The state’s unemployment fund is teetering on insolvency, with officials predicting bankruptcy as soon as 2005 if employers aren’t soon taxed to beef up the source of benefits for Kansas’ laid-off workers.

But business managers and owners aren’t keen on the proposed solution to the problem.

Jerry Pope, personnel director of Lawrence Paper Co., said he had never met a tax that wasn’t burdensome to business.

“It’s just another cost, and it’s not a good time for it,” said Pope, whose company employs more than 300 people in Lawrence. “I don’t think any of the businesses around here would be eager to take on an additional cost.”

But state policy-makers are saying that without a fresh infusion of cash, Kansas might run out of money to pay benefits to out-of-work Kansans within two years — the most dire prediction yet.

According to a “working document” released Tuesday by the Kansas Department of Human Resources, “projections indicate that the fund may become insolvent as early as 2005 or as late as 2009, depending on the extent and severity of future Kansas unemployment.”

And the document, which is to be considered for approval Thursday by the state’s Employment Security Advisory Council, suggests it’s time for the Kansas Legislature to consider raising unemployment taxes on businesses.

“Timely action on this matter may divert potentially more serious measures in the future,” the report stated.

The call for action comes during the state’s fourth straight year of paying out more in benefits to unemployed Kansans than it is receiving in “contributions” from businesses.

Dwindling jobless benefits pool worries state advisory council (12-9-03) Unemployment fund dwindling (8-4-03)

So far in 2003, the state has spent $303 million on benefits, while taking in just $199 million. Since the beginning of 2000, the state has spent $1.08 billion in benefits — and received just less than $700 million. As of Nov. 29, $319.7 million remained in the fund, buoyed by surplus contributions from earlier years.

“The trend … shows that for every dollar in tax revenue collected, the Kansas agency has paid $1.55 in benefits,” the document says, “obviously a potentially serious direction.”

Skepticism

Orval Weber, a research analyst for the Kansas Department of Human Resources, said the 2005-2009 timeline was based on a poll of a dozen experts across the state. He wouldn’t say how much money was needed to keep the fund solvent, nor how high taxes should be raised.

The prediction of impending bankruptcy was met with some skepticism.

“Now that the economy is looking like it’s on the rebound … we’ll have to see what it does to the fund,” said Rep. Donald Dahl, a Hillsboro Republican and chairman of the House Commerce and Labor Committee.

But even ardent anti-tax advocates conceded Tuesday that the fund needed fixing.

“We’ve seen an explosion in unemployment benefits paid to workers laid off from their jobs,” said Terry Leatherman, vice president of public affairs for the Kansas Chamber of Commerce and Industry and a business representative on the advisory council. “I share the department’s concerns about how far the trust fund has gone the last couple of years where we’ve seen this unemployment explosion in Kansas.”

Other options?

But he said higher taxes would exacerbate economic problems faced by Kansas businesses.

“That is not going to stimulate this economy,” he said.

Debbie Snow, a labor advocate on the advisory council, said she wanted to look at other options.

“I’m not really sold on which method to use,” she said. “I want to look at how much money we will naturally receive into the fund.”

Dahl, whose committee oversees unemployment issues in the House, said all options were open.

“If (taxes) need to be raised, they need to be raised,” he said. “We can’t let that become insolvent.”

When the economy was booming in the 1990s, then-Gov. Bill Graves succeeded in championing a multiyear moratorium on the unemployment tax paid by businesses.