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Pennsylvania may seek federal loan to pay jobless benefits

August 10, 2020 GMT

HARRISBURG, Pa. (AP) — Pennsylvania has contacted the U.S. Department of Labor about a loan to prop up its unemployment compensation trust fund as President Donald Trump pushes states to help pay for a new round of federal unemployment benefits.

Gov. Tom Wolf’s office said Monday it was waiting for federal guidance to understand the full impact of Trump’s executive order.

Wolf has urged Congress to extend the $600 per-week benefit, which ended last month. Under Trump’s plan, a new $400 a week benefit requires a state to commit to providing $100.

Since it is written under disaster relief and emergency assistance law, Trump’s plan also requires a new program to be created from scratch, separate from Pennsylvania’s existing unemployment benefits programs, Wolf’s administration said.

“This is not something that any state will be able to do quickly,” Wolf’s administration said in a statement.

Reducing the benefit from $600 a week to $400 a week will make it harder for families to get by during the pandemic, Wolf’s administration said.

It also places a larger financial burden on states, the administration said, noting that it has inquired about a federal loan as a precautionary measure.

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Pennsylvania had $3.4 billion in its unemployment compensation trust fund at the beginning of the year, according to federal figures.

Between March 15 and last Friday, Pennsylvania paid out $24.2 billion in unemployment benefits. Of that, $4.2 billion was state dollars, leaving Pennsylvania with just under $715 million in its trust fund, Wolf’s administration said.

Wolf’s administration said it has completed all of the prerequisite work to ensure it can borrow a 0% interest loan from the U.S. Department of Labor. At this point, Wolf’s administration anticipates needing to secure the first loan by early September, it said.

Just this year, Pennsylvania paid the final installment on $2.8 billion in bonds it issued in 2012 to retire a post-recession unemployment compensation debt that businesses owed to the federal government. The total debt service was $3.4 billion.