Recession slams Utah's unemployment system

After Susan Carlson lost her job in December, the Salt Lake City woman filed for unemployment benefits for the first time in 35 years on the job.

In doing so, she joined thousands of other jobless Utahns whose quest for help has strained the state's unemployment system like never before. The Utah Department of Workforce Services earlier this year experienced one of the steepest surges in workload anywhere in the country.

New weekly claims for unemployment benefits in Utah leapt from 687 in July 2007 to 5,397 a week near the start of 2009. With just fewer than 50,000 of the estimated 75,000 state residents currently out of work drawing assistance, total jobless benefits paid out per week now exceed $14 million, compared

with $1.6 million weekly just two years ago.

For several frantic months last winter, phones at the state Department of Workforce Services were sporadically overloaded as hundreds of newly unemployed Utahns called in or formed long lines at job centers across the state, seeking help. The agency had to triple its phone-line capacity, hire about 55 new claims processors and revise upward its federally set administrative budget by about $7 million to handle the glut.

"This recession was like no other," said Bill Starks, Utah's director of unemployment insurance. "It came on so fast and furious. We've never had increases like this."

With the spike in demand, the number of benefits applications that result in conflict between ex-workers and employers also has risen dramatically.

Initial appeals to eligibility decisions by Workforce Services more than doubled between May 2007 and May 2009, and the number of especially contentious cases subsequently appealed to a higher level nearly quadrupled in the same time period.

The department has scheduled more than 100 hearings per available day so far in 2009, nearly three times the level for all of 2007.

Those hearings included one for

Carlson, who appealed after the state denied her initial claim, concluding her job loss was related to her own performance and not the economic downturn.

Carlson fell at work in April 2008, broke her shoulder and had surgery. An already strained relationship with a new supervisor worsened after the accident and she returned to work part time. She eventually was let go after returning to work full time.

The state denied her appeal, too.

She's looking for another job, but feels discouraged by both the bad job market and what happened to her.

"It's their word against mine," she said. "It's sad."

Stories like hers speak of the desperation a state attorney believes may be driving a trend in appeals

that is without historic parallel.

"It looked like a Korean rocket," Micheal Medley, Department of Workforce Services general counsel, said of the spike in appeals. "It just went straight up."

 

But Utahns better off than most » By national standards, the Beehive State's jobless rate remains low, at a seasonally adjusted 5.2 percent in May, compared with a U.S. rate of 9.4 percent. Rates are as high as 13 percent in hardest-hit states. But job losses have spread to nearly every sector of the Utah economy and deep into most rural and urban areas.

The greatest declines have come in construction, manufacturing, professional and business jobs, and the trade and transportation and utility industries. In percentage terms, Wasatch, Emery and Daggett counties have seen the biggest declines; jobs are down 9 percent to 11 percent as of April. All five Wasatch Front counties have seen sizable losses, as well, ranging from 1.5 percent for Tooele County to 3.5 percent for Salt Lake County.

Most people thrown out of work have never been in the situation before, sending them abruptly into an unfamiliar world of hardship, uncertainty and fear.

"This is something they never anticipated, of being out of work with no hope of finding replacement employment in the near future," said Lauren Scholnick, a Salt Lake City labor attorney. "They feel like there's no safety net."

 

Insurance, not welfare

» Created during the Great Depression, unemployment benefits are an insurance plan, designed with the dual purpose of helping families through hard times and stimulating the economy as a whole. In general, these state-run systems make money available to workers who lose their jobs due to economic forces through no fault of their own, while they look for work, get training or wait for a call back to the workplace.

Unemployment program administrators say their main purpose is getting the temporary assistance out to those who need it, not stigmatizing potential recipients or playing keep-away with government dollars.

"Those who understand the system know it's not a benefit," said Medley. "It is insurance. It is not welfare."

 

Seeking different outcomes » About 70 percent of Utahns who apply for unemployment benefits are ultimately deemed eligible and receive aid, often in a matter of weeks. Utah's claims system is largely automated -- with more than two of three applications filed online and all funds handled electronically -- and it is regarded by many as user-friendly and fairly efficient in processing applications.

Both workers and employers can appeal the department's eligibility decision and appeals go to a telephonic hearing before one of 15 administrative law judges. Proceedings are relatively informal and judges are active participants.

With the recession, laid-off workers who might have landed new jobs quickly in a better economy are being forced to seek jobless benefits in higher numbers, and like Carlson, are increasingly likely to fight the system when their applications are denied.

Employers, whose ongoing insurance rates go up when their ex-workers qualify for benefits, also are challenging the system in greater numbers, blaming fired workers instead of the economic recession for the jobs they lost.

Employer Advocates of Salt Lake City is one of several companies that specialize in representing employers in unemployment disputes when they come before a judge. Company principal Larry Clark said his firm has seen a four-fold increase in its work as advocates handle 20 hearings daily.

"Employers are more likely to appeal during a recession," Clark acknowledges. "They just don't feel they're in a position to absorb any more claims."

Sterling Allan, owner of PES Network Inc., a clean-energy promotion company in Eagle Mountain, let his only employee -- other than himself -- go in March. By May, that employee had filed for unemployment, a move Allan is contesting.

"He'd been a very difficult employee," he said. "I kept him on much longer than I should have, trying to help him out."

Allan said the state recently informed him the former employee will be paid $444 per week in unemployment benefits, for a total of $6,660. Unless he wins the appeal, Allan's company will see its unemployment-insurance premiums increase to about $660 per quarter.

Workers file more appeals than employers because they have less to lose, while employers tend to weigh the chances of winning against the cost of pursuing the appeal, according to Medley.

Employers have been only slightly more likely to win their appeals than benefits claimants in recent years. From the start of 2008 through May 2009, for example, about 22 percent of employers won their eligibility appeals before an administrative law judge, as opposed to 20 percent of workers. And for cases that were appealed a second time and went before the Workforces Appeals Board from January 2008 to May 2009, employers won 6 percent of their cases versus 5 percent of jobless claimants.

 

Out of politicians' hands » However unpalatable at times to employers, Utah's policy of basing employer premiums on their individual experience has been a crucial factor in keeping the state's unemployment fund from going bankrupt. The trust fund holds about $645 million, down from $846 million a year ago but still well-funded by the state's own standards.

Similar trust funds in at least 32 others states are either edging into financial distress or have gone completely broke, forcing them to borrow billions from the federal government. Systems in Michigan, New York, Ohio, California and 10 other states have run out of money. All face the prospects of benefits cuts, hefty interest payments and tax hikes when the federal cash must be repaid in two years.

Experts say the main reason Utah's unemployment fund hasn't gone down the tubes is that key policy decisions are kept out of politicians' hands. The state instead uses a series of complex mathematical formulae tied to a host of historic and current economic measures to calibrate, for example, the base rates for weekly benefits and employer premiums.

Consequently, Utah built up its fund during better economic times, while other state legislatures yielded to pressure from business groups to lower premiums or from labor unions to increase weekly checks.

One leading state senator and tax lobbyist says the approach is part of a positive trend in Utah government, one that bases policy on facts instead of political muscle and special-interest pork-barreling.

"We've moved away from politics," said state Sen. Howard Stephenson, R-Draper, who also directs the pro-business Utah Taxpayers Association, "not perfectly and in every area, but in many cases the big bucks are being allocated on a scientific method rather than by politics as they were before."

tsemerad@sltrib.com lesley@sltrib.com