Gov. Nathan Deal and State Labor Commissioner Mark Butler announced that the almost $1 billion federal loan used to help pay state unemployment insurance benefits since 2009 has been repaid. The final payment of $62,490,887.99 was sent to the U.S. Department of Labor on May 14 and the GDOL has received confirmation that the loan balance is paid. The original projected payoff date was 2016.
“Emerging from the Great Recession, a top priority of my administration has been putting Georgians back to work, and this news proves we are making great strides,” Gov.
Deal said. “Georgia’s ability to pay off its unemployment trust fund loan two years early is a testament to the determination of Georgia employers, the Georgia Department of Labor and our state’s General Assembly. Working together, we have accomplished much, and I remain committed to keeping Georgia the premier state in the nation for business.”
In 2012, the Georgia General Assembly enacted legislation designed to strengthen the state unemployment insurance trust fund and help repay the loan. The legislation increased the amount of base wages used to calculate employer UI taxes from $8,500 to $9,500. It reduced the maximum period a person can receive benefits from 26 weeks to a maximum of 14 to 20 weeks based on a sliding scale tied to the state unemployment rate.
"Georgia has repaid the federal government two years earlier than expected and the bulk of the credit goes to Georgia employers who pay the unemployment insurance taxes and have put more than 175,000 Georgians back to work,” said Comm. Butler. “I want to thank Gov. Deal and the General Assembly for their assistance in making necessary changes to the unemployment laws, which, along with the GDOL's efforts to combat fraud and put Georgians back to work, have greatly helped repay the loan early."
Georgia’s unemployment insurance trust fund had a balance of $1.3 billion in December 2007 when the recession began and unemployment stood at 5.1 percent. As the recession lingered, hundreds of thousands of Georgians lost their jobs and were unable to find new ones. By December 2009, the unemployment rate had more than doubled to 10.4 percent, the trust fund was depleted, and Georgia was forced to join more than 30 other states in borrowing from the federal government to pay state benefits. From the time of the first loan through March 2014, Georgia paid $3.9 billion in state UI benefits.
To date, the state has borrowed a total of $956,389,306.63 to help make the payments. Georgia has paid $56,723,741.02 in interest. While the loan principal has been repaid, the final interest payment of approximately $2.7 million will be due and paid by September 30. The total payback will be approximately $1 billion.
Employers in states borrowing from the federal government to pay UI benefits eventually have to pay a higher rate of federal unemployment taxes (FUTA) until the debt is repaid. All of the additional federal unemployment taxes are used to repay the loan balance. States also use revenue from state unemployment insurance taxes (SUTA) to repay the loan. Interest payments are funded by general state revenue.
“By repaying the loan early, it will save our employers from having to pay approximately $600 million in additional federal unemployment taxes,” said Butler. “That money can now be used to create jobs and grow our state’s economy. And, now that the loan is repaid, our employers will see a reduction of $63 per employee in their federal unemployment taxes beginning in January.”
The state unemployment insurance trust fund has a current balance of $355,827,774.92.
The state does not expect to have to borrow again, based on current economic trends.
There are 14 other states that have not repaid their loans, as of Friday.
Video (Quicktime) and audio (mp3) comments from Commissioner Butler are available for download.
For video, go to: http://www.mediafire.com/watch/k54e2ydn9tiaeot/Commissioner_Mark_Butler_comments_on_Trust_Fund_Loan_Payoff.mov
For audio, go to: https://www.mediafire.com/?6zq6lh6cr0f5l7l