Arkansas debt owed to Feds balloons to $222.6 million

Arkansas’ unemployment insurance tab as of Dec. 31 with Uncle Sam was $222.61 million, lower than an early October projection of $223.8 million at year’s end.

But the tab could grow by more than $155 million by the end of 2011.

With the recession pushing people out of jobs and keeping unemployment rates higher than during previous recession, 25 state governments and the territorial government of the U.S. Virgin Islands have been forced to borrow funds from the federal unemployment insurance system. (Link here for an indepth story on the issue published Oct. 14 by The City Wire.)

The number of unemployed in Arkansas was 101,563 in November, up 33.5% from the 76,061 in November 2008. Initial claims for the weekly reporting period ending Dec. 19 came in at 5,231, down from the 2009 high of 10,223 in mid-July — a shift that suggests  either an improvement in the job market or thousands of Arkansans dropping from the eligibility rolls.

Ronald Calkins, assistant director-unemployment insurance for the Arkansas Department of Workforce Services, said Monday (Jan. 4) he estimates Arkansas will owe $350.3 million by the end of 2010, and $380.6 million by the end of 2011.

At the end of 2009, the U.S. Department of Labor reported that the 25 states and one territory had borrowed more than $26.03 billion to fund their respective unemployment benefit programs. California borrowed $5.914 billion in 2009, the most of any other state.

Mike Miller, with the U.S. Department of Labor division of fiscal and actuarial services, recently reported that payments from state unemployment trust funds will exceed revenues and interest income by $41 billion in fiscal year 2009 and $55.8 billion in fiscal year 2010.

“State UI regular benefit outlays are estimated at $74.9 billion in FY 2009 and $93.3 billion in FY 2010, up significantly from President’s Budget estimates of $66.9 billion and $65.0 billion, respectively,” Miller noted in the report.

There are many state and federal programs to help the unemployed, yet the primary program is a federal-state system — created in 1935 — that temporarily pays a portion of wages based on how much a person earned in the 52 weeks prior to losing a job. The typical program pays the benefit for up to 26 weeks, although some states and federal programs provide a 13-week extension in areas of deep economic distress.

Arkansas employers pay an average of 2.4% on the first $10,000 of taxable wages per employee (The rate can vary from 0.1% to 10% based on the employment history of the business.). Also, the FUTA (federal unemployment tax act) requires all U.S. employers to pay 6.2% of the first $7,000 in taxable wages per employee, although an “offset credit” of 5.4% reduces the obligation to 0.8% — roughly $56 per employee per year — for most employers.

Officials with the Arkansas Chamber of Commerce/Associated Industries of Arkansas have focused on educating member businesses on the growing problem that will likely result in higher taxes for Arkansas businesses.

“We’re doing everything we can to mitigate the increases, but at the end of the day there will be significant added costs to your business for the unemployment insurance program,” Arkansas Chamber President Randy Zook said in October.

Kenny Hall, executive vice president of the state chamber, said the group continues its education role and will meet with labor organization leaders later in January to work on a joint plan to push at the 2011 legislative session.

A joint plan will be difficult because business officials are likely to push for limiting benefits and lowering payouts in exchange for higher tax rates, Hall explained.

“But we have a 50-year history of working with labor and we want to honor that ... and hopefully we can all present a unified plan then (2011),” he said. “We don’t want to ask businesses to pay any more than they absolutely have to, but it’s a difficult balance” in maintaining a solvent unemployment benefit program that is fair to employees and employers.

Following is the list of outstanding federal loans as of Dec. 29 (source, U.S. Department of Labor):
Alabama: $146,094,356.07
Arkansas: $220,768,169.53
California: $5,914,584,870.70
Connecticut: $153,508,648.29
Florida: $951,700,000.00
Georgia: $52,000,000.00
Idaho: $100,484,625.22
Illinois: $1,122,049,926.74
Indiana: $1,484,263,709.85
Kentucky: $574,700,000.00
Michigan: $3,120,782,333.32
Minnesota: $260,568,554.43
Missouri: $455,339,093.19
Nevada: $125,221,794.99
New Jersey: $942,298,333.38
New York: $2,105,729,353.78
North Carolina: $1,597,616,067.74
Ohio: $1,724,837,799.00
Pennsylvania: $1,856,009,044.70
Rhode Island: $126,982,752.00
South Carolina: $677,612,443.00
South Dakota: $7,233,718.77
Texas: $1,290,150,871.62
Virgin Islands: $8,386,556.12
Virginia: $107,642,000.00
Wisconsin: $911,953,219.04
U.S. Total: $26,038,518,241.48