ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Tuesday, January 14, 1997 TAG: 9701140040
SECTION: BUSINESS PAGE: B6 EDITION: METRO
SOURCE: MIKE HUDSON AND JEFF STURGEON STAFF WRITERS
EVEN BUSINESS GROUPS wonder about the wisdom of reducing the safety net for jobless Virginians.
Some worker advocates are questioning Gov. George Allen's proposal to reduce the unemployment tax paid by Virginia businesses. They say the state should use some of a nearly $900 million reserve to expand its safety net for laid-off workers.
An employers' group, the Virginia Manufacturers Association of Richmond, said it opposes increasing worker benefits and prefers saving the money for use during the next recession. But the VMA isn't certain that a cut in the unemployment compensation tax is a good idea, either.
Last week, Allen suggested a change in the unemployment compensation system, which pays $65 to $224 weekly for as long as six months to people who lose their jobs through no fault of their own.
Employers fund the entire cost of the system through a state tax that ranges from $8 to $496 per employee per year. The exact amount depends on each company's history of layoffs over a four-year period.
Today a joint legislative panel overseeing the unemployment compensation fund is scheduled to debate the issue of the reserve's size.
In November, 709 people in Roanoke, Salem, and Roanoke and Botetourt counties were collecting benefits from the system. In the New River Valley, the figure was about 900; in the Alleghany Highlands, it was 140. In the state, the figure was 22,145. This is the latest information available.
Allen said the account from which worker benefits come has risen to nearly $900 million and said the reserve is large enough that he would propose temporarily lowering the tax on employers. Allen said such a move would stimulate economic growth. He has not specified the lower rate he would seek.
In response, worker advocates argued that any surplus would be better spent increasing unemployment benefits and removing roadblocks to qualifying.
In 1994, about 21 percent of the state's unemployed received compensation through the Virginia Employment Commission, the 48th lowest percentage in the nation. The national average was about 36 percent. That's the latest period for which comparative information is available from the Center on Budget and Policy Priorities in Washington.
"We are right at the bottom. Our program is nothing to brag about," said Walter Wise, president of the Roanoke United Central Labor Council, a coalition of 40 Western Virginia unions. "You see why it's built up a surplus."
"I think it's an opportunity for Virginia to get into the mainstream of the country - and not have such a regressive benefits program," said David Rubinstein, director of the Virginia Poverty Law Center in Richmond.
But an official of the manufacturing trade group said the public has received "misleading" information that painted a rosier picture of the system's health than is justified.
Allen said the trust fund's $900 million reserve could carry the system for four years without employers paying any additional money into the system. But those reports were based on the amount of money the system paid out during the past several years when Virginia's economy was strong, said Bob Kyle, vice president of the Virginia Manufacturers Association. And the reports assumed those payouts would remain unchanged during the next several years, he said.
A more conservative measure of the system's future obligations - a yardstick used by state analysts who look at benefits paid during the past 25 years - showed that the reserve would last less than 18 months, Kyle said.
That reserve is nonetheless relatively close in size to a target lawmakers set for the system in its last overhaul in 1983, Kyle said. For that reason, the employer tax is scheduled for an automatic across-the-board decrease regardless of any action of lawmakers, Kyle said. But it was too soon to know how that reduction would compare with Allen's proposal.
"The tax is going to be reduced no matter what happens," Kyle said.
The question for policy-makers, Kyle said, should be whether the reserve target set nearly 15 years ago is still appropriate. For his part, Kyle said the system appears to be running as programmed, because its reserve shrank during and after the 1990 recession as layoffs mounted, and grew during the recent recovery.
The panel that takes up the issue today must ensure that the fund is not "too high or too low," said its chairman, state Sen. Jack Reasor, D-Bluefield. He said the committee would consider whether benefits are high enough for workers, but the panel's main duty "is to protect the integrity of the trust fund."
Southwest Virginia businesses are "cautiously optimistic" that a small tax cut may be coming and that such a cut would enhance the perception of the state's business climate, said Bud Oakey, a lobbyist with the Roanoke Regional Chamber of Commerce.
"It sends a message Virginia government is interested in business and will help wherever it can," Oakey said.
However, businesses might prefer to forgo a small tax break now if it would be only temporary or would trigger a tax increase later if layoffs increase, he said.
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