In the early 1980s Washington had high unemployment and the trust fund, the money banked through employer taxes to pay unemployment insurance to laid off workers, went dry. To pay unemployment benefits to people without jobs, we had to borrow from the the federal government trust fund. Those loans came at a high price because they needed to be repaid with interest. That was very costly to businesses struggling to keep their doors open on Main Street and keep people working and drawing a paycheck. High costs are a killer especially in these dire economic times.
Washington is in much better shape than California and many other states. Despite our estimated $7 billion revenue shortfall----the difference between the revenue which is estimated to be available to state government and the spending rate of state government as it operates today. That is more than a 20% revenue hole and like many families struggling today, Gov. Chris Gregoire (D) and lawmakers currently meeting in Olympia, have a very difficult job ahead to fund essential services with 20% less money.
Washington also has a flush unemployment trust fund with more than $4 billion in reserves to pay unemployment claims. That money could drain fast if the state's unemployment rate continues to climb. It will drain faster if Gov. Gregoire and legislators divert a portion of that money to increase unemployment benefits or to fund other programs. Those withdrawals increases the likelihood that an increase in unemployment taxes to those providing jobs would occur especially if the economic recovery is delayed or very slow.
Today, the Governor is expected to announce that she wants to draw down the trust fund to provide additional benefits to unemployed workers and to provide some relief to employers. She will spell out that plan at a press conference this morning. The package she is expected to propose is estimated to involve a $400 million withdrawal.
Employers and workers are people and both are suffering in this unprecedented downturn. Nobody has a handle on how long it will last and what its ultimate toll will be on businesses, families, our state and nation. But we must be very careful and use our unemployment funds wisely. With the state's revenue shortfall being so large, there will be lots of creative ideas on how to tap trust funds.Those reserves need to be spent wisely and for which they are intended.
We don't want to go back to the 1980s or find ourselves in the California pickle. Borrowing from the feds should be only the option of last resort. If we aren't careful and judicious, we could find ourselves in a much worse situation a year from now. We need to position ourselves to recover quicker, create jobs faster and to sustain our recovery. And, that all starts by keeping costs down for employers so they can complete worldwide and insure that we keep as many of those currently employed working.
Don C. Brunell, President (DonB@awb.org)
