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WITH FAT JOBLESS FUND, TAX BREAK STILL PLEDGED

Oct. 1, 2001 – As the territory braces for more layoffs amid predictions of dire economic fallout locally from the war on terrorism, it has one ace in the hole: a super-healthy unemployment fund.
But administration and legislative initiatives to reduce that fund are still moving ahead.
Labor Commissioner Cecil Benjamin brushed aside the idea Monday that a dramatic increase in layoffs might strain the fund. "It's over-solvent" now, he said, and "it's too early" to tell just what demands will be made on it in the near future.
Sen. Norma Pickard-Samuel, whose bill to adjust the fund made it through the first committee in early September, said the cushion in the fund is so big that it will take about 15 years to use it up.
"This is not going to last for the next 10 to 15 years," she said of the current international crisis. "I have more confidence in America than that."
The fund now stands at a little over $60 million. According to Pickard-Samuel, federal officials say reserves of $20 million to $24 million would be acceptable for the Virgin Islands.
That range is considered sufficient to cover the average number of claims for unemployment compensation for a two-year period. That average is based on prior years' performance.
Benjamin said the territory's unemployment rate "doesn't fluctuate much." It hovers around 6 to 8 percent and "seldom goes beyond that."
Pickard-Samuel said unemployment claims have been running a little over $4 million a year and have been paid out of the interest being earned by the fund. "We're not even touching the principal," she said.
There have been cries for years for the V.I. government to change the way in which employers pay into the unemployment fund. The criticism have come both from local business leaders and from the federal government, which acts as custodian of the fund.
In every jurisdiction nationwide, employers are required to pay a percentage of their workers' salaries into the fund in order to cover benefits to workers who are laid off. The percentage for a given business is supposed to be based on the demands placed on the fund by that employer's workers. But in the Virgin Islands the system has been marked by wide swings in the level of contributions required of employers — and, in general, by overly high contributions.
Pickard-Samuel's bill to amend the system was reported out of the Labor and Veterans Affairs Committee, which she chairs, on Sept. 7. She said on Monday that she expects the measure to be considered by the Rules Committee at its next meeting, set for Oct. 12.
Like Benjamin, Pickard-Samuel said she is not worried that the use of the fund will increase significantly because of the current economic downturn. "Now is the time more than ever to pursue that bill," she said, adding that employers need the tax relief it will bring.
But at the same time she is offering employers a break by lowering their payments into the fund, she also plans to amend the bill to levy a surcharge on them of 0.1 percent of wages paid. That money would filter through the insurance fund but would remain at the disposal of the local government for use in computer and Internet services training programs. That, she said, translates into retraining for laid-off workers.
Although Pickard-Samuel failed to get a similar amendment through her own committee, she said she has reworked it and expects it to pass the next time.
Meanwhile, Benjamin said the Labor Department is working on its own version of unemployment insurance fund reform.
"We are proposing a brand-new structure to give a sort of relief to employers," he said. The proposal, not yet drafted, will be a "more permanent solution" than Pickard-Samuel's bill, he said.
Under the administration's plan, it would take 12 years to bring the territory's unemployment insurance fund down gradually to the federally recommended level of reserves — assuming that unemployment rates remain constant.

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