Georgia to seek federal loan for jobless funds

By Michael E. Kanell

The Atlanta Journal-Constitution

With its jobless benefits fund sapped by high unemployment, Georgia will be forced to seek a federal loan to make next week’s payout, the state’s labor commissioner says.

Labor Commissioner Michael Thurmond is expected to announce the loan request today.

The state has paid $1.6 billion to laid-off Georgians this year, an average of $33 million a week. Checks are cut on Tuesdays, and as of Wednesday the trust fund for unemployment benefits had about $25 million left, Thurmond said.

“As commissioner of labor it is my primary responsibility to ensure that all jobless Georgians eligible to receive benefits receive those benefits,” he told The Atlanta Journal-Constitution.

Georgia will join more than 20 states that have already asked for and received aid. Thurmond said he does not expect any obstacles to getting the federal line of credit. It’s not clear how much money Georgia will seek, or for how long. The state fund is replenished by employer taxes in the early part of each year.

Also today, Thurmond plans to issue the report on unemployment in November, and the rate is expected to remain above 10 percent for the sixth consecutive month. He’ll also call for a high-profile “jobs summit” to generate ideas and plans to get the state’s roughly half-million jobless back to work.

Since the downturn started in late 2007, more than 1 million Georgians have filed for unemployment at least once.

With the state having shed about 356,000 jobs in two years -- most in metro Atlanta -- Thurmond said it is time to bring together the “best minds from the public and private sectors to develop an economic growth and job creation strategy.” He’s expected to set a date early next year for the session.

Unemployment insurance was established during the Great Depression as a temporary buffer for those laid off, but -- since the money would likely be spent quickly -- also an economic boost.

About 269,000 Georgians -- a bit more than half of the jobless -- receive unemployment benefits. More than half of those receiving benefits already get federal money via federal extensions of the eligibility period. In Georgia, the checks currently top out at $355 a week.

The state’s benefits trust fund comes almost entirely from taxes levied on employers -- with each tax calculated in a way that takes into account the company’s size, age and past experience with layoffs.

Those taxes were lowered three times this decade as the economy expanded, the last trim coming in 2007.

Those cuts meant that the benefits fund in Georgia, as with many states, was not prepared for a rapid rise in claims, said public finance economist Gary Burtless, of the Brookings Institution.

A state is advised to keep the fund at a level that would pay a year-and-a-half or two years of payments during a time of high layoffs. But Georgia in 2007 had slightly more than a year’s worth, he said.

“It’s very biblical -- you are supposed to be saving in the good years to pay for the bad years,” Burtless said. “But employers don’t care about what actuaries say, they care about decreasing their taxes right away.”

Employers are taxed at a 1.7 percent rate on the first $8,500 of wages they pay an employee during the year. That tax represents about 0.4 percent of all private sector wages, compared to the national average of .67 percent, Burtless said.

Now the fund needs more money. And while the rate in Georgia is comparatively low, it would have been better to have had a higher rate when the economy was stronger, Burtless said.

“It’s not a good idea to be raising taxes on employers in the middle of a recession.”