Policymakers are growing wary as Utah finds itself in an ever-shrinking group of states whose unemployment insurance trust funds haven't gone broke yet.
Last week, Colorado and New Hampshire became the latest of 26 states to declare their trust funds wiped out by the recession's surge in jobless claims. Industry watchers predict as many as 40 states will run out of money for unemployment benefits before the economy rebounds.
Insolvent states are being forced to borrow from the federal government, raise taxes or cut benefits to keep unemployment aid flowing. Borrowing states now owe the feds almost $30 billion and face cutting benefits further and increasing premiums on employers when the loans come due.
While unemployment rates in Utah have hovered well below the national average, the state's unemployment trust fund has nonetheless fallen from $846 million in mid-2008 to about $500 million today. It is expected to dip as low as $200 million, before automatic premium hikes take effect in 2011.
State officials, meanwhile, have quietly begun to contemplate a replay of 1982-83, when Utah's fund was last tapped out.
Fund managers drew hard lessons from that economic slowdown, lessons that have helped the fund stay afloat this time. But no model could have anticipated the scale of the current recession, said Utah Unemployment Insurance Director Bill Starks.
"We've done everything we could,'' Starks recently told members of the state's Employment Advisory Council, a group of business, labor and public representatives that oversees the trust fund. "But if the economy continues to deteriorate past mid-year, we could go insolvent too.''
State lawmakers, now meeting on Capitol Hill, are taking up Utah's latest balancing act on trust fund policy. With HB18, legislators will consider a modest expansion of eligibility rules for state unemployment benefits, in order to qualify for a $20 million infusion of federal stimulus cash.
If passed, HB18 would allow state officials to measure a jobless person's past earnings in two ways to improve his or her chances of qualifying for benefits. Using the so-called "alternate base period" would allow an estimated 1,730 more Utahns to get unemployment insurance benefits, with an annual price tag of about $3.2 million.
Debate on the bill, scheduled Monday, comes after a similarly motivated decision in December to delay a proposed deal to raise jobless benefits to some senior citizens.
That deal to eliminate penalties for unemployed seniors who also collect Social Security retirement was shelved for several months, and possibly all of 2010, in order to keep the state in compliance with federal rules tied to another stream of stimulus money, worth about $1.5 million per week in Utah.
One state senator said stimulus cash has put lawmakers "in a little bit of a quandary.''
"We want to do the right thing in this bad economy and take advantage of federal money,'' said Sen. Ralph Okerlund, R-Monroe, and a member of the Senate Committee on Workforce Services and Community and Economic Development. "On the other hand, we're trying to be as conservative as possible.''
HB18 sponsoring Rep. Steve Mascaro, R-West Jordan, called it "a very disgusting situation we find ourselves in.''
"While I hate the idea of accessing President Obama's so-called inexhaustible source of money,'' said Mascaro, "I still feel that I am protecting my constituents by bringing some of it back to Utah instead of it going to Washington, D.C., and then off to somewhere else.''
That said, Utah isn't yet reaching for every available dollar in unemployment-related stimulus money. Under the American Recovery and Reinvestment Act, Utah could secure another $40 million by making other changes to its unemployment eligibility rules, but those do not appear to have much support.
The stimulus is offering Utah $20 million if it would make part-time workers eligible for unemployment benefits even if they seek part-time work to replace what they lost. Currently, Utah claimants have to seek full-time work to get unemployment aid.
And another $20 million of stimulus cash is available if Utah were to expand the circumstances under which residents could claim benefits when they are forced to move to accompany a spouse.
Both the part-time worker and relocation changes were proposed last legislative session but sputtered out without a public hearing. After members of the business community and Republican Gov. Gary Herbert renewed their concerns, those changes have not been included in HB18.
Budget director John Nixon said the Herbert administration is being cautious about unemployment benefits policies -- and any spending in general -- that might become a liability once stimulus cash dries up.
"The extended eligibility for benefits would be ongoing,'' Nixon noted, though federal funds to pay for them would not.
So far, 26 states have run out of cash reserves for paying unemployment benefits, forcing them to raise taxes, cut benefits or borrow heavily from the federal government.
Utah's unemployment trust fund is still solvent, but officials are moving cautiously on policies that affect the fund, saying it also could go broke if an economic recovery doesn't take hold by mid-2010.
