Louisiana seeking federal loan as unemployment fund runs dry
BATON ROUGE, La. (AP) — Louisiana will start borrowing money from the federal government in early October to keep paying benefits to jobless workers, as the state’s once-healthy unemployment trust fund is nearly empty because of the coronavirus outbreak, labor department officials said Friday.
Lawmakers meeting in a special session that starts next week are scrambling for financing options to refill the fund that topped $1 billion before the pandemic, rather than relying on federal loans long term. The fund balance Friday hovered around $49 million, and the fund is expected to run dry the week of Oct. 5.
Senate President Page Cortez and House Speaker Clay Schexnayder refused on Friday to officially acknowledge the near-bankruptcy of the trust fund in a state forecasting meeting. That formal recognition would, in 2021, trigger increased taxes for business that pay into the fund and a drop in jobless benefits for unemployed workers.
“We could find a better solution,” Cortez said.
Hundreds of thousands of Louisiana workers have lost their jobs since the state saw its first positive test for the coronavirus in March. At one point, nearly a half-million people in Louisiana were receiving unemployment benefits. That has fallen to about 350,000 people.
Louisiana leaders, like officials in many other states, hoped Congress would help replenish state unemployment trust funds. But discussions between Democrats and Republicans in Washington have broken down.
In early October, Louisiana will join at least 20 other states in drawing down federal loans to keep paying jobless benefits, said Benny Soulier, chief financial officer for the state Workforce Commission. The dollars will have to be repaid later with interest.
If state lawmakers don’t find a way to refill Louisiana’s trust fund or don’t intervene in some other way, business taxes will rise and unemployment benefits will fall next year.
The law requires the state forecasting panel — known as the Revenue Estimating Conference — to adopt a projection for the unemployment trust fund balance in September. While Cortez and Schexnayder refused, the conference’s other two members, Commissioner of Administration Jay Dardenne and economist Stephen Barnes, supported acknowledging the fund’s depletion.
Another conference meeting was set for Tuesday. Cortez said he hopes to have talks with Gov. John Bel Edwards’ administration ahead of that meeting about an approach for shoring up the fund.
Louisiana currently gives jobless workers a maximum of $247 per week, the third-lowest weekly benefit rate in the nation, according to Workforce Commission Secretary Ava Dejoie. That will drop to the country’s lowest rate of $221 a week in 2021 without some sort of intervention.
Meanwhile, the assessments charged on businesses that pay into the unemployment trust fund will rise, and a “solvency tax” also is supposed to be applied to businesses to pour new money into the account. Edwards announced Friday that he has temporarily suspended the solvency tax.
“While we will have to work together and with our congressional delegation to address the long-term need to replenish our trust fund balance, I am confident that we can all agree that we need additional time to recover from this emergency before there should be any consideration of the solvency tax,” Edwards said in a statement.
Though Cortez supports stalling the solvency tax, he questioned if the Democratic governor’s suspension order is legal or requires legislative action.
Proposals to refill the trust fund include taking federal coronavirus aid dollars that lawmakers earlier this year allocated to business grants, one-time payments to front-line workers and reimbursement of local government agencies’ spending on pandemic response. But agencies overseeing those earmarked programs say they expect to spend all of the money.
Other ideas include steering the remaining dollars from a prior year surplus into the trust fund and borrowing through a bond sale to investors to shore up the account.
The 30-day special session begins Monday.