Home News Local news ANALYSIS: V.I. JOBLESS FUND NOT A D.C. CONCERN

ANALYSIS: V.I. JOBLESS FUND NOT A D.C. CONCERN

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June 20, 2001 – Sen. Norma Pickard-Samuel proposes to tap the V.I. Unemployment Trust Fund, probably the sturdiest (if among the most obscure) element in the territory's financial structure.
The senator, who met with U.S. Department of Labor officials in Washington earlier this month, wants V.I. employer payments into the fund reduced and said that she will introduce legislation to that effect.
Federal officials in the Labor and Interior Departments have been aware for years that the Virgin Islands had a substantial amount of money in its unemployment insurance trust fund. Some said they were surprised that the territory had not sought to tap the fund before now.
All but the smallest employers throughout the nation pay unemployment insurance taxes into state and territorial trust funds to support unemployment insurance payments to laid-off workers. In the Virgin Islands, this is done under a complex structure of federal and local laws.
The V.I. trust fund, one of the smallest in dollars under the federal system, is by far the most secure. There is about $61 million in it at the moment, enough money to pay 3.71 years of benefit checks. The federal Labor Department regards a 2-year cushion (termed a "high-year multiple") as adequate.
The territory has several options available to address this situation. It can keep the fund high against a future economic disaster, such as a job-destroying hurricane. It could raise unemployment benefits and/or ease qualification standards for laid-off workers. It could lower the taxes paid by employers into the fund. Some combination of these options also is possible.
Pickard-Samuel, who chairs the Labor and Veterans Affairs Committee, has focused on the third option.
Weekly unemployment insurance benefits vary, based on a formula, with higher-paid workers getting higher benefits when laid off than lower-paid workers. The maximum paid out in the Virgin Islands currently is $233 a week, one of the lower rates in the nation.
Locally, individuals can draw weekly benefits only if:
– They were terminated from jobs covered by unemployment insurance.
– They can show that they were not fired for serious reasons.
– They can convince local officials that they are looking for work.
Routinely, in the Virgin Islands, nine out of ten workers applying for benefits will qualify.
The rates that U.S. employers pay in unemployment insurance taxes generally depend on the extent to which their former workers claim benefits. This is called an "experience rating," and it leads under some circumstances to rates changing considerably from year to year.
Experience makes a big difference
This pattern is followed with a vengeance in the Virgin Islands. Contribution rates are set annually. All employers with a negative rating from the previous year — that is, their ex-workers drew more benefits than the employer paid in taxes — are assessed unemployment taxes at 5.4 percent on the first $15,000 of each employee's salary. The formula is the same whether their account was in the red by $1 or by $100,000. If, at the end of that year, they have paid more in taxes than claims levied against their account, the rate falls sharply.
In other jurisdictions, the experience ratings are handled in more nuanced ways, and the unemployment insurance trust funds do not swell excessively. One Washington observer suggested that the current V.I. system is "inept."
Pickard-Samuel says the territory's employers have "grossly overpaid" the unemployment insurance tax and that she wants corrective legislation to cope with what she termed a "roller-coaster effect." There is speculation in Washington that some V.I. employers might find themselves with zero unemployment insurance tax rates for a while, until the inflow and outflow of money gets into closer balance.
The senator said she discussed two other issues when in Washington:
One was a technical matter regarding the time frame for making the unemployment insurance tax payments. Federal officials felt that a recent act of the V.I. Legislature in this regard was in conflict with federal law. The senator said that, even though she voted to override the governor's veto of the measure, she would press for new legislation that would resolve the problem.
The other concerned some $200,000 in penalties and interest in a fund kept separate from the much larger unemployment trust fund. The penalties and interest were collected from V.I. employers who did not pay their unemployment insurance taxes on time. The senator said that these funds had been improperly commingled with other funds and that she has instructed her legal counsel to file a lawsuit against the Finance Department on her behalf if the Labor Department has not received the funds by June 30.
She said that she had written the governor demanding that Finance turn the funds over to Labor. She further said that federal labor officials in Washington are "alarmed that these monies are not being turned over to the V.I. DOL upon request."
Tax experts in Washington told the Source that states and territories can do what they want with these funds. Washington should have no say, for example, in whether the money should be in the hands of the local Labor or Finance Department, they said.
How the V.I. compares
Unemployment in the U.S. as a whole, as the government calculates it, stands at 4.4 percent of the workforce. It is presumably higher in the Virgin Islands, the U.S. Bureau of Labor Statistics doesn't have a figure for the territory. The most recent statistics available in Washington show an average of 325 V.I. workers seeking weekly benefits, and an average of 296 workers actually securing them.
A closer analysis shows that American workers in general are much more likely to apply and qualify for unemployment insurance benefits than those in the Virgin Islands. Last year, 7,033,133 stateside Americans — or about 2.5 percent of the population — drew at least one unemployment insurance check. Meanwhile, the Virgin Islands reported that 1,048 people — or about 1 percent of the territory's population — did so.
Washington experts had no immediate explanation for the much lower percentage of persons in the territory drawing unemployment benefits. Is there hidden prosperity in the Virgin Islands? Are the unemployed in the islands in a long-term jobless situation, with their benefits exhausted? Are some — or many — of the unemployed outside the regulated labor market, and thus ineligible for benefits? (Anyone who works "off the books" cannot qualify for unemployment benefits if terminated; more important, their earnings won't count toward Social Security benefits when they retire.)
The V.I. maximum weekly unemployment insurance benefit of $233 isn't the lowest in the country (Alabama's is $190), but it is below that of most states. The maximum is, for instance, $365 in New York and $275 in Florida.
The average V.I. unemployment benefit check in April came to $213.04, compared to $234.27 in the U.S. as a whole. Fourteen states had a lower average, and the lowest in the nation was for Puerto Rico, $104.01. The size of benefit checks on the mainland sometimes reflects family size as well as prior earnings.

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