The Arkansas Senate is considering whether the state should issue bonds to repay $330 million received since March 2009 from the federal government for unemployment benefits.

The U.S. Labor Department loaned the money because the state’s unemployment fund was insufficient to pay benefits to an unexpectedly large number of unemployed.

Sen. Jeremy Hutchinson, R-Little Rock, said Arkansas comes out $25 million ahead by repaying the loan with bond proceeds. The interest paid by the state would be lower than the interest rate for the federal loan, he said.

Otherwise, he said, the payroll tax paid on employers would be increased to repay the loan.

Hutchinson added that the state probably would pay an interest rate of 3% on the bonds issued to repay the $330 million loan.

The Arkansas Workforce Services Department said the interest rate charged for the federal loan is 4.09%.

Hutchinson said lawmakers are also considering tightening restrictions on eligibility for unemployment benefits, as well as drug tests and a requirement that recipients without a high school diploma make efforts to complete their education.

The 2009 federal stimulus act waived interest on the Labor Department’s loans through the end of 2010, but interest began accruing Jan. 1.

The Workforce Services Department said 50,000 to 55,000 unemployed Arkansans receive an average of $280.74 a week in benefits.

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