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| AR State Sen. Johnny Key |
Those savings should restore the financial health of the fund, which has had a negative balance since the economic downturn in 2008 increased the number of laid-off workers who draw benefits from it. Current projections are for the fund to have a negative balance of $323 million at the end of the year.
When the fund is in debt, businesses pay higher unemployment taxes. The good news is that the fund will have a positive balance in 2015, according to a recent estimate by the state Department of Workforce Services (DWS). Leaders in the business community urged DWS to use conservative assumptions, so they are pleased with the new estimates on the health of the unemployment trust fund and called it "terrific news for the business community."
Act 861 of 2011 trims benefits paid to laid-off workers in several ways. It reduces payments from the state fund from 26 weeks to 25 weeks. Many laid off workers are getting extended benefits but those are paid from a federal account that is separate from the Arkansas state unemployment fund.
Act 861 also freezes benefits by repealing an index that would automatically raise benefits as wages increase every year. Now, benefits are written in state law and it will require an act of the legislature to raise them. The act also changes eligibility criteria, and it extends a current provision in the law that treats discharged workers and those who quit equally. That provision had been scheduled to expire.
In light of the good news about the unemployment fund, the governor now must make a decision regarding a related issue - whether to call a statewide election on a bond issue. A separate bill passed this year, Act 1125, authorizes the election and if voters approve, the state could issue up to $500 million in bonds to pay off the debt of the unemployment fund.
There could be savings to the state trust fund if bonds are issued soon because of lower interest rates on debt service, but on the other hand there also would be costs to employers. Employers would pay an estimated assessment of about 30 percent on their per employee unemployment taxes.
Arkansas employers pay an average rate of 2.9 percent of payroll in unemployment taxes. However, that may be misleading because some businesses pay more, in some cases as much as 10 percent. Therefore paying an additional assessment of 30 percent could be significant. The Arkansas State Chamber of Commerce is polling members to get their opinions on whether to issue bonds.
I voted against Act 1125, because I do not support the use of bonded indebtedness to pay off the unemployment debt.
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Johnny Key, Arkansas State Senator (R-Dist 1), represents Baxter, Marion and eastern half of Boone County. He is a former AR State Rep. and is both a fiscal and social conservative. He has sponsored legislation to reduce taxes on families and businesses including the bill cutting the sales tax on groceries in half and also sponsored legislation to exempt retirement and pension income. Senator Key has allocated a significant share of General Improvement Funds to AR State Univ at Mtn Home and North AR College in Harrison for capital projects. He sponsored legislation to make it easier for families to save for college tuition through tax-deferred savings allowed under Section 529 of the IRS code. He has consistently supported expanded job training and technical education for students who do not go to college and need job skills. Key and wife Shannon own two childcare centers in Mountain Home, AR.
Tags: Arkansas, Sate Senator, Johnny Key, Act 861 of 2011, freezes benefits, laid-off workers, businesses, Act 1125, Unemployment Fund, debt To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. Thanks!
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