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Agreement would help PA pay back billions in unemployment compensation debt

Written by Scott Detrow, StateImpact Pennsylvania Reporter | Jun 6, 2012 11:22 PM

(Harrisburg) -- Pennsylvania has been borrowing money from the federal government to pay out unemployment compensation claims since 2009, and has run up a nearly $4 billion tab. The commonwealth is finally paying off its debt. It's effectively refinancing a mortgage or using a second credit card to foot the bill.

A bill on its way to Governor Corbett's desk authorizes the Treasury Department to issue a $4 billion bond payment. The commonwealth will pay back Washington with the proceeds. Republican Ron Miller, who chairs the House Labor and Industry Committee, says the move will lead to a lower interest rate. "Right now we have $3.8 billion of debt with the federal government," he says. "We're paying interest on that every year. Last year it was $144 million dollars we're just throwing out the window."

The move put the fiscal conservatives who run Harrisburg in the strange situation of supporting the type of borrowing they've been opposing for years. House Majority Leader Mike Turzai said this bond issue is unique: "This isn't new debt," he argues. "We already have incurred this debt. And we've got to reduce our finance payments, because you can get lower rates right now than what we're paying to the federal government."

The legislation also changes the way unemployment benefits are calculated and distributed.

Democrats and labor groups worry it will make more than 40,000 people ineligible for future benefits. Pennsylvania AFL-CIO president Rick Bloomingdale denounced the bill, pointing out legislators reduced unemployment compensation spending by more than $100 million a year last June, and imposed tougher eligibility requirements. He called the new changes "unreasonable and unfair" in a statement.

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