PROVIDENCE – Rhode Island lawmakers are mulling a controversial proposal to dip into a near-$500 million unemployment insurance fund to pay for a popular job-training program called Real Jobs RI.
The fiscal maneuvering would divert – or “scoop” – about $6.6 million each year from the UI fund – earmarked to pay benefits for unemployed workers – and use it instead to help pay for the workforce-development program.
Nearly 400 Rhode Island companies have tapped Real Jobs RI, which faces a 65 percent budget cut largely due to a reduction in federal funding.
“Unless we want to stop, we have to figure out a way to keep the funding going,” said Scott R. Jensen, director of R.I. Department of Labor and Training.
Jensen advocated for the program during an R.I. House Finance Committee meeting on Tuesday.
“Without a way to fund this work, it will really slow down, and I don’t think that’s a good idea,” he added.
The diverting of funds, however, has raised eyebrows among some people who remember when the UI fund ran out of money during the Great Recession.
At the time, unemployment soared, and the reserves set aside for benefits quickly depleted. The state was forced to take out a loan from the federal government to make ends meet. The loan was ultimately paid back by employers, who already pay between $205 and $2,425 per employee for unemployment insurance each year.
For John C. Simmons, executive director of Rhode Island Public Expenditures Council, the recession exemplified how an underfunded trust hurts Rhode Island businesses.
“It saddens me to come here again after multiple times and ask: Why are we going into the unemployment trust fund to fund a governmental program?” said Simmons, whose nonprofit provides policy analysis.
The new proposal does include safeguards to stop diverting the funds should reserves fall below a certain threshold in an economic downturn, and if the trust fund doesn’t earn any interest during the prior year.
But Simmons argued the scooping of funds leaves the fund – and thus the business community – unnecessarily exposed.
“A set of principles have been established for the fund to pay for the benefits of unemployed workers. That’s how it should be used. It should not be diverted for another purpose, or reason, however noble the purpose,” he added.
House fiscal staff estimates the UI fund balance – absent any changes – would total $479.8 million during the fiscal year beginning June 30. If the scoop were approved, however, the balance would total $473.2 million, representing a $6.6 million difference.
The $6.6 million would then go into a separate fund, dubbed the “Job Development Fund,” which would pay for Real Jobs RI, and require Rhode Island employers to pay at a higher unemployment insurance tax rate for an extra year.
The proposal, part of Gov. Gina M. Raimondo’s $9.4 billion tax-and-spending bill for fiscal 2019, also codifies Real Jobs RI into law under the umbrella of DLT.
The proposal and budget are being considered by the R.I. General Assembly.
Jensen called the funding strategy “responsible,” saying the $6.6 million accounts for less than 2 percent of the total fund balance.
“I would submit the money means very little to the trust fund, but it means a lot to workforce development,” he said.
Simmons, pointing to the $9.4 billion state budget, disagreed.
“If it’s so valuable, let’s go find the funding somewhere else,” he said.