State Asks For $1.1B Federal Loan To Cover Shrinking Unemployment Fund

From the Georgia Recorder:

By Ross Williams

August 11, 2020

Georgia is asking for a $1.1 billion loan from the federal government to help refill the state’s depleted Unemployment Trust Fund, which pays unemployment benefits to displaced workers.

The fund contracted by about 80% since March, when Georgia businesses began laying off workers in historic numbers as fear COVID-19 spurred the governor to issue stay-home orders. As of Aug. 6, the balance was just over $504 million, down from over $2 billion in March.

A July 24 letter to U.S. Labor Secretary Eugene Scalia signed by Gov. Brian Kemp calls for the federal government to transfer $85 million in August, $585 million in September and $430 in October.

As of July, Georgia Department of Labor employees have processed more than 3.3 million regular unemployment claims, more than in the past three years combined. Some out of work Georgians have complained of long waits and difficulty getting their questions answered during the sky-high demand.

Unemployment benefits are funded by a payroll tax levied on employers. The loan will allow unemployed Georgians to continue to receive state benefits uninterrupted if the trust fund is emptied.

Georgia borrowed more than $950 million from the federal government in 2009 during the Great Recession and paid it back in 2014, along with over $56 million in interest. The final payment came two years earlier than projected, but unemployed Georgians saw their benefits shrink as a result, said Georgia Budget and Policy Institute Senior Analyst Alex Camardelle.

“Rather than lifting the payroll tax to help fund recovery, Georgia cut into the state general fund and reduced the duration of benefits to 14 weeks to pay back the loan,” he said. “Before COVID-19, our trust fund was back to where it was about 20 years ago, but over that time, our population has grown significantly.”

The loan letter came before President Donald Trump’s executive action extending unemployment benefits and calling on states to chip in a portion of the costs.

State officials in Georgia and across the country are trying to understand the details of how the It is not clear whether Georgia would need to seek a larger federal loan to meet increased spending caused by that action, said Auburn Republican Rep. Terry England, who chairs the House Appropriations Committee.

“We have already applied for a loan just for the normal benefits, so I don’t know if the governor were to decide to do this, if that would be something they would do, to ask for a larger loan, or if it works out that CARES Act funds can be expended for it, that may not be necessary,” he said. “I just don’t have a clue what the amount would wind up being, but it would be fairly substantial.”

This story was originally published by the Georgia Recorder. For more stories from the Georgia Recorder, visit GeorgiaRecorder.com.