Friday, Aug 22, 2014
Governor Beebe's weekly column and radio address: Arkansas Pays Its Debt
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Arkansas and America are still feeling the after effects of the Great Recession. Since the global economic collapse of 2008, our State has worked tirelessly to replace lost jobs and restore economic growth. While there are many national factors that influence the speed and scope of any recovery effort, there is a benchmark we are about to reach in Arkansas. Again, we show our capacity to work together and meet challenges.
Arkansas’s Unemployment Insurance program served as an important safety net for thousands of Arkansas families during the Recession. However, the sudden increase in demand for unemployment assistance quickly depleted the program’s trust fund. So, we had to begin taking advances from the federal government to meet our obligations. We were one of 35 states that had to take these advances, and we knew that, eventually, we’d have to pay them back. And by the end of this year, we will have done exactly that.
In April of 2011, Arkansas’s Unemployment Insurance advances totaled almost $360 million. While this did not affect our operating budget, we still needed to devise a plan for repayment. There was talk of a bond program, and the General Assembly authorized me to issue such bonds if I decided that was our best path. In the end, that didn’t happen, because we were able to reach a compromise between management and labor groups. And that accelerated our ability to reimburse the federal government. Arkansas’s cooperative negotiating also saved us from having to pay the servicing fees that would have accompanied bonds if those had been issued.
As with most compromises, everyone had to sacrifice something. Companies had to pay more into the UI trust fund for each employee through a reduction in tax credits. Unemployment-insurance recipients coped with stricter eligibility requirements and a shortened time span for collecting benefits. Between those measures and a recovering economy, analysts predicted we could fully repay the federal advances by 2015. Today, I can say with certainty: that prediction will come true.
After another sizable payment to the U.S, government, the balance owed by Arkansas has gone from nearly $360 million to below $3 million! And by year’s end, it will be zero. In addition, we have rebuilt our Unemployment Insurance trust, which now holds steady at around $200 million dollars to be used in case of a future downturn in the economy.
This is just one more example of responsible economic policy in Arkansas. Eight states are still authorized to receive UI advances this month, and 11 other states have outstanding balances totaling nearly $14 billion, more than half of that in California alone.
Hopefully, the Great Recession will be a once-in-a-lifetime economic event. While we still have work to do and jobs to find for Arkansans, we are on much more stable financial footing than we were five years ago. Both this experience with Unemployment Insurance and our ability to balance budgets without severe spending cuts show that Arkansans, when tested by the fire of crisis, can still work together to find the solutions that best serve our people.