If lawmakers convene later this month in a special session, as expected, one of the main issues they’ll be trying to address is the state’s rapidly depleting Unemployment Insurance Trust Fund, which has dwindled to less than $100 million from more than $1.1 billion early this year.
Though the state can borrow interest-free money from the federal government in the short term to keep the fund afloat, policymakers view that approach as a temporary fix, not in the least because interest payments kick in at the beginning of 2021 and businesses will be stuck paying the tab.
But the state doesn’t have many options, especially as the pandemic continues to stifle economic activity and Congress remains at an impasse over a fourth relief package.
The most likely solution will be for state lawmakers to find money that has come to the state through the federal CARES Act and has either not been allocated yet or remains unspent, says Louisiana Association of Business and Industry President and CEO Stephen Waguespack.
“The most obvious option is to take a look at all our CARES Act dollars, see what is still available that has not been expended and see if any portion of those can be used to cover the shortfall,” he says. “That is the low-hanging fruit. We don’t know what Congress is going to do but we do know if nothing happens, the program goes into bankruptcy, the federal loans go into effect and in January, employers face a 60 percent tax for every person they employ.”
LABI members are extremely worried about that possibility because it creates a downward spiraling effect: Employers will be less inclined to rehire workers if they know they’ll be taxed for having those employees on the books, which, in turn will drive laid-off workers in greater numbers to seek unemployment benefits, which will increase the size of the trust fund shortage, which employers are taxed to keep solvent.
“They’re very worried about it,” Waguespack says. “At this point, the ones we’re hearing from are just trying to figure out how to stay afloat. They’re coming up with some really creative solutions that will be fun to go back and analyze one day. But for now, it’s really difficult and the last thing they need is to get hit with a 60% payroll tax in January.”
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