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You will borrow $ 1.26 billion for the unemployment fund depleted
As Virginia struggles with how to replenish its funds exhausted unemployment benefits Hampton Roads employers expressed concern about the impact that increased taxes on unemployment could have on their business health.
Type tax increase identified by the Virginia Employment Commission earlier this fall can be difficult for some small businesses will be absorbed with job cuts, "said Jim Shirley, owner of Bennett's Creek Farm Market in Suffolk.
The state average unemployment tax per employee will increase $ 95 this year to $ 171 in 2010 and $ 263 by 2012, the VEC said in a September 29th presentation to the Unemployment Compensation Commission.
Adjusting to such increases may require revision in the number of hours that he keeps his shop open, he said Shirley. The store, which employs 25, is open seven days a week from 7:30 am to 7 pm
Retailers could be hardest hit by tax increases, because many consumers have taken action drastic spending.
Retailers "are surviving to reduce costs because the sales growth is not there," said Jeff Miller, President of Miller Oil Co., a fuel distributor based in Norfolk with 38 convenience stores in Virginia and 350 employees.
For small merchants, the financial pressure of weak sales and higher taxes on unemployment could be intense, "Miller said. "You have to have someone at the store, and if 're down to one person in the store, you can not cut it anymore. '
Besides boosting unemployment taxes for employers, Virginia have to ask paid more than $ 1.26 billion the federal government in the coming years to continue paying unemployment benefits, the VEC said in its forecast.
That's because the deficit in its fund unemployment benefits reach 194 million U.S. dollars later this year and the Balloon $ 561,000,000 in late 2010, the VEC said.
The VEC predicted in September that initial claims for jobless benefits jump 78 percent to 633 931 this year from 356 220 claims in 2008.
The tax state unemployment are calculated based on the volume of claims that employees of an employer on the trust fund and the solvency of the fund.
By itself Similarly, the unemployment tax increase would be insufficient to Canvas Creations Husted to reduce its workforce, said Pat Butler, president of the Norfolk and awning manufacturer canvas products. However, the increase may indicate the small companies like yours to hold off hiring unless they have additional sales, he said.
"Each time you add people, we look at the full cost of their compensation, including the cost of benefits, insurance and taxation," said Butler.
State Sen. John C. Watkins, R-Powhatan and chairman of the Unemployment Compensation Commission, Virginia said some employers have already expressed concern having to pay higher taxes unemployment on top of rising health insurance premiums, and other employee related costs.
"They not happy with what you have to pay unemployment taxes, but I knew it was coming, "he said.
eight members of the General Assembly Commission Unemployment Compensation explore ways to address the trust fund deficit when it meets in early December, said Watkins.
While levels increased significantly since last year, Virginia's unemployment rate still compared favorably with the national rate. In October, the state rate was 6.6 per cent well short of the national rate of 10.2 percent. In the worst case, the Virginia unemployment rate peak at 8 percent, the VEC predicted in September.
One reason for the pressure on the unemployment trust fund is relatively low rate at which the state has made employers to cover unemployment benefit in the past.
For the 12 months through September, the average unemployment tax per employee in Virginia was $ 93. That was lower than tax rates in Maryland, North Carolina, South Carolina, West Virginia and Washington, DC The Virginia average was only 37 percent of the national average of $ 249, according to the VEC.
Two dozen states, including North Carolina, South Carolina, New York and Texas, have provided $ 21 million from the federal government to pay benefits Unemployment, according to the Labor Department.
One problem with borrowing to pay unemployment benefits, the VEC has indicated, is that payments interest on that debt can not come from the unemployment trust fund or federal funds. Interest payments on his $ 1,260,000,000 of loans planned is likely to total of $ 36,700,000 and come from the general funds of the state, the VEC said in its September report.
Gov. Timothy M. Kaine contact the Department U.S. Treasury in September to borrow funds for the payment of unemployment benefits in Virginia during the current quarter. The money "is sitting there for us to get ahead, "said Don Lillywhite, the VEC director of labor market information.
The last time the Treasury seized Virginia to pay unemployment benefits were 1983, when a borrowed $ 45 million. The loan was returned quickly enough to avoid having to pay interest.
For those who have no work in Virginia, the maximum unemployment benefit is $ 378 a week, replacing 43 percent of state average weekly wage, according to the VEC.
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