Arkansas voters could soon have the opportunity to decide on up to $600 million of general obligation bonds that would repay federal loans for state unemployment benefits.
SB 305, introduced last week by Sen. Jeremy Hutchinson, R-Little Rock, would repay with bond proceeds the money being borrowed from the U.S. Department of Labor.
The department began loaning the money to Arkansas in June 2009 because the state’s unemployment trust fund had come up short in paying for benefits for an unexpectedly large number of unemployed.
The state has received $330 million of the federal loans. Interest on the borrowing began accruing in January at a rate of 4%.
Hutchinson said the state would probably pay 3% interest on the GO bonds, which he said would save $25 million in debt service over the rate charged by the federal government.
The measure gives the governor the authority to call the election.
The bonds would be supported by an increase in the taxable wage base for each employee, which is currently $12,000 a year.
The average tax rate on the base is now 2.82%.
If the revenue from the employment tax increase is not sufficient, the bonds would be supported by the state general fund.
The size of the tax increase would be determined by the Department of Workforce Services.
Almost 60,000 Arkansans currently receive an average of $280.74 a week in unemployment benefits