Maine Unemployment Trust Fund Stable, Despite Recession Bookmark and Share

November 30, 2009

Maine Labor Commissioner Laura Fortman announced today that the Maine Unemployment Trust Fund will continue to operate in 2010 without interruption. However, higher total benefits paid during the recession have triggered an increase in unemployment insurance premiums – an automatic process set in state law – which will generate enough to cover costs in the year ahead.

According to recent projections from the U.S. Department of Labor, Maine will be one of only a handful of states to emerge from the recession with a solvent unemployment trust fund. The agency estimates that as many as 40 states will have to take out loans in 2010 in order to continue to pay unemployment benefits to workers who have lost their jobs. So far, states have had to borrow over $20 billion to stabilize trust funds hard hit over the last two years as benefit payments to laid-off workers have exceeded income received from unemployment insurance premiums paid by employers.

Most states are expected to increase employer premiums next year as a measure to pay for the added cost of increased unemployment claims during the recession. Each New England state has announced an increase in unemployment premiums in the last two years.

Maine unemployment Insurance premiums are adjusted automatically each year, based on the amount of reserves in the state unemployment trust fund. The rate is calculated on a formula set in state law. Thanks to a healthy reserve balance that had built-up in the trust fund during better economic times, contribution rates in 2008 and 2009 were at the lowest possible schedule (Schedule A) provided for in state law. For the last seven years, rates were at the lowest or next to lowest schedule allowable.

The Maine unemployment trust fund is projected to pay nearly $254 million in benefits to workers impacted by job loss in 2009. Only $83 million in employer premiums is expected to be collected during the same period. Employer premiums paid to the unemployment trust fund can only be used to pay benefits. All operating costs for the program are paid for with Federal funds received from the U.S. Department of Labor. Maine’s premium increase is expected to bring in an additional $54 million to ensure the continued stability of the fund in 2010.

Maine unemployment premium rates are currently 27th in the nation (with 1 being the lowest). Maine benefit rates – the amount of benefits the average claimant receives – are 36th lowest in the nation.

Recent program changes have helped mitigate trust fund costs for employers. Earlier this year, unemployment modernization legislation signed by Governor Baldacci qualified Maine to receive $28.2 million in Federal funds that were added to the Maine unemployment trust fund and reduced reliance on employer contributions to pay benefits. In 2007, Maine decreased required employer contributions by $67 million over two years by adjusting reserve levels in the trust fund. A $32.5 million Federal grant distribution made to the trust fund in 2002 also boosted reserves in the account.

Maine Labor Commissioner Laura Fortman also credits the solvency and stability of the Maine unemployment system to a law change that occurred 10 years earlier that put the fund on solid ground.

“Business and worker advocates came together and compromised on a plan that shored-up the Maine trust fund and ensured that there were enough reserves on hand for when a recession hit,” said Fortman. “While other states are borrowing and face the prospect of expensive interest payments, Maine’s fund will have enough to continue to pay benefits to workers impacted most directly by the recession.”

Individual employer contribution rates are being calculated now based on the new schedule. Notice of 2010 rates will be mailed out to all employers starting December 16.