Unemployed Swamp Fund

New York spends $100M a week as Uncle Sam shores up plan; top benefit is one of nation’s stingiest.

By James M. Odato

Nancy Golin, unemployed the past two years, lives in modest quarters in Albany on an unemployment insurance check of $128 a week. That includes a temporary $25 stipend from federal stimulus money. It doesn’t pay the bills and she hopes a Legal Project lawyer can help her hold off creditors.

“I have prayed diligently,” the 59-year-old receptionist said recently at a Department of Labor job center. “I want to work. I really want to work.”

She’s among more than 500,000 New Yorkers causing a mountain of debt at the Labor Department. Even though they receive some of the smallest weekly checks in the nation for unemployment benefits, the state’s costs for the unemployed are expected to reach $5 billion and put the state $2 billion in the red by year end.

The state is paying $100 million a week from its Unemployment Insurance Trust Fund for claims, compared with $44 million a week last year.

The biggest check an unemployed worker can draw is $405, the same level it’s been for a decade. With the $25 stimulus boost, it still is one of the smallest maximum payouts in the nation.

The average check is $314, said Nancy Dunphy, deputy labor commissioner for employment security, which is the lowest average in the nation.

She says it’s time the rate was raised. The maximum has not increased since 1999, when it received a modest adjustment.

“It’s just not enough to meet the needs today,” Dunphy said. “We’re below most of the country — New Jersey, Pennsylvania and Connecticut are far above us in the range of $600, and in Massachusetts they have a dependent allowance and can add a bit more so it can go over $900 a week.”

She said because the maximum is so low, benefits collected by workers who lose lower paying jobs is also lower. Even with the stingy payouts, the state fund is insolvent because unemployment taxes are relatively light. The state taxes employers only on the first $8,500 of an employee’s salary. As a result, the state fund can’t build up the amount needed to supply the unemployed with the small sums available in New York.

“We have a taxable wage base that is frozen in time,” said James Parrott, a New York City-based economist with the Fiscal Policy Institute, a union-backed think tank.. “The fact that it is so low . . . leads to more job loss, a downward spiral.”

He said the weekly rate must be raised, which means unemployment taxes will rise, but increased jobless benefits will help stimulate the economy because the money is spent after it is received.

The checks were always meant to be economic stabilizers so that job loss doesn’t mean spending on consumable goods comes to a total halt .

Nancy Golen, who is at the Job Center regularly, isn’t stimulating the economy much. She’s borrowing from friends and getting help from her church for basic necessities while working out payment schedules with power companies. “I’m behind on everything,” she said. A $30 gas card from the federal government helped fill her fuel tank recently and was much appreciated.

Two matching bills aimed to address the situation. Labor Committee heads in the two chambers, Assemblywoman Susan John and Sen. George Onorato, had been hopeful of passage. Momentum for change was lost when Republicans staged a coup in the Senate.

The measure proposed would have raised the taxable wages in steps, starting this year at $9,500, $11,500 next year and $13,000 the next year. Parrott said $13,000 is already common nationally.

The maximum payout would rise in July to $475 and the minimum would be $75. The maximum would rise next July to $525; a year later to $575: and $625 in 2012. In 2013 and thereafter, the rate would be half the average weekly wage in New York.

The formula for people not making the maximum would result in higher payments for them, too. Even a small increase would be welcome, recipients say.

“I’ve been looking every day,” said Robert Cristo, 39, a writer and public relations officer out of work since October. He collects $336 weekly, including the $25 stimulus boost. “It’s demoralizing. I have to understand that it’s not all my fault. We are in a difficult situation right now and it is very difficult to get back into the job market right now.”

He said he’s lucky to be living in the Capital Region, because $336 a week in New York City would be nearly impossible to manage.

Dunphy said not only is the low rate hurting the economy, but it also cuts the amount of stimulus money flowing into the state because the federal aid is based on the payment rates . The state is expecting $400 million.

She said about a million different people would have received benefits this year as they enter and leave the system.

In all, the state owes $1.3 billion to the federal government through mid-June, one of 15 states that have borrowed $9.4 billion to meet unemployment insurance obligations. That’s behind Michigan’s borrowing of $2.18 billion and California’s $1.52 billion.

The good thing is the state won’t have to pay the federal government interest on the debt it is building to pay obligations. Under the stimulus legislation, states go without interest in 2009 and 2010.

The bad news is the state’s obligations will likely cause insolvency beyond 2010, Dunphy said, resulting in a need for “a special assessment on employers” to bail out the fund.

The Business Council of New York State objects to raising the taxes and the maximums as proposed, although the employers’ group said it would be willing to negotiate. Gov. David Paterson lists the issue as a priority.

The leading proposals in the Legislature, the council says, would hurt stable employers as much as those who commonly shed jobs.

The proposals would socialize the benefit and raise taxes for unemployment insurance 14.7 percent in year one alone, the group says.