Unemployment benefits

Nevada's unemployment rate hit 13.2 percent in August, second only to Michigan among the 50 states.

And given the dismal gaming and sales tax collections of the past few months, there's no indication the state's economy will be rebounding anytime soon.

That leads to a Catch-22 situation when it comes to jobless benefits. As state coffers dwindle, more and more people line up to collect unemployment. Meanwhile, businesses that fund the state unemployment insurance trust account can ill afford to have their taxes raised.

It's a dilemma that members of the state Employment Security Advisory Council must confront Tuesday when they meet to consider unemployment tax rates for 2010.

Gov. Jim Gibbons went so far last week as to urge the panel to actually reduce unemployment taxes slightly, to help employers survive the economic downturn. He proposed temporarily lowering the average employer assessment on the first $26,000 of wages to 1 percent from 1.3 percent. That would leave $70 million in the hands of employers, which would presumably help them weather the recession.

"Nevada will retain existing jobs and encourage new businesses to relocate to Nevada, creating new jobs and further diversifying our economy," Gov. Gibbons said of his plan.

"The best way to keep jobs and encourage businesses to add new workers is make it easier for them. Raising the unemployment tax rate may push some businesses struggling through the recession over the edge."

Elliott Parker, an economist at the University of Nevada, Reno, told The Associated Press that the governor's proposal is unwise. "Basically, we'd lose a quarter of the revenues coming in at a time when the unemployment fund is broke," he said.

We're all for lower taxes, and Gov. Gibbons is correct that many of Nevada's employers can hardly afford a tax hike. But Mr. Parker has a point. Lowering the tax rate would only create a larger long-term liability, as the state is already borrowing from the federal government to cover jobless benefits.

Under the Obama stimulus plan, states may receive interest-free loans through 2010 to help them cover unemployment claims. After that, they must pay an interest rate of 4.6 percent on outstanding balances.

Nevada has applied to borrow $264 million through the end of the year. If the governor gets his way, the state will be forced to go even further in debt to Washington -- a debt that will have to paid eventually by Nevada residents.

Now is not the time for an increase in the unemployment tax rate. Nor is lowering the tax a good idea. Better that the Employment Security Advisory Council leave the tax rate right where it is, minimizing the state's need for borrowing while at the same time not overburdening beleaguered Nevada employers.