Aided by more state revenues along with cuts to spending on the jobless, Georgia has repaid the nearly $1 billion federal loan taken four years ago to pay for a surge in demand for unemployment benefits.
The state made its final payment of $62.5 million months ahead of schedule, aided by several years of modest job growth, along with some controversial benefit trims and an effort to stem overpayments.
“A lot has to do with the recovery,” Labor Commissioner Mark Butler said. “We’ve seen jobs grow. Plus, some of the changes we made to the unemployment system also helped.”
The state took the loan in 2009 when the trust fund for unemployment insurance, funded by employer taxes that had been held down in prior years, ran dry.
In 2012, the state legislature increased employer taxes to add some revenue to the fund.
The legislature also cut the maximum period an unemployed person can receive benefits from 26 weeks to no more than 20 weeks, using a sliding scale that could mean as few as 14 weeks of benefits.
Those changes, aimed at bolstering the trust fund and making an early payback to the feds possible, came as the state’s jobless rate declined.
However, the proportion of long-term unemployed in the state remained historically high, so critics say the cuts were an unfair way to raise money for the payback.
“Georgia like most states has been cutting benefits to put it all on the backs of employees,” said Rebecca Dixon, policy analyst for the National Employment Law Project. “Georgia can do better.”
The maximum unemployment payment in Georgia is $330 a week. Seven states pay less, she said. Mississippi has the lowest maximum, $235 a week, while Massachusetts has the highest at $679 a week. The average unemployment benefit check in Georgia is $266.74, representing 30 percent of the average weekly wage in the state, according to NELP.
Critics also say the state set itself up for problems.
Starting in 1999, Georgia suspended payroll taxes and later suppressed “triggers” meant to rebuild the fund by raising business taxes. Government officials defended the action as being justified by a healthy job market and the desire to improve the business climate.
But the fund was vulnerable to a deep and prolonged crisis.
“About 90 percent of business didn’t pay unemployment taxes for about four years,” Butler said. “The best way to describe it is that they gave them a tax holiday. If that had never existed we would have never had to borrow any money (from Washington).”
Georgia had $1.3 billion in its unemployment insurance trust fund as the economy slid into recession in late December 2007.
As the unemployment rate rocketed from 5.1 percent to 10.4 percent and hundreds of thousands of Georgians lost their jobs, the fund for paying benefits evaporated. It was depleted by late 2009 and Georgia joined more than 30 states in hitting up the feds for a loan.
By then, the economy was growing slowly, while the job market was still erratic and layoffs still fairly heavy. But in the past three years, the economy has added more than 300,000 jobs. And while roughly 330,000 Georgians are still unemployed, that is down from more than 465,000 three years ago.
The state originally set 2016 as the deadline to pay back the feds. Last fall, with the economy improving, Butler said he expected it would be paid off in the second half of 2014.
Fourteen states that have not finished repaying their federal loans, including North Carolina and South Carolina, which still owe millions, Butler said.
About $2.5 billion in the trust fund should be sufficient for future crises, Butler said. The state unemployment insurance trust fund currently has a balance of $355.9 million.
“By the time another recession happens, we want to make sure we’re covered,” he said. “I’m hopeful that policy makers in the future won’t play with that fund the way it was in the past.”
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