by Nat Rudarakanchana May 3, 2013 vtdigger Some Vermont businesses shut down for months by Hurricane Irene are now being hit by new woes: sharply higher contributions to the states unemployment insurance trust fund.
In one example, the Woodstock Farmers Market, an upscale private market for produce and gourmet food, laid off its 45 employees after the storm as it closed down for extensive repairs, which lasted 11 weeks. But during that period, the state counted those 50 employees as ordinary fired employees, which worsened the companys unemployment insurance rating.
That UI rating summarizes employers history of firing and hiring employees, and means that employers with higher turnovers contribute more to the states unemployment insurance trust fund, which then doles out benefits to the unemployed.
For the Woodstock Farmers Market, that meant an extra $40,000 annually in contributions to the fund, even though they couldnt prevent the disaster or the temporary firing of their employees. That $40,000 represents about a years worth of profit, according to the firms chief financial officer, Steve Moyer.
Why should you be penalized in your UI rating for an act of god? asked Patrick Crowl, the markets owner. The cash flow after a disaster is your lifeblood. Youre paying all your money back to the state because of an act of god. It doesnt make sense.
It ought to be: Look, youre a hard-working business. Youve been paying unemployment for years and years. You have an act of god. You should go back to what your rating rightfully is, continued Crowl, who also has a $100,000 loan from the Vermont Economic Development Authority he still hasnt paid off.
The Ottauquechee River left The Cottage snack bar on Rt. 4 in West Woodstock badly damaged and inaccesible. VTD/Andrew Nemethy
Crowl isnt the only business owner facing up to this prospect, which he described as an unintended consequence of the states current insurance regulations. John Farrows West Hartford General Store suffered through three to five feet of water, which damaged everything, in his words.
He laid off his five employees, closed for seven months, and spent $300,000 to prop the business back up. But because of an inflated UI rating, he went from paying a few hundred dollars of unemployment insurance quarterly to $1,759 per quarter.
He ended up with a $4,000 debt to the state, and interest and penalties now approaching $500. He told VTDigger that hes refused to pay the debt so far. Farrow appealed his rating with the Department of Labor, went through a labor court hearing, and has testified in the Statehouse, though he filed his initial complaint with Congressman Peter Welch.
Its totally unaffordable for me, said Farrow, who owns and operates the store, and is appealing the unfavorable labor court decision this week. Im penalized for a natural disaster, basically.
State legislators, have taken note, and recently passed legislation in both the House and Senate, which shields the insurance rating of these businesses for eight weeks post-Irene, if they can prove that Irene directly caused them to layoff workforce.
The legislation reduces Crowls bill from $40,000 annually to about $12,000 to $15,000 annually. Although hes grateful for that relief, he still holds that he shouldnt have to contribute extra to the fund, because of an insurance rating he couldnt avoid.
Legislation as initially introduced wiped out all insurance rating changes and expenses caused directly by Irene. It was co-sponsored by Rep. Alison Clarkson, D-Woodstock, among others. She is from Crowls House district and someone he complained to early on.
The states unemployment insurance rating is also calculated on a three-year period, added Crowl, which means that the business will still pay an additional $36,000 to $45,000 over three years, even with the relief.
Labor commissioner Annie Noonan told VTDigger in an email that choosing eight weeks as the right relief period strikes a delicate balance between providing relief and minimizing the burden on unimpacted businesses.
She noted that providing this retroactive eight week relief to affected businesses will cost the states trust fund $8.6 million, a cost borne by all businesses, including those who werent affected by Irene.
The fund can afford to spend about $12 million on this relief, according to Noonan, before spending jeopardizes the states ability to pay back a massive federal loan it took out in 2010, $54 million of which is still owed. Paying back that loan and keeping the insurance fund solvent is a top priority, she said.
Eight weeks relief is all the trust fund can afford at this time, said Bill Botzow, D-Pownal, who chairs the House Commerce committee which shepherded the legislation. We went as far as we thought was fiscally prudent, he told VTDigger.
Noonan added that the average length of unemployment for those impacted by Irene stood at seven weeks, meaning that the legislation is generous enough to help many of the states businesses.
Theres no estimate of just how many businesses had their insurance rating skewed by the storm, said Noonan. Under the legislation, businesses first have to prove that Irene, and not some other factor, forced them to fire staff. Only after businesses go through that process will figures become available.
There are, however, about 21,000 businesses in the 12 federally declared disaster counties, declared after the 2011 floods and Hurricane Irene, Noonan said. Its unknown how much extra in total such businesses have already paid to the states trust fund, thanks to skewed ratings.
According to the legislation, for future disasters, the shield for a firms insurance rating will only last four weeks. Noonan said the shorter and more conservative shield protects the integrity of the trust fund, and could be changed by lawmakers in future years if necessary, if the shield is inadequate.
For Farrow, who took 28 weeks to climb back on his feet, four or eight weeks simply isnt good enough. He calls his extra contributions a severely unfair penalty.
Sen. Peter Galbraith, D-Windham, who presented the bill on the Senate floor this week, also framed the question in terms of fairness, and defended the eight-week shield.
I think weve come up with a fair solution, said Galbraith, who noted the need to balance the solvency of the fund with the need to aid those who were worst hit. Theres no solution thats perfectly fair.
There are many kind of losses, acts of god, for which people get no relief at all, he continued. Again, if I had a magic wand, and we had unlimited money, I would absolutely give everybody the full amount.
Its not like theres just a huge pot of money there that can just pay it out, said Botzow later, employing similar terminology.