AZ Borrows Private Funds To Cover Debt From Unemployment Insurance
The state is borrowing $200 million this week in a move officials say should save a lot of money for business owners.
Arizona Public Radio's Howard Fischer explains.
The state's jobless fund is supposed to support itself with a tax on employers. But when the recession was longer and deeper than anticipated, the trust fund went broke and Arizona had to borrow $420 million from the federal government. When the state could not pay that off last fall, employers were assessed and extra $21.00 per worker.
So, Mark Darmer of the Department of Economic Security said that is set to double this November. Darmer said the decision was made to borrow $200 million privately to pay off Uncle Sam immediately - and repay that over the next 8 months. He said the big advantage is that can be done without the $42.oo-per-worker surcharge. "It's really more advantageous for the Arizona economy for us to let the employers retain that money to be able to go out and hire additional staff rather than paying it to the federal government to just build a positive balance in the trust fund a lot sooner."
He puts the savings to employers in not having that surcharge at $100 million. The trade-off of borrowing privately is that it will take longer for the fund to finally get in the black again. Darmer is predicting that should happen some time in the third quarter of 2014.