Louisiana seeks federal loan as unemployment fund dries up

BATON ROUGE, Louisiana (AP) – Louisiana will begin borrowing money from the federal government in early October to continue paying benefits to the unemployed, as the once healthy state unemployment trust fund is nearly empty because of the coronavirus epidemicMinistry of Labor officials said on Friday.

Lawmakers meet in special session starting next week are scrambling to find financing options to replenish the fund that exceeded $ 1 billion before the pandemic, rather than relying on long-term federal loans. The fund balance on Friday hovered around $ 49 million, and the fund is expected to dry up the week of October 5.

Senate Speaker Page Cortez and House Speaker Clay Schexnayder on Friday refused to officially acknowledge the near-bankruptcy of the trust fund at a state forecast meeting. This formal recognition would lead, in 2021, to an increase in taxes for companies that contribute to the fund and a reduction in unemployment benefits for the unemployed.

“We could find a better solution,” Cortez said.

Hundreds of thousands of workers in Louisiana have lost their jobs since the state experienced its first positive test for the coronavirus in March. At one point, nearly half a million people in Louisiana were receiving unemployment benefits. This fell to around 350,000 people.

Louisiana’s rulers, like officials in many other states, hoped Congress would help replenish the state’s unemployment trust funds. But talks between Democrats and Republicans in Washington failed.

In early October, Louisiana will join at least 20 other states in withdrawing federal loans to continue paying unemployment benefits, said Benny Soulier, chief financial officer of the state’s Workforce Commission. The dollars will have to be repaid later with interest.

If state lawmakers can’t find a way to replenish Louisiana’s trust fund or otherwise intervene, taxes on businesses will rise and unemployment benefits will fall next year. .

The law requires the state’s forecasting panel – known as the Income Estimating Conference – to adopt a projection of the unemployment trust fund balance in September. While Cortez and Schexnayder refused, the other two members of the conference, administration commissioner Jay Dardenne and economist Stephen Barnes, supported recognition of the exhaustion of the fund.

Another conference meeting has been scheduled for Tuesday. Cortez said he hopes to have talks with Gov. John Bel Edwards’ administration ahead of this meeting on an approach to consolidate the fund.

Louisiana currently gives the unemployed a maximum of $ 247 per week, the third lowest weekly benefit rate in the country, according to Workforce Commission Secretary Ava Dejoie. This will drop to the nation’s lowest rate of $ 221 per week in 2021 without any intervention.

Meanwhile, the contributions imposed on companies that contribute to the unemployment trust fund will increase and a “solvency tax” is also supposed to be applied to companies to put new money into the account. Edwards announced on Friday that he had temporarily suspended solvency tax.

“While we need to work together and with our delegation to Congress to meet the long-term need to replenish our trust fund balance, I am confident that we can all agree that we need more time for ourselves. recover from this urgency before there are any solvency tax considerations, ”Edwards said in a statement.

While Cortez supports blocking the solvency tax, he questioned whether the Democratic governor’s suspension order was legal or required legislative action.

Proposals to top up the trust fund include taking federal coronavirus aid dollars that lawmakers allocated earlier this year to business grants, one-time payments to frontline workers, and reimbursement of expenses for workers. local government agencies for pandemic response. But the agencies overseeing these reserved programs say they expect to spend all the money.

Other ideas include transferring remaining dollars from a previous year’s surplus to the trust fund and borrowing through a bond sale to investors to consolidate the account.

The 30-day special session begins Monday.

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