Hawaii businesses got some relief from the nation's largest increase in unemployment taxes this legislative season; however, the average sevenfold increase was still high enough for many nonprofits to use state exemptions to pull millions out of the $500 million trust fund.

Nonprofits like Straub Clinic & Hospital, Chaminade University of Hawaii, Catholic Charities of Hawaii and most of the state's private Catholic schools have chosen to self-insure unemployment claims. The decision will help some of them avoid paying increases to the state's unemployment insurance (UI) fund that were triggered by expected shortfalls related to a tax holiday and joblessness.

State law allows 501(3)(c) nonprofits to opt out of the UI fund, which pays benefits to out-of-a-job workers, said Darwin Ching, Hawaii Department of Labor and Industrial Relations director.

“;We've estimated about $3 million less in collections based on (nonprofits) requesting to opt out,”; Ching said.

These nonprofits will have to self-insure claims dollar-for-dollar for at least two years and cannot tap the state's trust fund to pay UI benefits to former workers, Ching said.

While Gov. Linda Lingle signed a tax law last month that reduced the average amount businesses would have had to pay from $1,070 per employee to about $630 this year and $970 next year, it still represented a significant increase over the average $90 contribution per worker paid by employers in 2009.

When they applied for the exemption, Catholic Charities, whose 300 employees provide social services to 60,000 Hawaii residents, faced seeing its contribution jump from $10,000 to more than $200,000, said Eddie Ontai, vice president of administration services for the nonprofit.

“;Really, it was a no-brainer for us,”; Ontai said.

Altogether, about 100 nonprofits have opted out of the state's trust fund for the next two years, said Anne Eustaquio, a UI program specialist for the state.

“;We normally have just a handful of nonprofits that request to opt out,”; Eustaquio said.

Given the coming increases, Chaminade's decision to self-insure was an easy choice, said Brother Frank Damm, executive assistant to the president at Chaminade University.

When the state's unemployment trust fund swelled to a record $552 million in 2007, Chaminade benefited when the legislature passed a tax holiday. However, as a result of fund shortfalls, Chaminade was going to see its UI benefit costs soar to as much as $200,000 at a time when the university was already grappling with higher health costs, he said.

“;The unemployment benefit increases were coming at a time when our health benefit costs have gone up,”; Damm said. “;We were looking at having to cut a big chunk from the salary budget if we had to fund both of these increases.”;

On the advice of certified public accountant Natalie Iwasa, Holy Nativity School also opted out of the state's unemployment compensation trust fund.

“;They were able to save some money, but I don't have that option,”; Iwasa said, adding that her own UI taxes have gone up to $488 from the $90 that she paid a year ago.

The move will save Holy Nativity thousands and will allow the school to redirect its finite resources toward education costs and providing financial aid for its students, said Holy Nativity's Head of School Dr. Robert Whiting.

“;Now more than ever, we are preserving our core operations to maintain a quality educational environment for our children while we are finding proactive ways to respond to the various financial increases to our operations,”; Whiting said. “;Self-insurance is just another way to continue our legacy of delivering quality education within a small and personalized environment.”;

While some nonprofits will see a savings as a result of their decision, costs will go up for others, said DLIR spokesman Ryan Markham.

“;Certain nonprofits will get stuck with a much bigger bill than they would have if they had just contributed,”; Markham said. “;If unforeseen layoffs occur, that could happen.”;

Catholic Charities was forced to lay off about 60 workers in 2009 when state service contracts were cut, Ontai said.

But, even if further cuts occur, Ontai said the nonprofit will benefit from self-insuring claims.

“;We ran best- and worst-case scenarios and this was still the way to go,”; he said.

Since Chaminade has never drawn even as much as $50,000 from the $1 million that it has put into the trust fund, “;it was an easy choice to bail out,”; Damm said.