Friday, May 31, 2013
Governor Beebe's weekly column and radio address: Preserving our Safety Net
Arkansas’s Unemployment Insurance program is an important safety net for working Arkansans who find themselves facing tough times. Our workers saw those tough times hit especially hard at the onset of the Great Recession beginning in 2008. The program’s trust fund ran dry, and Arkansas was one of 36 states that received advances from the federal government to make certain that those who had lost their jobs could still receive help. Concerns arose about how the State would repay those advances. A cooperative plan came together, and now as our economy continues to recover, that plan is working well.
Arkansas’s Unemployment Insurance Trust Fund is financed through payroll taxes that companies pay on their employees. Unfortunately, the national economic downturn brought with it a surge of layoffs that increased the number of unemployed workers and also reduced payrolls that generate revenue. This led to the Trust Fund dropping to zero for the first time since 1984. From 2009 to 2011, Arkansas received $360 million in federal advances to keep the UI program functioning. As soon as the economy began its slow climb out of recession, we immediately set about paying back those advances.
Two years have passed, and we’ve reached an important milestone. We are still paying back the federal government, but the total has dropped by almost half to $193 million. Meanwhile, the Trust Fund has been replenished and now has a $205 million balance. It’s the first time in four years that we’ve had a positive overall balance in our Unemployment Insurance Program.
How did this happen? Businesses accepted a reduction in the federal tax credit they receive from paying for Unemployment benefits. The length of time workers could collect benefits was reduced, and the eligibility requirements were made stricter. There were lengthy negotiations, and at one point the Legislature approved the authority to issue bonds in order to pay back the advances. However, since we reached a consensus, issuing bonds became unnecessary and the continued recovery of Arkansas’s economy has put us on the right path.
Although we now have a positive balance, we’re not going to exhaust it by immediately paying off the rest of the federal advances. We need to keep a healthy balance in the trust fund to handle anticipated new unemployment claims for the rest of this year, as well as for any unexpected employment shifts. We still expect to complete our repayments to the federal government next year. And, when that happens, businesses will see their full federal tax credits restored.
While this is another example of Arkansas leaders using good governance to work together and solve problems, there is a more important factor to consider. Arkansans can be confident that the safety net they hope they’ll never need will be there if needed. We work hard every day to bring more jobs to our State and to find our people new jobs when companies shut down or move away. Having the safety net of Unemployment Insurance helps families endure the tough times. Being responsible stewards of our Unemployment Insurance system helps our State best serve its people and the businesses that power our economy.