CHARLESTON, W.Va. -- We're used to hearing bad economic statistics about West Virginia and bad comparisons to other states, but when it comes to unemployment insurance, we're actually ahead of the pack.

 

By Sept. 2010, 32 states had to borrow money from the federal government to the tune of almost $40 billion when their unemployment insurance systems went bust. West Virginia is one of the few, and the only one among surrounding states, to avoid that fate so far.

That's good for business, since employers in states with outstanding federal loans can face higher increased federal unemployment tax expenses.

Part of the reason the state has so far been able to avoid insolvency is due to smart legislative action taken in 2009. When it became clear that the fund's solvency was threatened, Gov. Manchin and the Legislature worked to pass a bill that raised the taxable wage base for unemployment insurance premiums from $8,000 to $12,000.

Part of the problem at the time was the Great Recession, which would eventually more than double the state's unemployment rate, which had been well below the national average.

But part of the problem was also that the rate of employer-paid premiums for the fund had been stuck at the same level since 1981, even though wages had increased since that time and the maximum unemployment benefit had grown by 119 percent over nearly 30 years.

This was in effect a structural problem in the system that waited like a ticking time bomb for a major recession, which eventually came to pass. 

The reforms of 2009 bought the fund and the state's jobless workers some time, but they weren't enough to completely eliminate the problem. According to Workforce West Virginia, current projections show that the fund will come dangerously close to insolvency in March of 2011.

Fortunately, there is a way to avoid that outcome. West Virginia can join the 33 states -ranging from deep red to dark blue - that have changed their unemployment system by modernizing it to reflect the current workforce.

West Virginia can receive $22 million in Recovery Act (aka stimulus) funds by making reforms such as covering jobless part-time workers and those who are again looking for work after having to leave their jobs when dealing with a family crisis, such as domestic violence or caring for a sick family member.

The timing is perfect, provided the Legislature acts quickly in the 2011 session. West Virginia could receive enough money to avoid hitting bottom next spring and avoid borrowing money from the federal government. It would also be a way to avoid another unsavory alternative: dipping into the Rainy Day fund, which will likely be needed to close revenue gaps in coming years. Using Rainy Day money to pay for unemployment insurance would in effect force ordinary taxpayers to fund a liability of employers who lay people off.

While the state could receive the already allocated federal dollars right away, it could delay implementation until well into 2011, when unemployment rates are expected to fall and the fund is expected to recover.

The move would do no harm to employers, since they are already paying premiums on the wages of these workers who are currently ineligible for benefits. Further, involuntary separation from work due to compelling family reasons would not affect employers' contribution rates the way ordinary layoffs do.

The people in these situations, a relatively small number, are not likely to be among the long-term unemployed. Part-time jobs are easier to find than full-time jobs, and labor market conditions are not to blame when people have to leave their jobs for compelling family reasons. In all these cases, people would be eligible to file for unemployment only when they could return to work and start actually looking for a job.

The main beneficiaries of the changes would be women workers, who are more likely to be caregivers for family members or victims of domestic violence. Women also comprise two-thirds of the state's part-time workforce.

Recovery Act funding is estimated to be enough to cover these changes for at least four years given delayed implementation and the state has the option to revisit the program and make changes in the future.

Making these changes is a winner for the state's unemployment insurance system, for the state's business community, and for the people who rely on it through no fault of their own.  And it's the right thing to do.

Wilson, director of the American Friends Service Committee WV Economic Justice Project, is a Gazette contributing columnist.