Recent articles on the financial plight of state unemployment programs have appeared across the nation. Unfortunately, those articles fail to thoroughly investigate the cause of pending insolvencies.
In any funding equation, there are always questions of expenditures as well as revenues. Unfortunately, the experts referenced in national articles only represent the revenue side of the unemployment equation.
In Missouri and Kansas, expenditures are a big part of the problem.
The federal unemployment bureaucracy historically has encouraged states to expand the types and level of benefits paid, well beyond what can be supported by tax revenues. The federal program also financially rewards states that pay those expanded benefits quickly. The combination of paying more benefits more quickly created a system vulnerable to mistakes and fraud. A Government Accounting Office study conducted a few years ago suggested that fraud and abuse amounted to tens of billions of dollars annually, and states did very poorly in their efforts to recover those misappropriated funds.
The federal pressure to expand benefits was evident in the recent stimulus legislation. States were offered millions of dollars, and in many cases hundreds of millions of dollars, for unemployment programs upon the condition that those states expand benefits to groups of workers not currently covered. As a condition of receiving the stimulus funds, the federal government demanded those benefit expansions be made permanent. Once federal stimulus money ran out, states were left to figure out how to pay for the expanded - and now permanent - new benefits.
Kansas did expand benefits and accepted the stimulus money after being assured by the state work force agency that their fund was sufficiently solvent. As a result, Kansas is now expected to be insolvent by year-end.
Missouri passed the expansion of benefits required in order to receive the federal stimulus money, but as a part of that legislation attempted to sunset the expanded benefits when the federal money ran out. The federal government said Missouri's law did not meet the requirements for federal aid because the benefits were not permanent, and declined to provide any stimulus funding.
Unemployment programs were originally designed to provide a safety net for employees who lost their jobs "through no fault of their own." Over time, state unemployment systems have morphed into unstable behemoth programs that support illegal drug users, criminals and the voluntarily unemployed.
For example, Missouri businesses waged a 10-year battle to eliminate unemployment benefits for people who were fired for using illegal drugs on the job. As this debate raged, organized labor was able to sneak into law language that legalized certain levels of marijuana. Business groups were eventually successful in repealing the legalization of marijuana and eliminating benefits for illegal drug users.
Even more recently, a former business owner in Missouri was allowed to claim unemployment benefits against a company she had sold for a sizable profit. The basis for the claim was that the sale of the business constituted a separation from her employment.
Businesses understand their responsibility for funding the unemployment system. However, businesses demand a program that serves as a true safety net, not as a long-term entitlement. Businesses also demand accountability for how government agents spend that money. Simply raising taxes - as is often suggested - simply creates a more expensive problem.
Business groups in Missouri and Kansas are promoting more efficient use of unemployment tax money, increased emphasis on re-employment services and enhanced job training. The only true solution for insolvent unemployment programs is to help the unemployed find and retain work.
Jim Kistler is president and CEO of the Associated Builders and Contractors Heart of America Chapter, which represents ABC members in Kansas and Missouri. The construction trade organization represents more than 25,000 businesses and nearly 2 million employees nationwide. Kistler can be reached at jim@abcksmo.org.
