Unemployment compensation bill hits snag

JEFFERSON CITY, Mo. -- Legislation that would authorize the state to sell $450 million in bonds to bail out Missouri's Unemployment Compensation Trust Fund derailed in the Senate on Thursday.

The impasse occurred on a substitute version of the measure offered by state Sen. Bill Foster, R-Poplar Bluff, that would temporarily increase the amount Missouri employers pay into the fund instead of selling bonds.

Foster said borrowing money to keep the system solvent would trap the state in a cycle of debt without providing a long-term fix.

"That is like having one charge card and running up the maximum to pay another charge card," Foster said. "That doesn't solve the problem."

Foster's action procedurally blocked the Senate from considering the version preferred by the bill's handler, state Sen. John Louden, R-Ballwin.

Louden set aside the bill, which has already cleared the House of Representatives, so he could ponder his next move. With the legislative session set to end May 14, Louden said he is unsure of the bill's chances for passage.

The recent economic downturn that caused a spike in the number of Missourians seeking jobless benefits helped push the unemployment fund into insolvency. To date, the state has borrowed $215 million from the federal government to maintain benefits.

Missouri has to pay more than 6 percent interest on the federal loan.

"By selling bonds, you get a lower interest rate; it's that simple," Louden said. "It's not as complicated as the other side wants to make it."

Foster said he would accept a compromise under which bonds would be sold to pay back the money Missouri has already borrowed.

"There is really no point in failing to borrow enough to get us out of trouble," Louden said.

Currently, Missouri employers pay into the fund up to 6 percent on the first $7,000 earned by each worker, although that threshold is slated to climb to $8,000 later this year.

Under Foster's proposal, if the fund reserve falls below $500 million, the threshold would increase by $1,000 a year until the fund balance exceeds $800 million, at which time the threshold would be lowered.