Nonprofit Newswire | Rise in Jobless Taxes Prompts Nonprofits to Leave State Fund

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April 11, 2010: Star Bulletin | We have previously suggested that something like this was going to happen due to the increase in unemployment taxes hitting nonprofits, and here it is: In Hawaii, where nonprofits have had to absorb a “sevenfold” increase in their unemployment taxes, several have chosen to self-insure unemployment claims, including the Straub Clinic & Hospital, Chaminade University of Hawaii, Catholic Charities of Hawaii and most of the state’s private Catholic schools.

This isn’t a decision that they’ve taken lightly. By pulling out of the state program, the nonprofits have to self-insure claims on a dollar-for-dollar basis for two years and cannot go to the state’s unemployment trust fund to pay benefits for former employees.

Did they have a choice? Catholic Charities saw its unemployment tax bill rise from $10,000 to over $200,000. According to a state spokesperson, some 100 nonprofits have opted out so far. The states are hardly in better shape on this than the nonprofits. According to CNN, 33 states and the U.S. Virgin Islands have completely run out of unemployment funds, forcing them to borrow from the federal government or find other means of paying unemployment.

Imagine if the economy weren’t, supposedly, on the upswing? The 60 workers that Catholic Charities in Hawaii laid off due to state service contract cutbacks are lucky they work for a nonprofit well-heeled enough to self-insure.—Rick Cohen