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Bills seek to overhaul Pa. unemployment trust fund

When the Pennsylvania Department of Labor and Industry announced Thursday that the state's unemployment rate had dropped in April to 7.5 percent, it was good news.

When the Pennsylvania Department of Labor and Industry announced Thursday that the state's unemployment rate had dropped in April to 7.5 percent, it was good news.

But it frightened Gail E. Carmack, a paralegal who has been laid off since 2009.

A good report means that 20 weeks of federally funded extended unemployment benefits - the final 20 weeks of benefits that anyone can receive - will come to an end June 11 unless Pennsylvania legislators act quickly to adopt the federal government's new formula for disbursing the money to the states.

If the legislature doesn't act, 45,000 people will lose their benefits June 11. An additional 90,000 will be affected by the end of the year.

"If that happens, I'll be up a creek," said Carmack, of West Philadelphia, who spent Tuesday at a jobs club for the unemployed. "What am I supposed to do?"

The fix is relatively simple, and the Pennsylvania House is likely to tackle it Monday. It also will come up in the Senate next week.

But when it comes to politics and legislation, nothing is as simple as it appears. It's almost as if the legislators opened the hood to change the spark plugs and then decided it would be the perfect time to overhaul the engine - an engine that's ailing, but still chugging along.

The engine is the state's unemployment trust fund - now insolvent, drained by the still-tough economy. More than half the states, including New Jersey and Delaware, are in the same boat.

Ordinarily, employers pay several hundred dollars per year per employee into the fund, which serves as insurance, providing benefits to the jobless.

When benefits outstrip revenue, employers pay more, employees kick in a contribution, and the state borrows money from the federal government. Now Pennsylvania owes $3.8 billion, New Jersey $1.3 billion, and Delaware $62.5 million.

Two years ago, knowing that a shortfall was inevitable as the recession deepened, advocates for the unemployed met with representatives from business and labor to find a way to fix the fund before it crashed.

Their plan was that employees, who pay into the fund only when it is stressed, would pay all the time. Employers would pay more, too. Now they pay a rate based on the first $8,000 of wages. That base rate would increase. Also, the unemployed would receive fewer benefits, primarily through changes in eligibility and how those benefits were calculated.

But those negotiations fell apart last autumn amid finger-pointing on all sides.

That's why, in Harrisburg, the whole engine is now being overhauled; there are widely different legislative proposals in the House and the Senate.

Republican Sen. John R. Gordner, who sat in on the negotiations, proposed Senate Bill 1030. It follows the basic outline of the negotiations and would save the state unemployment system $50 million a year.

His version is backed by labor and advocates for the unemployed. Gordner, who represents several northern counties, leads the Senate's Labor and Industry Committee.

But business is lined up solidly behind House Bill 916, introduced by Rep. Scott Perry, a Republican from York and Dauphin Counties. His bill would save the system $632 million a year - most of it by cutting benefits.

Currently, benefits are based on a recipient's highest quarter of wages. Under the Perry bill, they'd be averaged over three quarters - meaning the benefits for people with sporadic or seasonal employment would be much lower. That would save $463 million and affect 350,000 people, the majority of the unemployed in Pennsylvania.

Under the Gordner bill, the maximum weekly benefit would be lowered for those getting the highest rate, affecting 100,000 and saving $19 million.

Perry's bill says employer-paid severance would be deducted from benefits, affecting 50,000 and saving $88 million. Gordner's bill says benefits would be paid only after severance ran out for people with bigger exit packages, saving $22 million and affecting 4,500.

Estimates of savings come from analysis by the Pennsylvania Department of Labor and Industry.

Both bills include the initial formula fix allowing Carmack and others to continue receiving the 20 weeks of federally funded extended benefits before the program ends Dec. 31.

"What am I supposed to do if I'm cut off?" asked Carmack, adding that she'd take any job despite her college degrees. "I'm not too proud."

In April, the state's economy added 23,700 jobs, an improvement - but not enough for the 477,000 unemployed.

"Even though there are some people who are lucky enough to have a found a position," Carmack said, "there are still a lot of people who cannot."