Kentucky takes out $865 million federal loan for unemployment insurance trust fund
With more than 900,000 unemployment claims filed in Kentucky since March, Gov. Andy Beshear’s administration announced last week it had secured an $865 million loan from the federal government to aide Kentucky’s unemployment insurance trust fund.
According to representatives from Kentucky’s Education and Workforce Cabinet, the Beshear Administration requested the loan from the U.S. Department of Labor to shore up the state’s trust fund before it “zeroes out.”
Presenting to the Interim Joint Committee on Economic Development and Workforce Investment, Deputy Secretary Josh Benton, of the Kentucky Education and Workforce Cabinet, said the state unemployment insurance trust fund had a balance of nearly $150 million as of June 5, but that the balance was “significantly lower now.”
The Administration submitted its request for the zero-interest federal loan on June 10.
“When a state of emergency was declared in March, many employers were forced to shut down operations and move employees to unemployment insurance through no fault of their own,” said Ashli Watts, Kentucky Chamber of Commerce President and CEO. “We urge state and federal lawmakers to come together to find a solution that avoids additional taxes on business, which will impede the ability of employers to bring their employees back to work in Kentucky.”
The Kentucky Chamber, in addition to other chambers of commerce, have urged Governor Beshear to use CARES Act funding to help shore up the struggling trust fund, and have also asked Leader McConnell for federal assistance.
In 2009, Kentucky owed nearly one billion to the federal government for unemployment insurance because benefits had been increased and funding was insufficient for those benefit levels. The 2008 recession exacerbated the problems and employers in Kentucky were facing massive federal taxes if the situation wasn’t addressed.
In response to the issue, then-Governor Steve Beshear created a task force with legislators, business representatives which included Kentucky Chamber President and CEO Dave Adkisson, and officials from organized labor to hash out a plan to address the problem which led to the passage of House Bill 5 in the 2010 special session – a victory for Kentucky businesses.
The state’s approximately 91,000 employers started paying a surcharge assessment of 0.21 percent of their taxable wage base of $10,200 per employee in January 2014 to pay off a $972 million federal loan needed to meet UI benefit obligations.
In 2016, the surcharge was removed by the Bevin Administration, saving an estimated $34.2 million annually to Kentucky employers.