Artee Williams, the director of Arkansas’ Department of Workforce Services, is confident a more than $310 million debt owed by the state to the federal government will be repaid no later than 2015.
As of May 2011, Arkansas owed more than $343 million that accumulated through federal government advances to help pay unemployment benefits.
The DWS is a “hybrid” organization in that it is a state agency that collects and disburses federal money and money collected from federally-imposed unemployment taxes. At the height of the recession, Arkansas’ unemployment trust fund was depleted, and the U.S. Labor Department’s “Title 12” program loaned DWS the money to pay unemployment benefits.
The debt began growing during the 2008-2009 U.S. recession, and the subsequent “jobless recovery.” As of April, Arkansas’ jobless rate has stubbornly held above 7% for 39 consecutive months and the number of unemployed has topped 100,000 for 38 straight months.
To tackle the debt issue and to restore Arkansas’ unemployment trust fund, Gov. Mike Beebe and Arkansas lawmakers raised the payroll contribution threshold in the 2009 legislative session, and curtailed benefits and changed eligibility requirements in the 2011 session.
Act 861, signed in 2011, eliminated wage indexing, reduced Arkansas jobless benefits from 26 to 25 weeks, and set new eligibility requirements for workers seeking unemployment. The changes were estimated to save $60 million to $75 million.
April 2011 was the last month Arkansas officials borrowed funds under Title 12.
As of June 4, the amount owed by the state was $310.742 million. Williams said the state is scheduled to pay about $40 million in principal and interest payments in September. He and other state officials estimate the debt will be paid off by or during 2015.
“We don’t anticipate, unless there is some significant recession, we don’t anticipate having to borrow any more money. ... Anything could change that, but for right now we don’t foresee a need to apply for additional Title 12 advances,” Williams said.
He said the state made the first “voluntary payment” of $29.136 million in September 2011 — a moved that saved the state $574,157 in interest charges.
Also in September 2011, Arkansas made an interest payment of $10.113 million.
Williams said a voluntary payment of $8.8 million is planned for July, with another voluntary payment of about $30 million set for September. September could also see an interest payment of around $10 million, Williams added.