Don't put all the burden on the workers
Pennsylvania's conservative majorities in the state Legislature are averse to borrowing, but they have made the right decision to take out one of the largest loans in the state government's history.
Through a bond issue of up to $4.5 billion, the state will repay the federal government for the money it has borrowed since 2008 to meet sharply increased unemployment compensation payments caused by the Great Recession.
The borrowing is the best course because it will retire the debt and diminish the impact on employers, who otherwise would face a rapidly escalating series of special assessments over a decade to pay off the federal government.
Unfortunately, lawmakers have used the special circumstances created by the financial crisis to "reform" the unemployment compensation system on only one side of the ledger - the displaced workers' side.
Advocates of the change adopted the mantra that Pennsylvania's unemployment compensation system has a spending problem rather than a revenue problem. The bill, therefore, limits eligibility for unemployment benefits in several ways, to reduce spending. It would save about $276 million a year by limiting benefits for people who make the majority of their annual income over the course of a few months, often construction workers who can't control winter weather or the availability of work beyond construction season. (The move was doubly disingenuous for a Legislature that can't bring itself to adopt a highway and bridge reconstruction program that would keep more construction workers on the job for longer periods.)
Moreover, the program does have a revenue problem. For decades, the unemployment compensation tax paid by employers has been based only on employees' first $8,000 of income, virtually assuring a shortfall when unemployment spikes. Pennsylvania, meanwhile, is one of just a few states that also collects unemployment compensation contributions from workers.
It is prudent to pay off the debt, modernize the system and to fight fraud by those who game the system. It is unfair, however, to assign the reform burden solely to workers who do not control their fate in the labor market.