Major Change Possible for Georgia Unemployment Benefits

Mike Klein, GPPF Forum Editor

Georgia appears prepared to make significant changes to its unemployment benefits program, changes that could have an impact on Georgians without jobs.  Options under review at the State Capitol include a waiting period that would delay the first check, fewer total state benefit weeks and reducing the maximum weekly benefit dollars.

Some combination of these three ideas or others is possible.  Governor Nathan Deal’s chief spokesman Brian Robinson said, “The governor is looking at several options that we’ll discuss with legislators once the 2012 session begins.”  Lawmakers return in January but the real work to get key issues ready for the General Assembly has been underway for months.

Georgia’s “official” unemployment rate is 10.2 percent, well above the 8.6 percent national rate reported for November by the U.S. Department of Labor.  “Official” does not try to estimate those who became so discouraged that they quit looking for work.

Georgia has written $777 million in state-funded benefit checks this year.  “We have to find a way to control the outflow,” said state labor department commissioner Mark Butler.  “What we are bringing in is barely enough to meet the demands we have to pay out.”  Federal benefits paid out are more than $1.16 billion.  Three state-based options under review include:

** First, implement a “Waiting Week” before the first state paid benefit to save an estimated $35 million per year.  The current average recipient receives benefits for about 14 weeks.

** Second, reduce the number of state paid unemployment benefit weeks from 26 weeks now to between 20-to-26 weeks to save $163 million per year.

** Third, reduce the maximum weekly benefit from $330 to $300 per week to save $58 million. The current average benefit check is $259.

Georgia Labor Commissioner Mark Butler

Butler described these options as “like coming up with the best (of the) worst solutions” but the first-year state labor commissioner also acknowledged, “Those are the best ideas.”

Unemployment compensation is a state and federal shared responsibility.  States manage their programs and assume the benefit costs for an initial period — in Georgia that is currently 26 weeks — before federal funds pay additional benefits for up to 99 total weeks.  Thirty-five states including Georgia quickly depleted available state funds during the recession.  Georgia began to borrow federal funds in December 2009.

Federal loan repayment is a different challenge.  The $721 million that Georgia owes must be repaid with dollars from federal unemployment insurance taxes levied on employers statewide.  This year the federal tax was an annual $21 per employee; next year the cost to employers will be $42 per employee and it will go up another $21 every year until Georgia’s loan is repaid.

“I’m going to be as aggressive as possible paying this back so we can reduce the amount of the increase from the feds,” Butler said.  “The longer you (have outstanding loans) the higher the federal tax gets” on statewide employers.

An already compound problem became more complex this year when President Barack Obama’s administration sent conflicting signals about waiving state interest payments.  The White House budget submitted to Congress in February contained such a proposal, but then the administration backed away from the idea and states began to pay interest this fall.

Georgia repaid $27 million in October: $6 million principal and $21 million for interest.  Butler said the interest payment was financed with $15 million in redirected Medicaid funds and the remainder came from the labor department budget.  Employer dollars financed the $6 million.

One year ago Texas faced the long-term prospect of a much larger repayment, $2.1 billion in principal plus interest.  The Lone Star state sold bonds, repaid the debt owed to Washington and replenished the Texas state account.  Texas estimated that it avoided $110 million in federal interest by financing the debt with state bonds.  Last month the Illinois General Assembly approved a similar bonds sale.

Georgia bonds are not on Butler’s short list.  DOL conferred with Attorney General Sam Olens’ office.  “The structure they showed us is extremely complicated almost to the point where it would be very hard to pull it off” without a constitutional amendment, Butler said.  The federal loan interest rate is about 4 percent; state bonds could be sold at a lower rate.

Anything that changes will require General Assembly approval because nearly everything that governs unemployment benefits is contained within law.  The option – doing nothing – would make this situation much worse next year and require new borrowing.  “We cannot get out of this by putting this onto business,” Butler said.  “You cannot tax your way out of this.”

Georgia Employment Data:

Georgia Unemployment Rate:  10.2%

National Unemployment Rate:   8.6%

October 2010 Long-Term Unemployed:  240,600

October 2011 Long-Term Unemployed:  259,300

October 2010 Statewide Payroll Jobs:  3,851,400

October 2011 Statewide Payroll Jobs:  3,818,800

October 2010 Initial Claims:  57,494

October 2011 Initial Claims:  55,865

2011 State First-Time Payments:  223,319 People

2011 Federal First-Time Payments:  460,149 People

2011 State Payment Dollars:  $777 Million

2011 Federal Payment Dollars: $1.16 Billion

(Data Source:  Georgia Department of Labor)

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