Rhode Island's unemployment insurance system "is the most expensive such system in the country."
With every candidate promising more jobs, lower taxes, better education, and an end to fraud and abuse, voters face a daunting task when they try to figure out whether a candidate actually has specific proposals for tackling such problems. When Ken Block, a Republican candidate for governor, was asked about saving money during a Nov. 8, 2013, appearance on Rhode Island Public Radio, he said one potential source of savings was the state's unemployment system, financed by a tax companies pay to cover benefits for workers who lose their jobs. "When we attack our unemployment insurance system, which is the most expensive such system in the country, and we bring those costs into line with how other states run their program and what it costs for those other programs, I believe we should be able to save somewhere between another $50 [million] and $80 million annually year over year over year, which could be another third of a billion over four years," he said. PolitiFact doesn't rate predictions. But Block’s claim that Rhode Island has the most expensive unemployment system in the country -- a claim he has made repeatedly, including in a Nov. 13, 2013, Providence Journal commentary -- is a checkable statement. We emailed his campaign and asked for its evidence. Block’s policy director, Matthew Schweich, sent us a link to the "2014 State Business Tax Climate Index," published by The Tax Foundation, a business-backed tax policy group. It ranks Rhode Island as 46 out of the 50 states, based on a complicated scale that assesses how well a state's tax system enhances or harms the competitiveness of the state’s business environment. In a category that compares unemployment insurance systems, Rhode Island ranks the worst. But Block didn't say the state has the worst system. He said it has the most expensive. The report doesn't have a state-by-state comparison of expense. In fact, Rhode Island was not ranked worst in any of the measures quantified in the report. The state has the sixth-highest minimum tax rate charged to employers and the 10th-highest maximum tax rate. Its taxable wage base -- the income level beyond which employers don't have to pay additional tax -- is higher in 14 other states, according to The Tax Foundation report. When we raised this issue with Block's office, Schweich argued in an email that, "You can’t measure the overall cost of a program by evaluating just a single metric. So, even if Rhode Island isn’t ranked absolute bottom in any individual category, the cumulative effect of being ranked near the bottom across many categories can demonstrate that, overall, RI’s system is the most expensive." He also argued that there are many ways to define "expensive." "Does it mean the cost to the state? The cost to employers? The economic and reputational cost to Rhode Island of being ranked bottom?" he wrote. "The Tax Foundation has produced the most detailed ranking of [unemployment insurance] programs, so we used it as a basis for this statement. We were satisfied with the methodology." Then we called The Tax Foundation and spoke to Joseph Henchman, coauthor of the study. He said a ranking of 50 out of 50 didn't necessarily make Rhode Island's program the most expensive. Other factors are considered as well. "We're measuring both expense and compliance and administrative costs," he said, explaining that the foundation would prefer to characterize Rhode Island's system as the most burdensome or the most complex. For example, one reason Rhode Island scored low in the rankings was because a local business has to be in operation three years before its actual track record for hiring and firing employees is used to set its unemployment insurance tax rate. Until then, the business is simply assigned a rate, which can be unfair to a company with a steady employee base. In most states, a business' experience rating is set after one year. Instead, Henchman sent us a 2011 report he authored that focused solely on state unemployment insurance programs. In a comparison of the average unemployment tax rates, Rhode Island ranked third highest behind Idaho and Oregon for 2010, and in a comparison of the average weekly unemployment insurance benefits, the state ranked fourth highest, behind Hawaii, New Jersey and Massachusetts. And that was before Rhode Island implemented a series of changes, still being phased in, that will decrease the average weekly benefit over time, according to Henchman's study. Finally, we looked at a recent report from the U.S. Department of Labor. The state-by-state ranking of tax rates that employers paid on total wages in the second quarter of 2012 shows Rhode Island ranked as the fifth highest, behind Alaska, Hawaii, Idaho and Oregon, all of which taxed more. In the ranking of the average weekly benefit paid to the unemployed in the second quarter of 2013, Rhode Island came in 10th behind Colorado, Hawaii, Massachusetts, Minnesota, New Jersey, North Dakota, Pennsylvania, Washington and Wyoming, all of which paid more. Our ruling Ken Block said Rhode Island's unemployment insurance system "is the most expensive such system in the country." If he had said we were AMONG the most expensive, he would be on solid ground. But he has repeatedly insisted that Rhode Island's program is THE most expensive. The only evidence he supplied was a Tax Foundation report that doesn't directly evaluate the expense of the system. And other measures, from the foundation itself and U.S. Department of Labor, say it's not the most expensive. Because Block was unequivocal, we will be as well. We rate his statement as False. (If you have a claim you’d like PolitiFact Rhode Island to check, e-mail us at politifact@providencejournal.com. And follow us on Twitter: @politifactri.)
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