The Arkansas Senate last week approved a measure that would give the governor the authority to call a statewide election on up to $500 million of revenue bonds to repay federal loans for unemployment benefits.
If SB 305 becomes law and voters approve, the Arkansas Development Finance Authority would issue the bonds. Proceeds would repay the federal loans, including interest, and replenish the state’s unemployment trust fund.
The U.S. Labor Department began loaning the money to Arkansas in June 2009 because the state’s unemployment trust fund became insufficient to pay benefits to an unexpectedly large number of jobless workers.
The Arkansas Department of Workforce Services said the state has borrowed $337.5 million from the federal government for unemployment benefits.
According to the measure’s sponsor, Sen. Jeremy Hutchinson, R-Little Rock, the special revenue bonds would be supported by an assessment on employers.
Hutchinson estimated the state would save $25 million by issuing bonds at 3% interest rate to repay the loans, which carry an interest rate of 4%.
If Akansas issues $350 million or less of the debt, the special employer assessment would be 0.5% of the first $12,000 an employee’s annual salary.
If all $500 million of the authorized bonds were issued, the annual assessment rate would increase to 0.7% of the first $12,000.
Almost 60,000 Arkansans currently receive an average of $280.74 a week in unemployment benefits.