed people goes up, the demand on the trust fund increases.
 

  “This is not something that is unique to Delaware,” MacPherson said. “Unemployment is up across the board.”
 
   The national unemployment rate is currently at 6.5%, he said. Delaware’s most recent rate as of September is much lower at 4.7%, according to the Bureau of Labor Statistics.
 
   However, MacPherson said the fund is something they regularly monitor and track on a monthly basis, and the state is not yet at a critical point where it would have to look at doing something differently.
 

   “Things are so fluid right now. Every day we hear about different layoffs … it’s such a fluid situation and that’s why we keep such a watchful eye on the trust fund balance,” he said.
 
   As of Oct. 31, the fund had $145.9 million, down from $289.7 million 10 years ago on the same date.
 
   “The dollar amount really tells the story,” he said.
 
   MacPherson added that Delaware is in better shape than many other states. He would rate the First State at just above the middle of the pack for unemployment trust funds, partly because Delaware has a lower unemployment rate than the national average.
 
   “Across the U.S. there has been an increased demand on every state unemployment insurance trust fund,” he said.
 
   An October report by the National Employment Law Project showed five states’ funds have actually become insolvent. Those states are Michigan, Indiana, New York, Ohio and South Carolina.
 
   MacPherson said the fund is cyclical just like the economy, following behind as unemployment goes up and back down.

    In Kent County, as of Aug. 31, there were nearly 4,000 unemployed people out of more than 71,000 residents, according to the Kent Economic Partnership Inc. Bureau of Labor Statistics for September show Kent with a lower unemployment rate than New Castle County, but a higher one than Sussex.

    Dawn Ford, Delaware district manager for Kelly Services employment agency, said they’ve definitely seen an increase in the number of job seekers in the Dover area.
 
   And those unemployment numbers don’t look to be decreasing any time soon. A Dover job market survey by Manpower Inc., an employment agency, shows employees expect to hire at a moderate pace during the remaining part of the year.
 
   “Compared to one year ago … hiring intentions for the fourth quarter are much weaker,” the report states.
 
   Although MacPherson said more unemployment claims are by far the driving force of the fund’s decrease, there also is some drop in revenue.

    The trust is funded exclusively by assessments paid by employers based on the number of employees, so as employment drops there also is a drop in what employers pay, MacPherson said.
 
   The Social Security Act of 1935 created state unemployment compensation funds. The actual trusts are maintained by the U.S. Treasury from taxes collected from employers as individual states pay unemployment insurance. The states then draw on their funds held by the federal government, MacPherson said.
 
   Although Delaware isn’t looking at doing anything differently yet, there was a change recently for the first time in 20 years during this calendar year, MacPherson said.
 
   Employers used to pay unemployment tax on the first $8,500 of earnings by an employee, he said, adding that taxable amount has been increased to $10,500 in response to what’s going on with the economy.

    At the federal level some changes were made as well, which shows how unemployment demand is creating action, he said.

    In June, the U.S. Congress passed a measure, which gave a 100% federally funded 13-week extension on unemployment benefits, MacPherson said. The measure took effect in July. Unemployed Delawareans get 26 weeks of regular state benefits before the federal extension takes effect.
 
   There’s also some serious discussion of extending the extension to make it even longer, he said.

    “It was a national response to a national issue,” MacPherson said.

Email Jayne Gest at jayne.gest@doverpost.com