La. to Cut Jobless Benefits, Raise Taxes
Friday, October 7, 2005
Louisiana is preparing to cut unemployment benefits, raise unemployment taxes on employers and trim spending on job training next year because of the mounting jobless claims after hurricanes Katrina and Rita, state officials said yesterday.
Nationally, the number of job losses blamed on Katrina and Rita rose to 363,000 last week, the U.S. Labor Department reported yesterday.
Most of those losses -- reflected in new claims for unemployment insurance benefits -- were caused by Katrina, which destroyed or damaged thousands of homes and workplaces along the Gulf Coast, department analysts said.
Louisiana accounts for more than half the total, with 216,324 jobless benefit claims, and projects that tally to reach about 300,000, said Ed Pratt, spokesman for Louisiana Labor Department.
In comparison, 193,000 Louisiana residents filed for jobless benefits in all of 2004, he said.
So far, Louisiana has paid $128 million in storm-related claims, but it expects the total to reach about $1 billion by next August, Pratt said, which would reduce the state's unemployment insurance trust fund to about $500 million. That projection will trigger automatic benefit cuts and tax increases under a law that was passed earlier this year and that takes effect Jan. 1.
The state "will have taken such a big hit," he said.
The maximum unemployment benefit for Louisiana workers who lose their jobs after Jan. 1 will be $221 per week, down from the current cap of $258 a week -- the sixth-lowest in the nation. The national average for this cap is $377.18 per week.
The cuts will not affect the benefits received by the victims of Katrina and Rita, which struck in August and September respectively, because they will have filed their initial claims before the new year, said Alesia Wilkins, Louisiana's deputy secretary of labor.
But the changes will make it more expensive for Louisiana employers to hire the hurricane victims next year. An employer paying the average unemployment tax rate in Louisiana will see that cost rise to $153 per worker per year on Jan. 1, from $126 currently, according to an analysis by the National Employment Law Project, an advocacy group for low-wage workers.
The unemployment insurance changes will take effect at a time when the federal government, private insurers and businesses will be pouring billions of dollars into reconstruction in the Gulf Coast region, providing a significant boost to the economy and increasing demand for workers. Thousands of workers also have left Louisiana, and many will find new jobs elsewhere, which could make the state's labor market tighter next year, economists note.
Unemployment insurance programs are administered by the states under federal guidelines. The benefits are paid out of state unemployment insurance trust funds, with the vast majority of the revenue coming from the unemployment insurance taxes paid by employers. Both the benefit amounts and the tax rates are determined by the states.
Louisiana's trust fund also provides money for state job training programs. Before the storms, the trust fund was authorized to transfer $50 million to a separate state job training fund. But that will be canceled because the trust fund will have fallen below a certain level, Wilkins said.
State unemployment insurance programs cover most workers. The federal government provides disaster unemployment assistance to U.S. workers who lost their jobs because of a federally declared disaster but are not eligible for state benefits -- such as the self-employed.
Disaster unemployment assistance has covered 61,000 of the Louisiana hurricane victims, Pratt said.
Before 1988, the federal government picked up the unemployment-benefits tab for all workers left jobless by a disaster. But in an effort to trim federal spending, Congress passed a law that year shifting most of the costs to the states, requiring them to finance the benefits for all workers eligible for state unemployment insurance, said Maurice Emsellem, policy director for the National Employment Law Project.
The change led many states to adopt the kind of mandatory benefit cuts and tax hikes enacted by Louisiana to avoid being swamped by claims from one event, he said.
Louisiana officials are seeking additional federal money to help them avoid taking those steps, Pratt said.