Senate Passes Unemployment Bill To Pay Down Federal Debt
As Pennsylvania’s unemployment hits 8.1 percent, lawmakers are trying to figure out how to get the state Unemployment Compensation (UC) fund out of a very deep hole.
The Senate passed a bill that would authorize the Department of Labor and Commerce to borrow up to $3.5 billion from a private bank at a lower interest rate than what it borrowed from the federal government starting in 2009, when the state got pummeled with a severe economic downturn.
The fund is $3 billion in debt, and if the bill doesn’t pass, businesses in Pennsylvania will suffer the consequences through higher taxes and fees, said Sam Denisco, Vice-President of Government Affairs at the Pennsylvania Chamber of Business and Industry. Although the bill doesn’t address the long-term solvency of the fund, it will transfer the debt to an account with a lower interest rate, so it’ll save money in the short term.
If the bill doesn’t pass, the state will have to cover $104 million in interest alone next year, and would be forced to impose another interest tax on businesses. They’d also lose a tax credit in 2012, because of the federal debt.
“(This bill) allows us to pay that federal debt and pay down the debt. It makes smart financial sense and saves employers tens of millions of dollars,” says Densico. He says unemployment compensation is one of the top five concerns of Chamber of Business and Industry members when they are polled every year.
That’s because employers have to pay UC taxes, between 3.7 to 10.82 percent, depending on the type of business and whether the business is new or not.
The state will still have to borrow to cover the costs of an 8.1 percent unemployment rate in Pennsylvania, though. Ahnivah Williams, a job developer with the Philadelphia Unemployment Project, says unemployment is hitting new highs. She says the 8.1 percent figure doesn’t tell the whole picture of who isn’t working.
“There’s people who aren’t included in that (number). There’s people who just graduated college. People who have gotten fired. Those who don’t collect benefits. The underemployed, or those working part-time,” she said.
The Senate Bill, known as SB1310, is expected to be passed in the House early next month.