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Rhode Island Owes Feds $200 Million for Unemployment Benefits

Monday, January 07, 2013

 

Rhode Island still owes the federal government nearly $200 million from loans taken out to cover unemployment benefits, according to figures released last week by the National Conference of State Legislatures (NCSL).

The state is one of just 19 states across the country that currently have loan balances within their unemployment insurance trust funds, which were set up to help unemployed workers during economic downturns.

But many of those trust funds were inadequately funded for years and when the Great Recession hit the country, states were forced to borrow from the government. In total, states have taken out almost $50 billion in loans and still owe $27,177,528,656.68, according to the NCSL.

Rhode Island, which began borrowing funds in March 2009, still owes $199,470,182.74.

The outstanding balance has caught the eye of some government watchdogs, including Ocean State Tea Party in Action (OSTPA) spokesperson Lisa Blais, who questioned how the state plans to pay back the loans.

“Businesses in Rhode Island, particularly local small businesses, are struggling enough, they don't need the additional tax expense of increased rates to the Department of Labor and Training,” Blais said. “The loan underscores the train wreck that is Rhode Island’s economy.”

RI Must Pay Loans in 2 Years

But the Ocean State is not alone and several states may need to borrow more money if unemployment rates across the country do not significantly. In Rhode Island’s case, the state began borrowing when the jobless rate was nearing 12 percent and experts say the unemployment rate isn’t expected to drop below 9 percent until sometime next year.

A report released last year by the Center on Budget and Policy Priorities noted that “because unemployment is expected to remain high for some time, such borrowing will likely continue for the next few years.”

And defaulting on the loans is not an option. The report suggested that a failure to repay the government would only hurt employers

“States are required to fully repay the loans, with interest, within two years of borrowing the funds,” the report stated. “If a state does not repay the full amount, the federal government will recoup its funds by effectively raising the federal tax on employers within the state each year until the loan is repaid.[34] As a result, employers in 27 states face higher FUTA tax rates in 2012.”

According to Rhode Island’s Comprehensive Annual Financial Report released last week, the state’s Employment Security fund incurred $541 million in expenses during the 2012 fiscal year. As of June 30, 2012, the fund was running a deficit of $151.5 million.

For some, an inability to fund their unemployment trust funds is one of the key reasons so many states still find themselves in the hole.

“The states have a fundamental problem: They’re not funding these trust funds appropriately,” Mike Evangelist, of the National Employment Law Project, told the Pew Center on the States last year. “You just keep digging the hole deeper, you keep losing more. It is a compounding problem.”

Is RI Too Generous?

But others say Rhode Island has been too generous when it comes to handing out unemployment and other benefits in recent years. In December, the website 24/7 Wall St. released a study that suggested the Ocean State hands out the most generous benefits in the country/

The study broke down six key entitlement categories (average pension benefits, total per pupil spending, Medicaid payments per enrollee, percentage of weekly wages covered by unemployment benefits, number of months of TANF received, average TANF cash assistance per month) and found that the Ocean State ranked in the top ten among all states in all but one category (average TANF cash assistance per month).

That state ranked second in average pension benefits ($34,577) and percentage of weekly wages covered by unemployment benefits (43.4 percent) and fourth in Medicaid payments per enrollee ($8,566).

“Rhode Island does more to spread wealth among its residents than any other state,” the study stated. “In the third quarter of 2012, unemployment insurance in Rhode Island covered 43.4 percent of the recipients’ previous weekly wages, more than any state except for Hawaii.”

For Blais, the answer is simple. The state needs to create a more business friendly atmosphere if it wants to solve its unemployment crisis.

“The juxtaposition of loss of population and the tax revenue that leaves with it should sound long overdue alarms for state leadership to stop talking and jump into action to create a tax and regulation landscape that costs less for business,” she said. “They should also reduce the excess costs that support themselves to create an economic climate that causes pause for anyone else who is thinking of leaving the state."

 

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Comments:

and for our GA members Gay Marriage is the top priority. Too pathetic for words...

Comment #1 by Chris MacWilliams on 2013 01 07

Rhode Island is in a death spiral. Unsustainable tax increases every year coupled with a falling population. A population that is getting poorer. We will hit bottom when multiple cities go bankrupt and congress changes the law not allowing states to file for bankruptcy. Or we can become a right to work state and eliminate collective bargaining for public sector unions. We have a great military. They don't need a union. Why would any other government employee.

Comment #2 by george pratt on 2013 01 07

its like death by a thousand cuts...

you try to eb positive but when you see the census data released, its like, the writing is on the wall here.

there is every reason to believe that ri could be a great state except that the political leadership is out of touch and only focuses
who ever spends the most time and money at the statehouse.

Comment #3 by jon paycheck on 2013 01 07

@ jon paycheck - Political leadership. Are you kidding??? Look around. our GA is an abomination because there is NO leadership. BTW they did not get to Smith Hill by accident.

Comment #4 by Chris MacWilliams on 2013 01 07

If you've experienced high unemployment for 4 years, and productive people are starting to leave, wouldn't it make sense to try different government policies?

Do handouts and bailouts and taxing and spending and huge state budgets and omnipresent regulations produce full employment? Does socialism produce prosperity?

I'm not sure our politicians even realize that their own careers are at stake. Could they at least try lowering taxes, removing regulatory burdens, and cutting budgets to encourage business and talented people to move in rather than flee?

Comment #5 by Art West on 2013 01 07

art... the last 4 years of obama have destroyed the backbone and spirit of this country.

its just easier to sit home and collect a check then get up and work....

and i dont see obama changing his ways in the enxt 4 years. in fact, he may promoe the stay at home life style even more.

like i say, keep voting democrat and this si what you get.

george bush was blamed for the iraq war.. obama will be blamed for the death of the us as we knew it.

if you dont bekieve me, just ask ANYBODY that came to this country 20 years ago and never got a dime of governement assisatnce.

they will tell you is all over...

Comment #6 by jon paycheck on 2013 01 07

oh good, our taxes get to go up again!!

Comment #7 by pearl fanch on 2013 01 07

jon,

I feel the same sense of defeat that you do. But, we can't let the bastards get us down, to coin a phrase.

I'll keep fighting for the America I love.

Comment #8 by Art West on 2013 01 08




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