Unemployment insurance costs to drop

The state fund that pays benefits to unemployed workers has returned to a positive balance, allowing officials to make a temporary adjustment to the program that will save employers an estimated $1.2 million.

The state had been borrowing money from the federal government since December to shore up the Unemployment Trust Fund, which was depleted as a result of a surge in unemployment claims filed by workers who lost their jobs during the economic downturn.

However, the fund is now in surplus thanks to a rise in employer contributions and a decline in the number of claims filed by workers, officials from the Department of Labor and Industrial Relations said Friday.

The state borrowed a total of $163 million from the U.S. Treasury through the end of September and paid $211,000 in interest. The federal government waived an additional $371,000 in interest owed by the state because the trust fund was in the black by the end of the federal fiscal year on Sept. 30.

The DLIR initially had expected to owe the federal government $1 million in finance charges, and set up a mechanism to collect that amount from businesses. Because DLIR essentially overcollected for the interest costs, it will suspend collections next year in a move that will save businesses an estimated $1.2 million.

"The fact that the (Unemployment Trust Fund) currently has a positive balance alone is encouraging news," said Jim Tollefson, president of the Chamber of Commerce of Hawaii. "Furthermore, the additional $1.2 million savings is significant for the business community and Hawaii’s economy," he said.

As part of the federal government’s agreement to waive the $371,000 interest payment, the state is not allowed to tap its credit line with the U.S. Treasury through the end of the year. The DLIR, however, projects it will need to borrow again before then.

To avoid having to use federal funds, DLIR officials said they have received approval to borrow interest-free from the state Treasury on a short-term basis. The arrangement was laid out in a bill passed by the state Legislature last session.

"The legislature deserves much credit for crafting a temporary mechanism in our law to pay interest that both met federal requirements and provided tax savings for businesses during these challenging economic times," Gov. Neil Abercrombie said in a prepared release.