State legislative leaders are hoping Congress will give states flexibility to use some federal pandemic relief money to help bail out their unemployment compensation trust funds, which in the case of Louisiana could be insolvent as soon as mid-September.
At a meeting this morning of the Louisiana Economic Recovery Task Force, a business group convened in April by legislative leadership, Senate President Page Cortez said he spoke earlier today with U.S. Rep. Garret Graves, R-Baton Rouge, and is increasingly optimistic Congress will pass a fourth, massive relief package before the end of the month of somewhere between $1 trillion and $3 trillion.
The package could contain funds that could be used to help the state backfill its dwindling unemployment compensation trust fund, which currently has only about $300 million remaining in it, or about seven weeks worth of benefits given the current number of laid-off individuals seeking assistance.
It’s also possible the state could use some of the funds it has already received from the federal CARES Act, passed in March, Cortez says.
The issue is of huge concern to the business community because the fund is funded by an annual tax on businesses that, by law, will increase once the amount in the fund dips below $100 million.
That business tax, though it wouldn’t go into effect until 2021, could amount to as much as 30% of a company’s payroll. For some businesses, it could be even higher because a 10% credit many businesses receive would go away if the fund reaches the point of insolvency.
“Essentially, companies could be paying as much as a 40% tax,” says Jim Patterson, vice president of the Louisiana Association of Business and Industry, who addressed the task force.
Louisiana started the year with one of the country’s more robust unemployment trust funds. It had more than $1 billion in it. Since the pandemic, however, nearly $847 million has been paid out.
By law, the state will have to borrow federal money to replenish the fund and is finalizing its loan application this week, Patterson says.
That borrowed money is what businesses would have to repay, unless another round of congressional pandemic relief or some other solution can be found.
“We are hoping Congress will grant a further waiver so we will not have to borrow, Patterson says. “There are discussions being had with Congress about trying to essentially provide some kind of forgiveness of these loans. Whether this will come about is the big question.”
In the meantime, task force chairman Jason Decuir asked members to brainstorm “creative solutions,” including changes to state law that could be taken up during a fall special legislative session.
[polldaddy poll=10589565]
