State likely to borrow to fund benefits for jobless

JEFFERSON CITY, Mo. -- Missouri will likely have to borrow an additional $120 million from the federal government to pay unemployment benefits due during the rest of this year, a state official said Tuesday.

The money would come on top of $61 million already borrowed by the state this year to temporarily shore up its insolvent unemployment insurance trust fund.

"The situation as far as the trust fund is not going to get any better. It is not going to heal itself," said Gracia Backer, director of the state Division of Employment Security.

Federal law requires states to borrow money to prevent a disruption in jobless benefits. But the interest rate is nearly 6.1 percent.

Money in the state's jobless fund comes from fees charged to employers, who can be assessed additional money to cover interest payments but who cannot be charged higher fees to shore up the fund without a change in state law.

Earlier this year, the Republican-led legislature passed a bill authorizing the state to issue bonds as an alternative to borrowing federal money for the unemployment trust fund. Supporters said bond interest rates would have been lower than the rate charged by the federal government.

But Democratic Gov. Bob Holden vetoed the bill, saying it only would plunged the state further into debt and could have threatened the state's good bond rating.

Lawmakers could consider whether to override Holden's veto during a session that begins Sept. 10.

Doesn't care how

Backer said she didn't care how, but Missouri needs to find some way to raise more money for its jobless benefits.

Businesses currently are taxed on the first $7,500 of an employee's wages. But the tax rate varies. Established businesses that have never had unemployment claims can be exempt from the fees while other businesses can be charged up to 6 percent. A new business would start out at a roughly 3.6 percent tax rate but could have its fees adjusted up or down depending on its jobless claims, Backer said.

Because the taxes are charged only on the initial annual earnings of an employee and are paid quarterly, most of the state's money for the trust fund comes in late April and late July. That's why the amount of money likely to be borrowed from the federal government in the final four months of 2003 is twice as much as has been borrowed so far.

Unless the state finds a way to raise more money for its unemployment insurance fund, it is projected to have to borrow an additional $185 million during 2004, Backer said.

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On the Net:

Employment Security Division: http://www.dolir.state.mo.us/es