This post was contributed by a community member. The views expressed here are the author's own.

Politics & Government

Unemployment Benefits Deal Will Not Address PA's Debt

House leaders pledging to address solvency in the fall.

The House and Senate leaders’ agreement June 15 to extend unemployment delays addressing the state’s $3.5 billion in unemployment compensation debt to the federal government until the fall. 

“Here’s a jobs bill that both extends benefits and provides reforms, so the unemployment (compensation) system is more solvent and is available for those people who need it,” said state House Majority Leader Mike Turzai, R-Allegheny. 

Democratic leaders praised the compromise deal that will help about 45,000 Pennsylvanians who would have lost their benefits Friday, but acknowledged the need to deal with the debt issue. 

Find out what's happening in Hellertown-Lower Sauconwith free, real-time updates from Patch.

“The way this all goes away is to deal with the solvency issue,” said state Rep. Bill Keller, D-Philadelphia, minority chairman of the House Labor and Industry committee.

Keller and Turzai called the deal the most significant unemployment compensation reform in more than a decade. 

Find out what's happening in Hellertown-Lower Sauconwith free, real-time updates from Patch.

As originally proposed in the state Senate, the legislation would have saved $80 million, but a competing proposal in the state House would have saved $630 million annually. The compromise bill will save about $114 million annually, according to Republican estimates. 

While the bill does not address the federal unemployment compensation debt, it contains measures that both sides said would hold down future costs in the state unemployment system. The changes only apply to those who were receiving federal extended unemployment benefits and had been out of work for 72 weeks or more. 

For those people, the top level of benefits will be capped at $572 per week and frozen at that level for next year. Previously, an annual cost-of-living adjustment was made to the maximum level of benefits. 

The benefit freeze will save $10 million this year and between $50 million and $70 million next year, with higher amounts in the years to follow, said state Rep. Ron Miller, R-York, chairman of the House Labor and Industry Committee. 

A proposed increase in the minimum weekly benefit level--from $35 to $70--would be postponed from 2013 until 2015 under the changes made Wednesday. 

Other changes include a new requirement that benefit recipients be actively searching for work, which Republicans said would result in minor savings--and an offset for anyone who receives more than $17,853 in severance pay before leaving their job. 

However, an earlier provision that would have prevented those who willingly quit their jobs from collecting benefits was removed from the bill as part of the compromise deal. 

“There were never dollar amounts on those areas of what we perceived as needed reforms,” Turzai said of the work-search requirement and the willful quit provision. “But that doesn’t mean we’re going to stop working on them.” 

Addressing the solvency issue will require either more serious cuts to jobless benefits--which Democrats and organized labor strongly oppose--or increases in payroll taxes, which are split between workers and employers in Pennsylvania. 

Democrats were pleased with the compromise Wednesday, which Minority Leader Frank Dermody, D-Allegheny, called “a significant victory for Democrats and labor.” 

Gene Barr, director of government relations for the Pennsylvania Chamber of Business and Industry, which represents the state’s business community, said his organization would support the bill even though it does not address the unemployment fund’s debt. 

“Better something than nothing. We have to start getting this under control,” said Barr, who added the cap on the maximum benefit level would help control “runaway spending” on unemployment benefits. 

The Republican attempt to make serious cuts to eligibility to achieve savings on unemployment was derailed earlier this month when 32 members voted with Democrats to kill a more significant unemployment reform bill. 

The state’s unemployment compensation debt to the federal government is forcing businesses in Pennsylvania to pay about $500 million in extra taxes this year to cover the interest. 

Nathan Benefield, research director for the Commonwealth Foundation, a fiscally conservative Harrisburg think tank, said the deal was a bad one. 

"If we’re extending the benefits and not paying back the debt, it means higher costs on employers," Benefield said. "And that means higher unemployment." 

Amendments to the bill were expected Wednesday evening, and it was scheduled for a final vote Thursday. As part of the deal, the state Senate will schedule a new session day Friday to debate the legislation.

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?