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An Unemployment Fund Fix

The insolvency of the state’s unemployment compensation fund

Members of the Missouri House this week took up legislation aimed at resolving the insolvency of the state’s unemployment compensation fund. Currently, the fund that pays unemployment benefits for out of work Missourians is out of money, and the state is borrowing money from the federal government to continue to pay claims.

House Bills 1268 and 1211 would prop up the state system by issuing bonds to pay off the federal government at a lower rate than what is now mandated, then would force the state to pay the interest should the fund be insolvent in January of 2006. The bill also seeks to take better control of the fund by mandating more thorough eligibility checks of unemployment compensation recipients.

Bill co-sponsor, Rep. Todd Smith said the insolvency of the fund has been a long time coming and had something been done when problems first surfaced, problems with the fund could have been avoided.

“As early as 1998, we heard warnings that the fund was on its way to insolvency,” said Rep. Smith. “Right now the system is broken, and it would have been a lot easier to fix this if it wouldn’t have become insolvent. We need to get the state committed to making some changes in the future to help our businesses who are bearing the brunt of this breakdown.”

A combination of business taxes and federal money supports the fund which pays laid off workers. Rep. Clint Zweifel says he fears the system is fatally flawed now, and by relying on state-backed bonds, it will only make things worse.

“I’m worried that every time we have an economic downturn and the fund runs down to zero and the state steps in with money, that will take away the incentive to fix the underlying problem,” said Rep. Zweiffel. “The fund, the way it is set up to operate now, is structurally unsound.”

Rep. Smith says his bill would allow for the state to step in when the fund began dropping, then allow businesses to pay back the state money in better times.

“Right now, it’s like turning around a battleship,” said Rep. Smith. “We are a year, year-and-a-half away from being able to affect changes in the fund. This way, with state involvement, we’ll be much more reactive.”

Representatives debated the bills sponsored by Smith and Rep. Neil St. Onge over the course of two days before ending work for the week.

React to Education March

Carrying signs, chanting slogans and singing songs of protest, about 2,000 public school students, teachers, and administrators marched on the State Capitol this week. They wanted state leaders to improve the state of education funding in Missouri. Speaker of the House Catherine Hanaway said she heard the message loud and clear.

“This says to the legislators that Missouri schools are really hurting,” said Speaker Hanaway speaking to reporters following the school rally on the steps of the Capitol. “And that this is a significant enough problem that they would take a day they would normally have off, get on buses and come from all over the state to the capitol.”

For former high school principal and current state representative D.J.Davis, the rally showed that school leaders are becoming better able to speak with one voice on education funding.

“The education community is more aware of the budgetary process than perhaps we realized,” said Rep. Davis. “We’ve been talking more and more about education funding at the State Capitol for the last three years, and now we’re beginning to hear from the schools as well.”

Leaders of the demonstration said they were not pointing fingers either at the legislature or the governor. But there was a clear message to the day. Schools need more money now.

“These people are telling the legislature that we need to put education first, and that we need to not just mouth the words, but that the dollars need to be there to back those words up,” said Speaker Hanaway.

Rep. Davis, who sits on committees dealing with education and education financing options said money in the short run would not be very easy to come up with.

“Under the current foundation formula and the Excellence in Education Act of 1993, to keep up with funding actually means to increase funding every year, and I don’t know if that is going to be possible this year,” said Rep. Davis

Rep. Davis said long-term solutions might be included in a report from the Interim Joint Committee on Education that he co-signed and was released this week. It presents three options for education funding, but does not propose any legislation for the current session. In the meantime, Rep. Davis said the House will continue working on legislation that will help school districts save money in the year to come. Speaker Hanaway said she is optimistic that a small increase for schools will be possible.

“Within state funding, we need to make education the thing that we put the most emphasis on,” said Speaker Hanaway. “To the extent that there is any new funding, we make sure it goes there. To the extent that cuts must come from other state departments. And we must ensure that all money we budget for education goes to education without being withheld.”