Georgia’s September Bill is Due, but Unemployed Georgians Stuck with Most of the Tab

Georgia has to pay its monthly bills, just like the people who call the state home. This month, Georgia has an important bill to pay – the interest payment on the federal loan to the unemployment insurance trust fund.  Georgia plans to stick its financially fragile unemployed workers with most of this bill, possibly hurting the state’s economy in the process.

Georgia’s September bill is due because the state borrowed more than $746 million during the Great Recession to pay its unemployment insurance obligations.  As of this month, the state still owes $397 million on the loan. The state took out the federal loan after handing out employer tax breaks for more than a decade, which drained more than $3 billion from the unemployment trust fund.

In 2012, the legislature passed HB 347 to set up a faster repayment of the federal loan at the expense of Georgians who lost jobs. GBPI’s analysis of the law revealed that it reduces the maximum benefit jobless Georgians can receive through state-funded unemployment insurance to a range of 14 to 20 weeks from 26 weeks. The range is determined by the unemployment rate near the time a laid-off worker files a claim. The maximum number of state-funded benefit weeks now in Georgia is 18. That gives Georgia the dubious distinction of having the shortest duration of these benefits in the nation.

The 2012 law also modestly increases taxes employers pay into the trust fund on behalf of their workers.  Beginning this year, employers started paying state unemployment insurance taxes on each employee’s first $9,500 in wages, a $1,000 increase.

Cutting unemployment insurance benefits accounts for most of the revenue generated by the 2012 law, which means that Georgia’s unemployed are shouldering most of the burden for repaying the federal loan to the trust fund.  About 37,000 Georgians had state-funded unemployment insurance benefits expire from July 2012 through June 2013.

Not only is it unfair that Georgia is shifting most of the federal loan repayment burden to the unemployed, it doesn’t make much economic sense, either.  Cutting jobless benefits leaves less money for unemployed Georgians to put into the economy as they pay for housing and other basic necessities.  Mark Zandi, chief economist at Moody’s Analytics, estimates that every dollar of unemployment benefits generates $1.55 in new economic activity.  The nonpartisan Congressional Budget Office ranks assistance to the unemployed as one of the most effective tools for creating jobs.

The state’s 8.8 percent unemployment is still near historic highs. Meanwhile, the long-term unemployed account for a historically high portion of the jobless. Georgia’s economy needs as many contributors as possible to get back on track. Those contributors should include its unemployed workers.

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