Like a sump pump that automatically kicks in to keep a basement dry, Iowa’s unemployment insurance mechanism has again triggered a tax increase designed to keep the fund used to pay benefits from swimming in red ink.

The 2011 rate increase announced earlier this month will be the second consecutive annual increase in the unemployment tax, which last year was adjusted upward for the first time in eight years. It’s also the first back-to-back increases since Iowa’s fund went bankrupt and had to borrow from the federal government in 1984.

“The main difference between then and now is that we have remained solvent,” said Joe Walsh, deputy director of Iowa Workforce Development, which administers the fund. “We had gotten ourselves into a real economic crisis by becoming insolvent.”

Walsh said actuarial projections show that this year’s rate increase is having the intended effect on the trust fund’s balance, which as of last week had increased to $328 million, compared with about $250 million on June 30. By comparison, the fund’s balance was approximately $700 million on June 30, 2008. The state maintains an additional $150 million in a reserve fund.

“I think we’re on target to where we were expecting to be,” he said. “Our balances have gone up as predicted.”

On the claims side of the equation, the numbers are looking better as well. For the week ended Sept. 4, 3,534 initial claims were filed, about half as many as the 6,853 filed the same week in 2009.

“It’s still not a perfect economy, but I think the 3,500 claims are much closer to a normal year,” Walsh said.

In the past 12 months through August, the fund paid out approximately $664 million in claims to unemployed workers.

Unemployment insurance contributions from employers are based on two primary factors – whether the business is new and the number of layoffs a company has had during the last five years. As a result, companies with seasonal workers and regular shutdowns pay higher rates than companies that have relatively few shutdowns or layoffs.

Approximately 43 percent of Iowa employers fall within the zero-rate tax category, meaning they will pay no unemployment tax this year. About 26 percent, some 18,000 companies, saw an increase of between 1.1 and 3 percent in their unemployment tax rates this year. Walsh said estimates for 2011 contribution rates won’t be available until mid-November.

Iowa is among just 15 states that haven’t had to borrow from the Federal Unemployment Account in the past two years, Walsh noted, which puts it in an enviable position compared with many other states.

“Iowa has really continued to be one of the responsible states out there, continuing to ensure that its trust fund remains solvent,” he said. “It’s offensive to me that a lot of states have used low unemployment taxes as an economic development tool, while responsible states have been at a disadvantage because of that. … Our employers are in a much better position to recover from this economic downturn because we have maintained a solvent trust fund.”