story by Roby Brock, with Talk Business, a content partner with The City Wire
roby@talkbusiness.net
Nearly two years after the state’s unemployment insurance (UI) trust fund found itself $360 million in the hole, Gov. Mike Beebe (D) says the jobless safety net has paid back nearly half its federal debt and is operating in the black.
In his weekly radio address, Beebe singled out the UI trust fund and outlined what has transpired to pull the fund balance out of the red.
The trust fund, which is financed through payroll taxes that companies pay on their employees, was hit hard when jobless claims skyrocketed during the recession and early recovery years.
The debt began growing during the 2008-2009 U.S. recession, and the subsequent “jobless recovery.” As of April 2013, Arkansas’ jobless rate has stubbornly held above 7% for 51 consecutive months. Between April 2009 and February 2012 the number of unemployed topped 100,000. Even after falling below 100,000, the number of unemployed has remained high and was estimated at 95,154 during April 2013. Prior to the recession, the number of unemployed hovered around 70,000.
Those circumstances led the fund to borrow heavily from the federal government, raising concerns about how the state would repay its advances.
As of May 2011, Arkansas owed more than $343 million that accumulated through federal government advances to help pay unemployment benefits. During a May 2012 interview, Artee Williams, the director of Arkansas’ Department of Workforce Services, said he was confident the more than $310 million debt owed by the state to the federal government will be repaid no later than 2015.
The governor, Arkansas legislators, and business leaders changed a number of provisions in the 2009 and 2011 legislative sessions to repair the trust fund’s solvency.
Act 861, signed in 2011, eliminated wage indexing, reduced Arkansas jobless benefits from 26 to 25 weeks, and set new eligibility requirements for workers seeking unemployment. The changes were estimated to save $60 million to $75 million.Two years ago, the reforms were projected to lead the state to be debt-free by 2015 and it appears on track to do so.
Beebe said during his recent radio remarks:
“Two years have passed, and we’ve reached an important milestone. We are still paying back the federal government, but the total has dropped by almost half to $193 million. Meanwhile, the Trust Fund has been replenished and now has a $205 million balance. It’s the first time in four years that we’ve had a positive overall balance in our Unemployment Insurance Program.
“Although we now have a positive balance, we’re not going to exhaust it by immediately paying off the rest of the federal advances. We need to keep a healthy balance in the trust fund to handle anticipated new unemployment claims for the rest of this year, as well as for any unexpected employment shifts. We still expect to complete our repayments to the federal government next year. And, when that happens, businesses will see their full federal tax credits restored.”