Most Maine communities shoulder layoff cost burden

With the whole state talking about the Palesky tax cap, Maine Department of Labor staff have been waiting to see when the discussion would turn to possible layoffs, unemployment costs and how communities would pay them.

Under the tax cap initiative, many communities are projecting layoffs for their employees.

Most local government units in Maine offer direct reimbursements for unemployment costs, which means if an employee is laid off, the city or town itself pays for 26 weeks of unemployment benefits.

“It’s going to be a significant cost for municipalities across the state,” Adam Fisher, assistant to the labor commissioner, said Tuesday. “We’ve been talking in-house, and we’ve wondered when it was going to come out.”

The Palesky tax cap would limit property taxes to 1 percent, or $10 per $1,000 of assessed value, for residents and businesses.

Maine has 2,108 local government units, including fire and police departments, school departments and districts, county units and approximately 490 municipalities.

“Of those, 1,879 [units], or 89 percent, are direct reimbursement,” Fisher said. “They have to pay dollar for dollar for unemployment benefits.

“It’s going to be really hard for these communities,” he said. “They are going to find themselves in the position of having to lay people off and then paying them unemployment benefits.”

The remaining governmental units pay into the state Department of Labor’s unemployment fund, which pays unemployment costs to participants.

The state has never had to deal with huge statewide cuts among municipal employees and so does not have a backup plan in place for these municipal units requiring huge payouts at the same time, Fisher said.

“There just isn’t anything in the unemployment law,” he said. “Their only options are paying premiums and direct reimbursement.”