Pennsylvania to borrow $4.5 billion to pay off unemployment debt to federal government

HARRISBURG?

? State legislation to pay off nearly $4 billion in borrowed federal unemployment benefits while also placing new limits on eligibility and benefits is on its way to Gov. Tom Corbett's desk.

The House voted 129-67 on Wednesday to approve the bill, which allows the state Department of Labor and Industry to borrow up to $4.5 billion over 10 years at a low interest rate to pay off the $3.8 billion in benefits the state has borrowed from Washington since the recession began. The Senate gave final approval to the bill on Tuesday.

Backers have compared the decision to issue bonds to a mortgage refinancing and argue that the state isn't taking on new debt with the bonds. The debt will be paid through employers who pay unemployment compensation taxes to the state.

"We'll save money," said House Majority Leader Mike Turzai, R-Allegheny.

In a statement, Corbett thanked the House for its vote and said the lingering debt "was threatening Pennsylvania jobs."

"Thanks to the Legislature's quick action on this jobs bill, employers will not have to worry about unpredictable repayment costs and solvency will be restored to the trust fund," Corbett said.

But as part of the deal to pay down the state's debt, some lawmakers also insisted on changes to eligibility and benefits to help restore the solvency of the state's Unemployment Compensation Trust Fund, which is insolvent.

Pennsylvania's statewide unemployment rate in April was 7.6 percent, which was lower than the federal rate of 8.1 percent during the same period. Updated state jobless numbers could be released as soon as next week, said Christopher Manlove, a spokesman for the state Department of Labor and Industry.

One of the biggest fixes in the bill, at a savings of $276 million, would tie benefit payments more closely to the time someone works.

Under current law, 20 percent of a person's benefits are calculated based on how much they made outside their highest-earning quarter in the year before they applied for benefits. The bill would increase that threshold to 49.5 percent.

House Democrats argued during a House Rules Committee meeting before the vote that the change would disproportionately affect roughly 48,000 seasonal workers. They also said the overall changes included in the bill would actually increase unemployment, because people would have less money to spend, which would lead businesses to shed workers.

"We understand there is a problem," said House Minority Leader Frank Dermody, D-Allegheny. "We had hoped to solve the problem with shared sacrifice. But this bill includes virtually no sacrifice for employers while benefits are slashed. We can do much better."

Rep. Jennifer Mann, D-Lehigh, who voted against the bill in the Rules Committee meeting but said she planned to vote in favor of the legislation on the floor, said the state had to do something about its $4 billion tab to the feds.

"It would be nice if they forgive it, but 10 other states have already paid their [debts] back," she said. "This bill is a compromise. And a compromise means that you don't get everything you want."

john.micek@mcall.com

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