Unemployment compensation crisis is starting to hit Pennsylvania businesses; state owes $3 billion to feds

CitizensVoice.com:

Gov. Tom Corbett's plan to deal with the state's unemployment compensation crisis resonates with business owners.

"You don't leave people on unemployment for a year or two," said Joe Fasula, co-owner of Gerrity's Supermarket, a regional grocery chain with nine locations in Lackawanna and Luzerne counties. "It's no surprise to me that this happened."

The state depleted its unemployment insurance trust fund during the recession, borrowed from the federal government to cover jobless benefits and owes $3.5 billion for the loans. Dozens of other states have followed a similar path.

State businesses pay millions of dollars in penalty fees associated with the federal obligation. Pennsylvania businesses' average unemployment compensation payments to cover the state fund's shortfall will increase by about $21 per worker this year because of the debt, said Sam Denisco, vice president of government affairs for the Pennsylvania Chamber of Business and Industry.

"We need to take a long look at the solvency of the state unemployment trust fund," he said. "It's out of control and needs to be reined in."

In his budget address Tuesday, the governor said high unemployment compensation costs stall job creation. Legislation in the General Assembly should rectify the state system's insolvency, he said.

Bond issues could address the federal debt, Denisco said, and the legislation should address unemployment eligibility, fraud, waste and abuse.

"We want the unemployment system used as a safety net to transition back to work," he said.

Department of Labor and Industry analysts project average business payments to the unemployment compensation fund will decrease this year because the interest on the state's federal loans has dropped, spokesman Christopher Manlove said.

But Gerrity's unemployment compensation fund payments topped $206,000 in 2011, a 35 percent jump from 2009, Fasula said, and he anticipates another substantial increase this year. Extended jobless benefits deter some unemployed people from seeking work, Fasula said.

"You try to hire somebody and they say, 'I'm better off on unemployment,' " he said. "It's already a drag on trying to employ people."

Higher unemployment compensation payments ripple across the business spectrum, said Natalie Pettinato O'Hara, a principal at PACE Construction Managers Inc., in Scranton.

"It's a hit because any employees that we have, we are getting surcharged on their compensation," said O'Hara, whose company works on commercial and institutional structures. "It takes right out of my bottom line. It costs me more to employ somebody, then it costs me more to do the work I have and to bid on future work costs more."

jhaggerty@timesshamrock.com