Georgia borrowed $721 million from Washington to help the unemployed survive the lousy economy and now, as the bills come due, it may repay the debt by cutting back on jobless benefits.
The state Labor Department will send a $21.4 million check to Washington this week, the first payment on debt run up since late 2009. Labor Commissioner Mark Butler is weighing a slew of repayment options, but strongly hinted he favors cutting benefits -- both the weekly amount and the number of weeks of eligibility.
“That’s not fair,” said Katrina Cunningham, a laid-off waitress applying for benefits last week at a north Atlanta unemployment office. “People have needs, not wants, and they need the money. They need to survive.”
Butler, in an interview, said he opposes raising or re-instituting taxes employers pay into the unemployment insurance fund. By mid-October, he’ll offer Gov. Nathan Deal and legislative leaders a list of options to repay the debt.
“I believe we have to keep these taxes at a minimum right now because they’d be an additional burden on businesses that would keep them from hiring people,” said Butler. “We’ve got to get these people back to work and increase revenue and this problem would take care of itself.”
Georgia makes weekly payments to workers, laid off by no fault of their own, from its unemployment insurance reserve, funded by employer taxes and borrowed federal money. But in 2000, amid low unemployment, the General Assembly declared a "tax holiday" which lasted through 2003, absolving most employers from paying the taxes.
The reserve fund fell from $2 billion to $703 million in late 2003. Although employers were supposed to refill the fund once the holiday expired, legislators repeatedly granted them additional tax breaks.
The fund's balance today is $228.1 million. Employers now pay, on average, $187 per employee per year.
The Great Recession hit Georgia particularly hard -- the state’s jobless rate, now 10.4 percent, has been higher than the nation’s for 49 consecutive months -- and the fund was depleted by 2009. Georgia, like many states, turned to Washington for help and borrowed $721 million. Other states have also trimmed benefits to help repay borrowed federal money.
Georgia, also like most states, grants the unemployed 26 weeks of benefits depending on the worker’s last salary. The federal government offers a 73 week extension.
One-third of Georgia's 482,321 unemployed workers received jobless payments last month, according to the Georgia Department of Labor. Weekly payments range from $44 to $330 and average $258.
More than $15 million of this week’s $21.4 million interest payment came from the state’s Medicaid program, which provides health care for the poor, Butler said. Legislators agreed earlier this year to use Medicaid funds to help repay the benefits debt. The Labor Department dipped into its job-services program for the remainder of the interest payment.
“Taking that interest payment out of Medicaid and DOL programs that are supposed to help unemployed workers is wrong,” said Elizabeth Appley, a lawyer who represents nonprofits that focus on working families. “Employers should repay (the loan) because employers underfunded the system for years and caused the problem.”
Butler noted that Washington, as part of a deal last December to extend federal insurance benefits, will require employers to pay an additional $21 per worker next year in federal taxes.
The commissioner convened a task force earlier this year to come up with repayment solutions, as well as ways to return the state’s insurance fund to solvency. He declined to release findings, preferring instead to let small business owners, temporary staffing agencies and the Georgia Chamber review the recommendations first. Legislators and Gov. Deal will ultimately decide how to repay the debt.
Butler said floating bonds to repay the principal and interest “doesn’t look like a feasible option at this point,” because the state constitution doesn’t allow it and it would take too long.
Washington is considering waiving or postponing repayments, and the issue will be again raised this fall as Congress weighs President Obama’s jobs bill. Congress will also take up another extension of federal unemployment insurance due to expire by year’s end.
The commissioner suggested that cutting the eligibility timeframe, as well as weekly amounts, will be recommendations for the General Assembly to consider. Michigan, Missouri and South Carolina this year cut eligibility from 26 to 20 weeks. Florida cut payouts from 26 to 23 weeks.
Butler noted that the average Georgian is unemployed for 14 weeks. He said reducing the length of eligibility is “an option we have to take a look at for the short term.” He also said that reducing weekly payments, particularly for Georgians who receive a higher weekly amount, “is part of the package we’ll be showing our private sector experts and also to the (legislative) leadership.”
Clare Richie, a senior policy analyst with the nonpartisan Georgia Budget and Policy Institute (GBPI), noted that Georgia already ranks No. 32 nationwide in average weekly payments -- and near the bottom in duration of benefits paid. The Census Bureau estimates that unemployment insurance nationwide kept 3.2 million people nationwide from slipping into poverty last year.
“We have 1.7 million Georgians in poverty and a majority of them are children, so we shouldn’t be taking steps to add to that amount,” said Richie, who'll release an unemployment fund solvency plan today. “Georgia unemployment benefits are already too low to be touched.”
Richie and Appley, the attorney, suggest instead that the General Assembly raise the minimum tax rate. About one-third of Georgia businesses, according to GBPI, pay only $2.55 per year per employee. Currently, employers are taxed only on a worker’s first $8,500 of annual income; GBPI says that amount should at least be doubled.
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