Repayment Plan on Tap

The Arkansas Department of Workforce Services in January will present the General Assembly with a plan to repay the federal government the $331 million the state owes for unemployment insurance benefits paid to residents since March 2009.

The U.S. Department of Labor loaned the money because the state’s unemployment fund has been insufficient to make payments. The fund is expected to have a deficit of $311 million by the end of the year.

About 55,000 people in Arkansas receive an average of $280 a month in unemployment insurance benefits.

Workforce Services director Artee Williams said it is unlikely that Arkansas can follow the lead of Texas, which recently issued $2 billion of bonds to repay its loans from the Labor Department and rebuild the balance in its unemployment insurance trust fund.

Williams told the department’s unemployment advisory council, which includes representatives of business groups and labor interests, that he hopes to present a debt-repayment proposal when the legislative session begins Jan. 11.

“You simply asked us to use the wisdom of Solomon to address what you presented,” Williams said. “We are still in that process. We will be for just a bit more time.”

The average business in Arkansas pays $288 per year per employee into the unemployment trust fund. The tax is based on a percentage of the first $12,000 in wages.

Businesses pay a total of approximately $360 million a year into the unemployment trust fund.

Williams said Friday he is considering a proposal to raise the taxable wage base to $16,000, by $1,000 a year over four years.

The state Chamber of Commerce said its members oppose the higher wage base and any other increase in the unemployment insurance tax on employers.

The 2009 stimulus act waives interest on the Labor Department’s loans through the end of the year, but interest will begin accruing on Jan. 1 unless Congress extends the program.

If the waiver is not extended, Arkansas will begin collecting an advance interest tax of 0.2% on employers effective April 1. The tax would remain in effect until the outstanding loans and interest are paid, and the advance interest fund has accumulated $5 million.

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