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States tap federal aid to shore up empty unemployment funds | News – Kansas City, Missouri

Kansas City, Missouri 2021-05-27 15:16:46 –

As a result of the federal coronavirus aid flowing into the state, companies could be spared billions of dollars in tax increases and could free up money to spend on employees and invest in businesses.

According to the Associated Press, more than half of the states’ governors and lawmakers have used at least some of the federal pandemic bailouts to spill unemployment insurance trust funds due to the surge in unemployment benefits caused by business closures and restrictions. I am planning to rescue. Review.

By using federal aid, the state can avoid the automatic tax increases imposed on businesses to repay the federal loans that have highlighted the state’s unemployment system during the COVID-19 pandemic. In short, state unemployment funds could recover much faster than after the Great Recession, which took five to ten years for some states to replenish their funds.

“For the first time in decades, the state will be able to get out of the recession and save for the next recession with a well-funded unemployment trust fund, rather than focusing on the repayment of the previous debt. Jared Walczak, Vice President of State Projects at the Tax Foundation, a Washington, DC-based non-profit organization, said.

Some worker advocates will prefer the state to use pandemic funding to directly help those who are financially afflicted during the coronavirus outbreak.

“Spend money just to replenish accounts doesn’t help workers,” said Jenna, senior lawyer for the National Employment Law Project, a New York-based group advocating for low-wage workers and the unemployed. Gerry said.

However, corporate groups claim that employees will ultimately benefit if their boss does not have to bear the tax burden of replenishing state unemployment funds.

Dan Mehan, President and Chief Executive Officer of the Missouri Chamber of Commerce, said:

The federal government has provided the state with several rounds of aid since the coronavirus pandemic began last year, culminating in the $ 195 billion flexible funding included in the US rescue program signed by President Joe Biden. did. US Treasury guidance allows the unemployment trust fund to be used to replenish to pre-pandemic levels.

According to AP analysis, at least 29 states have already proposed to transfer or use a total of more than $ 12 billion in federal coronavirus aid to unemployment trust funds. This ranges from a $ 25 million remittance in Wyoming to a $ 1.5 billion commitment in Georgia, Ohio.

Maryland Republican Governor Larry Hogan And the Democratic Party of California Governor Gavin Newsom Each announced a budget plan this spring to strengthen its depleted unemployment compensation account with the $ 1.1 billion Federal COVID-19 Fund.

Hogan said the move would allow the state to “continue to help those in need” while at the same time offering “tax cuts to struggling businesses.”

State unemployment benefits are covered by special federal and state taxes on employers. Each state sets its own tax rate and benefit payments. When there is a shortage of trust funds, the state can get a federal loan to continue paying unemployment benefits. Loans that were executed in 2020 and are still on the books in January next year must be repaid by November 2022. Otherwise, the federal government will raise taxes on businesses to collect funds.

Ten years ago, the Great Recession caused the unemployment trust fund to go bankrupt in 35 states, incurring a total of more than $ 40 billion in debt to pay the unemployed. It took the state years to repay it.

A US Department of Labor Report Shortly before the pandemic began, 21 states warned that unemployment funds were still in short supply to survive a potential recession. Most of these states borrow from the federal government for pandemics. I needed to. Layoff hit hard Declare the unemployment fund.

In the year since March 2020, AP’s analysis shows that total state trust fund funding has plummeted by two-thirds, but the median state endowment balance has fallen further to $ 1.1 billion to $ 2. It’s $ 50 million.

But with federal bailouts, fewer states have borrowed to pay unemployment benefits than they did during the last recession. As of Tuesday, 18 states have borrowed $ 52 billion from the federal government for unemployment loans. California is at the top of the list with about $ 21 billion in unemployment debt, with New York at over $ 9 billion and Texas at nearly $ 7 billion.

Missouri took five years to repay more than $ 1 billion in federal unemployment loans after the recession that ended in 2009. However, the Unemployment Fund avoided unemployment during the pandemic, backed by $ 300 million in aid provided under a law signed by Republican Governor Mike Parson. According to former President Donald Trump.

The Person’s office was encouraged by the Missouri Chamber of Commerce to do so.

“If we didn’t do that, the employers there would be small and medium-sized, large-scale, coming back and trying to get back strong, but they would have to raise unemployment insurance rates. I wouldn’t have. ” Mehan, CEO of the Chamber of Commerce.

Pennsylvania only Made the final payment About $ 2.8 billion in bonds issued in January 2020 to repay the federal government on unemployment compensation loans triggered by the Great Recession. A few months later, I had to start borrowing again for a pandemic. The state currently owes the federal government about $ 1.6 billion in debt for unemployment loans.

Business representatives are encouraging Democratic Tom Wolf administration and Republican-led parliament to use federal coronavirus bailouts to restore the state’s unemployment fund. House Speaker Brian Cutler said he would support the use of relief money for existing costs before funding the new program.

“Members often talk about supporting their businesses and small businesses. This is a good opportunity to take some action behind them,” said Alex Halper, Executive Director of the Pennsylvania Chamber of Commerce. Says.

Workers’ advocacy groups have raised concerns that some states are putting coronavirus bailouts into the unemployment fund, while ending an additional $ 300 a week in federal unemployment benefits.

West Virginia has borrowed $ 185 million from the federal government to continue paying regular unemployment insurance. Republican Governor Jim Justice has secured a federal pandemic bailout of about $ 600 million for the state’s unemployment system.

Sean O’Leary, senior policy analyst at the nonprofit West Virginia Budget Policy Center, said the money would help people buy food, pay rent, find jobs, and expand high-speed Internet access. Said that it may have been used for.

“There’s a lot you can do with that money over the past year, but there’s still a lot you can do. $ 600 million is a lot of money just sitting right now,” he said.


David A. Lieb reported from Jefferson City, Missouri. Associated Press writer Marc Levy contributed from Harrisburg, PA.

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