Missouri projected to borrow $2.7B for jobless benefits

Wednesday, September 2, 2009 | 5:12 p.m. CDT

JEFFERSON CITY — Missouri may have to borrow more than $2.7 billion from the federal government to pay unemployment benefits over the next five years, according to projections from the state labor department.

The debt estimates confirmed Wednesday by the Missouri Department of Labor and Industrial Relations are more than three times as large as what the agency had projected at the start of 2009. Since then, unemployment has continued to rise, making additional borrowing likely.

Unemployment benefits are financed through special state and federal assessments on businesses that essentially amount to taxes. When state funds run dry, states borrow from the federal government to pay unemployment benefits. The federal government then recoups the loans by increasing the taxes that businesses pay.

Missouri already has borrowed nearly $232 million to pay jobless benefits since its unemployment insurance trust fund became insolvent in February. It's seeking federal authority to borrow an additional $350 million through the end of the year, said Lawrence Rebman, director of the Department of Labor and Industrial Relations.

Seventeen other states also have borrowed money to cover unemployment benefits. California's loans have topped $2.6 billion, the largest nationally, and Michigan has borrowed more than $2.4 billion, according to figures through early August from the National Conference of State Legislatures.

In January, Missouri's labor department had projected that its outstanding federal loans for jobless benefits would peak around $800 million in 2012 and be paid back by 2016. The most current figures at that time showed a 7.3 percent unemployment rate in Missouri. That rose to 9.3 percent by July and is projected to be above 10 percent throughout 2010, Rebman said.

"The unemployment situation got a lot worse and is looking to be around for a lot longer," Rebman said.

The department now projects its outstanding federal loans for jobless benefits to peak at more than $2.7 billion in 2013, with more than $1.1 billion still due in 2017 when its spreadsheet of projections ends.

"For Missouri employers who are following this issue, it has been shocking to see these estimates soar, knowing they are on the hook to repay these borrowed funds," Daniel Mehan, president and CEO of the Missouri Chamber of Commerce and Industry, said in a written statement.

"The only thing more distressing ... is knowing that this may not be as bad as it gets," Mehan added. "We are coming to a point where the repayment of these funds used to help unemployed workers may hinder the re-employment of Missouri workers when the recession is over."

A state unemployment council has proposed that lawmakers raise fees on businesses to reduce the amount of money borrowed from the federal government and to avoid some of the mandatory federal surcharges needed to repay the loans. But legislation making those changes did not pass during the 2009 session.

Rebman said the rising debt projections for Missouri's unemployment insurance fund make it essential that lawmakers take action next year.

"Employers and their associations must come to the table and work out a solution that involves proper funding of the unemployment trust fund," he said.


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