National organization praises Rhode Island for Unemployment Insurance reforms
August 15, 2011
A recent report by the National Employment Law Project singled out Rhode Island as one of only two states to have taken effective steps to restore their unemployment insurance trust funds to health over the long-term. Click here to read the report (pdf).
The NELP report, entitled “Unraveling the Unemployment Insurance Lifeline,” explores state Unemployment Insurance (UI) legislation, and asserts: “Only Colorado and Rhode Island this year implemented effective financing reform, by raising and indexing their taxable wage bases, and by requiring that contributions to their trust funds be based on the amount businesses draw in benefits.”
During the spring legislative session, Governor Chafee proposed a package of reforms to the employer-funded Unemployment Insurance system that balanced additional employer contributions with benefit reductions and new eligibility restrictions. This package, which was voted upon and approved by the General Assembly, is expected to restore the RI trust fund to solvency by 2015 and build the trust fund balance to more than $500 million by 2020. Without these reforms, solvency would not be attained until 2016, and the trust fund balance in 2020 would reach only $45 million – far below the recommended level needed to maintain fund stability.
In March 2009, the employer-supported trust fund which pays benefits to RI Unemployment Insurance claimants became insolvent, and the state began borrowing from the federal government in order to continue to pay benefits. As of August 1, 2011, Rhode Island had borrowed approximately $339 million, of which it has already paid back $99 million.
The solvency and long-term health of Unemployment Insurance trust funds became issues for a majority of states during the recent economic downturn. According to NELP, as of July 27, 2011, a total of 30 U.S. states had borrowed a collective $40 billion in federal funds in order to pay benefits to Unemployment Insurance claimants around the country. And, as of September 30, those states will have to pay a collective $1 billion in interest on those loans.
The NELP report also criticizes Rhode Island for enacting what it calls “harsh changes to its benefits calculation formula that will result in the state's wage replacement rate falling from among the best in the nation to the middle of the pack.” Currently, Rhode Islandis ranked as the sixth highest state in terms of wage replacement, but this ranking should change substantially once the benefits calculation formula takes effect in 2014.
ABOUT DLT: The RI Department of Labor and Training offers employment services, educational services and economic opportunity to both individuals and employers. DLT protects Rhode Island’s workforce by enforcing labor laws, prevailing wage rates and workplace health and safety standards. The department also provides temporary income support to unemployed and temporarily disabled workers. For more information on the programs and services available to all Rhode Islanders, please call the RI Department of Labor and Training at (401) 462-8000 or visit the web site at www.dlt.ri.gov.