How Idaho Unemployment Insurance Benefits Are Paid For

Last week, the head of Idaho’s Labor Department encouraged state and federal lawmakers to vote against any further extensions of federal unemployment insurance benefits.  Director Roger Madsen said he considers unemployment insurance to be one of this country’s most successful social programs, but believes extensions hold back business growth.  You can read Madsen’s letter here.

We decided to look at how Idaho’s unemployment insurance program works and how it could be impacted by the end of federal extensions.  Lets start with the basics.

Idaho’s unemployment insurance program is paid for by a tax on employers.  Department of Labor Spokesman Bob Fick says the amount each business pays is based on its experience with the fund.  In other words, if you’ve laid off a lot of people, you will pay a higher tax rate than a company that has never done layoffs.  The department splits businesses into two categories; employers who’ve paid more in tax than their former employees collect in benefits and employers who’ve paid less in tax than their former employees have collected in benefits against them. 

In Idaho, there are 14 different tax rates that businesses fall into.  The basic rate an employer pays per worker is 3.36 percent on the first $33,300 of income.  The highest rate is currently 6.8 percent on the first $33,300.  Nearly all Idaho employers pay this tax.  Exemptions include people who are self-employed (real estate agents, insurance agents, etc.)  Officers of a corporation can also exclude themselves from coverage.

simoncjgardiner / Flickr

The unemployment insurance taxes are then pooled in a state trust fund, which pays benefits to laid-off workers.  Fick says there is currently $155 million in Idaho’s fund.  It has bounced back after being broke during the recession.  Idaho borrowed more than $202 million from the federal government beginning in June 2009 to pay the flood of unemployment benefit claims.  The state has repaid those loans, in full, by selling revenue bonds.  Idaho also received federal stimulus (American Reinvestment and Recovery Act) funding to help pay claims during the height of the recession.

“Under the stimulus bill, the state received $32.2 million in exchange for liberalizing benefits, allowing benefits for part-time workers who were laid off and still only wanted to work part-time, for unemployed people in approved training programs and use of the last or fifth quarter of wages in calculating eligibility if the first four of the last five quarters do not qualify the applicant. The 32.2 million came in and went out immediately as benefits.”  – Bob Fick, Idaho Department of Labor

A laid-off worker can collect state unemployment insurance benefits for up to 26 weeks.  The current series of federal extended unemployment benefits stretch out benefits for up to 99 weeks.  Those extensions are set to expire at the first of the year, unless Congress votes otherwise.