Inside the debate to save Kentucky's unemployment safety net

05/27/2010 10:07 PM

FRANKFORT —A key Republican Senator wants to re-write major tenets of the proposed fix to Kentucky’s unemployment insurance safety net fund that the U.S. government has had to bail out.

Sen. David Givens

The bill that includes a formula to get the fund out of debt unanimously cleared the Senate’s state and local government committee Thursday night looking exactly the way it did when it passed the House on Wednesday. The proposed fix would put the fund back in the black by 2017 through a combination of raising contributions form employers and lowering benefits to out-of-work Kentuckians.

But what raised the most debate Thursday — from both a Republican and a Democratic senator — were proposed amendments set to be introduced by Sen. David Givens, a Greensburg Republican, on the Senate floor Friday morning.

In a rare move for a late-session committee meeting, Givens brought in two economists to testify Thursday night. They answered questions about the urgency of a fix and discussed proposed reductions of unemployment benefits, which laid the groundwork for Givens’ suggested changes.

Overall, Givens’ amendments would go farther to reduce those benefits, which he said would allow Kentucky to get the unemployment insurance trust fund out of debt faster. That would be best for businesses and unemployed workers in the long run because it would cut the interest payments Kentucky has to pay to the federal government for bailing it out with $800 million, Givens said.

Givens didn’t offer the changes in committee for strategic reasons. Presenting floor amendments, instead of voting on the changes in committee, would allow the bill flexibility both on the Senate floor and back in the House. With floor amendments, the House and Senate could pick and choose which to include. In effect, even if the Senate passes one amendment, the House could disregard it and the bill still become law without going to a conference committee.

On Tuesday, Rep. Larry Clark, a Louisville Democrat and main sponsor of the bill, told cn|2 Politics that any changes would “kill the bill.” Givens disagreed.

“I don’t think my amendments will have that effect,” said Givens, who added he would still vote for the bill in its original form. “There is sufficient time to have conversations (on the changes). Until the first $30 million in grant money from the federal government is received, we have time.”

Givens also said the fact that the changes won’t go into effect into 2012 also bought the legislature time to tweak the system. He said he didn’t speak with Clark before presenting the amendments and noted that the legislative process doesn’t require him to.

Here’s what Givens wants to do:

  • One amendment would change how unemployment  benefits are calculated. Instead of basing them on the average wages of Kentuckians, Givens is seeking to tie them to the Consumer Price Index, which measures inflation.

Currently, the maximum benefit for an out-of-work Kentuckian is capped at $415 a week because the fund is in bankruptcy. Once the trust fund gets out of debt and crosses the $120 million threshold, that cap comes off.

Citing a potential for a large leap in amount paid once the fund is solvent, Givens said switching to tie it to inflation was necessary to keep the fund stable.

“(This system) is a drain on our state’s economy,” Givens said

  • The other amendment would kick in once the trust fund gets into the black again. Givens proposed cutting the rate of  benefits to unemployed Kentuckians. Currently, someone out of work would be paid 68 percent of the state’s average wage — that’s the highest benefit rate in the country.

The bill called for lowering it to 62 percent, which would put Kentucky below only Oregon. Givens has proposed dropping it to 52.9 percent. Such a cut would take Kentucky to 15th highest and could reduce the average payout to an unemployed Kentuckian by $40 to $50 a week.

Givens said all of these things would allow for more breathing room for businesses and would help get the fund back in the black faster.

“When we have a fund that is solvent business pays less into the fund allowing them to keep more money and create more jobs,” Givens said.

But those suggestions didn’t go over well with everyone, even senators of his own party.

At one point, Sen. Alice Forgy Kerr, a Lexington Republican, asked if Givens’ amendments were from his own revelations or from recommendations from an unemployment insurance task force, of which Givens was a member of. That task force formed the foundation for the original bill. Givens said the amendments were his own.

The current House bill introduces a variety of changes into how the current unemployment insurance trust fund currently works, with many of the changes going into effect in 2012. Other provisions in the bill include:

  • Making businesses pay unemployment taxes on the first $9,000 an employee makes, up from the current $8,000. It then gradually increases that fee by $300 every year until the fee reaches $12,000 in 2022.
  • Implement a one-week waiting period before being allowed to check unemployment benefits.

Earlier in the week, both sides in the House praised what they called the “shared sacrifice” of industry and labor in the bill. Yet that very fact baffled Democrats and Republicans in the Senate committee

“The current system is a wall to job creation,” said Senator Damon Thayer, a Georgetown Republican and chair of the committee.

Final passage of any fix to the unemployment insurance trust fund is far from certain,  especially after a similar bill during the spring regular session died in the Senate.

“This is not a perfect solution,” Thayer said. “I’m still scratching my head as to why businesses are supporting this.”

—Kenny Colston


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