« | »

Tennessee May Reduce Unemployment Pay

From The Tennessean:

Tennessee considers reducing unemployment pay

Small businesses prefer idea to another tax hike

By Bonna Johnson
February 3, 2010

With Tennessee’s jobless rate persistently in double digits, the idea of cutting weekly benefits has emerged as one way to keep the state’s unemployment compensation fund in the black.

That seems like a smart plan to cash-strapped small-business owners, who are paying higher taxes after an increase to keep the fund solvent last year, and some say another tax increase could push them under.

But laid-off workers say the maximum weekly amount is already too low and shouldn’t be tampered with

In Tennessee, the most a laid-off worker can get each week in unemployment benefits is $275, the fourth-lowest rate in the nation and a tie with Florida. (The rate has been bumped up temporarily to $300 a week with a $25 federal stimulus add-on.)…

The state’s unemployment compensation fund stood at $630 million before the recession started. But the pool of money has been drawn all the way down to $103 million as about 170,000 unemployment checks are sent out each week.

The fund is expected to go $20 million in the red in April, but a no-interest federal loan is expected to cover the gap until tax revenues start coming in, said Bill Fox, an economist from the University of Tennessee who advises the state on the trust fund that pays jobless benefits.

However, another shortfall — this one even larger — is expected once again in 2011

On Tuesday, Williams floated the idea of reduced worker benefits in a speech to small-business owners lobbying at the Capitol on behalf of the National Federation of Independent Business, a small-business lobbying association.

Williams said cutting benefits wouldn’t be his favorite thing to do, and other lawmakers are likely to resist.

But "it’s something we should look at doing even though it is not popular," Williams added…

"We tried that little tax increase last year and hoped it would be enough," said John Rotty, president of The Office Planning Group in Gray, Tenn. "Reduced benefits may have to be the next thing they do." …

Tennessee’s maximum payment of $275 replaces just 29 percent of the average weekly wage here. On average nationally, the replacement rate is 35 percent

Lt. Gov. Ron Ramsey said he is confident the state’s fund will remain solvent with no policy changes, but he conceded that smaller benefits may be looked at…

Tennessee’s weekly unemployment benefit is among the lowest in the nation.

Massachusetts: $628
Washington: $605
New Jersey: $584
Pennsylvania: $558
Rhode Island: $546

Tennessee: $275
Florida: $275
Alabama: $265
Arizona: $240
Mississippi: $235

Expect to see more and more stories like this as the Obama recession continues.

This article was posted by Steve on Wednesday, February 3rd, 2010. Comments are currently closed.

4 Responses to “Tennessee May Reduce Unemployment Pay”

  1. BannedbytheTaliban says:

    ” who are paying higher taxes after an increase to keep the fund solvent last year, and some say another tax increase could push them under. ‘

    So the state is forcing small business owners to pay for employees that they don’t have in the form of taxes. Wouldn’t it make more sense to not tax the business and let them use the money to actually employee somebody? Wait, what am I saying, how would that possibly increase dependancy on the government? Welcome to Obama’s America.

  2. proreason says:

    I would layoff the entire government before I cut unemployment benefits.

    And in preparation, I would start immediately.

    • Right of the People says:

      Agreed, I can think of a a whole lot of programs that could be cut before cutting unemployment pay.

  3. crosspatch says:

    They should eliminate minimum wages while they are at it.

    The way many states approach things is to increase taxes on those producing to provide money for those unemployed. That is fine for short term benefits when people are between jobs. The problem comes in when benefits are extended to tens of months. They then increase taxes more on the productive sector to provide a continuing supply of money to those not working. At that point the money becomes a “lotion” or becomes like giving someone with a brain tumor a Tylenol. It eases their discomfort for a while but doesn’t address the underlying problem. Unemployment compensation does not provide jobs and by taxing the productive sector, it might actually make unemployment worse.

    Reducing minimum wages would allow companies to keep employees they might otherwise be forced to lay off in economic downturns. Roosevelt extended the great depression by instituting wage controls that prevented employers from reducing wages and forcing many employers completely out of business as a result.

    Programs need to address the underlying causes of problems and not simply apply a temporary “salve” to temporarily ease people’s suffering. Once the cash is gone, the suffering returns.

« Front Page | To Top
« | »