FOR IMMEDIATE RELEASE
State Rep. William Keller
House approves bill to help Pa. pay back UC debt to feds
HARRISBURG, Dec. 19 – House lawmakers today approved legislation that would give Pennsylvania more flexibility to issue bonds in order to pay back the billions of dollars it owes to the federal government in unemployment compensation debt, according to state Rep. Bill Keller, D-Phila., who voted for the bill.
Keller, Democratic chairman of the House Labor and Industry Committee, said Pennsylvania's Unemployment Compensation Trust Fund has borrowed $3.8 billion from the federal government since 2009 in order to pay unemployment compensation benefits to the hundreds of thousands of Pennsylvanians who lost their jobs as a result of the recession. The federal government required the state to start repaying the borrowed money beginning in January, which triggered and interest tax on employers to help make those payments.
The bill (S.B. 1310) would allow the state to seek up to $4.5 billion in bonds to repay federal loans through the Pennsylvania Economic Development Financing Authority. It also would establish a 90-day amnesty program for unpaid contributions by employers and overpayments to claimants, as well as give the state greater flexibility within the UC Fund to pay debt service on the bonds.
“It is urgent we get this bond issue done so that we can repay the federal government for the contributions they made during our periods of high unemployment,” Keller said. “Paying back that money will allow us to turn our focus toward a long-term solution for our Trust Fund insolvency problems.”
Keller successfully amended the bill to allow PEDFA to offer the bonds through a competitive sale or through a private sale, but would require the authority to look at a competitive sale first. Keller said a competitive sale would offer more accountability to the public.
“This is, by far, the largest bond issue that any state has authorized for repayment of federal unemployment loan debt,” Keller said. “We need to ensure there are appropriate opportunities for the Commonwealth to receive and review impartial proposals and that we will deal with underwriters who offer a fair and reasonable price.
“Without my amendment, PEDFA and the Department of Labor and Industry would have the ability to negotiate this billion-dollar bond sale on their own with the underwriters of their choosing, and no public vetting. A competitive sale may generate the best offers for the Commonwealth,” he said.
According to Keller, Texas issued $2 billion in bonds; Idaho issued $200 million; Illinois will issue bonds for $2.4 billion; and Michigan is working on legislation to borrow up to $3.2 billion.
House Democratic lawmakers tried to offer amendments that would help shore up the UC Fund by getting more Pennsylvanians back to work, including grants to employers for on-the-job training, and more money for the state’s Industry Partnerships and Job Training programs. Their amendments failed largely along party lines.
Keller said lawmakers should not consider the bond issuance legislation the ultimate fix.
“There is a lot more work to be done to strengthen Pennsylvania’s strained Unemployment Compensation Trust Fund,” Keller said. "The Trust Fund solvency problem exists because Pennsylvania has been stuck in a time warp when it comes to addressing the long-term needs of our unemployment compensation system.”
Keller said the fund is insolvent because Pennsylvania has failed to modernize the taxable wage base on which employers are taxed, currently at $8,000. The state also has failed to lift arbitrary caps placed on the fund in the 1980s to limit the amount of money that could be generated to it. Employers also received significant UC tax breaks in the 1990s during good economic times, so the fund was not prepared to cope with bad economic times, he said.
According to Keller, 43 states have a higher taxable wage base than Pennsylvania's base of $8,000.
Senate Bill 1310, as amended by the House, now goes back to the Senate for consideration.