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Idaho dependent on federal loans to make unemployment payments

Idaho dependent on federal loans to make unemployment payments

Idaho Freedom Foundation staff
June 3, 2010

Idaho has borrowed more than $200 million from the federal government to pay for unemployment benefits to out-of-work residents, and is unlikely to start paying back that loan this year.  Unless Congress acts, the Idaho Department of Labor could have to pay interest on that loan next year at rates around 4 percent.

As long as the state labor department is taking federal money, Idaho employers will continue to pay the highest possible unemployment insurance tax rate allowed by state law.  Labor department spokesman Bob Fick said he expects employers will continue to pay a rate that averages 3.36 percent for an employee’s first $33,000 in wages for the next three to four years.  Employers’ unemployment taxes were 3.36 percent in 2009 after being at a standard rate of 1.8 percent in 2008.

State law doesn’t allow the labor department to tax employers any higher, and the high number of unemployed Idahoans is forcing the department to take federal loans.  “There’s nothing that can be done,” Fick told IdahoReporter.com.  “The law that was passed in 2005 made all of this automatic.  The only thing the department does is the math.”  Though 3.36 percent is the base rate, employers can pay anywhere from 0.96 percent to 6.8 percent in unemployment insurance taxes depending on their history of payments and former workers that have filed for unemployment.

Fick said that while the state unemployment rate has dropped for two consecutive months, Idaho’s high jobless rate has necessitated borrowing more federal money this year.  He said he expects the state to start repaying the federal loan starting in 2011.

Idahoans receiving unemployment are also feeling the strain.  At the start of the year, the labor department cut the maximum weekly benefit from $362 to $334, and the average weekly benefit dropped from $261 to $240.  As people remain unable to find work, they are also running out of eligibility for weekly unemployment checks.  In May, the labor department reported that an average of 104 people a week exhausted state and federal extended unemployment benefits.  The yearly total of exhaustions is 1,164.

Idaho isn’t alone in borrowing from the feds, as 33 other states have borrowed a total of $37.5 billion from the Federal Unemployment Account as of early May.  California has borrowed the most, almost $6.6 billion, and only one of Idaho’s neighboring states, Nevada, has taken a federal loan for unemployment payments.

Idaho businesses could pay more in federal unemployment insurance taxes starting in 2012 if Idaho doesn’t pay back its $204 million loan from the federal government, according to Fick.  Employers would need to pay an additional $21 per worker to the feds to help pay off the state’s loans.  “Thirty other states are going to have their employers see the same situation,” Fick said.  Congress could act before then to change unemployment laws to prevent employers from paying more and could continue to allow states to borrow without paying interest.

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