Virginia Borrows $1.26 billion To Pay Unemployment Benefits; Detroit Loses $400 Million on $800 Million of Bonds; Detroit’s Easy Solution
by ilene - December 1st, 2009 12:31 am
Virginia Borrows $1.26 billion To Pay Unemployment Benefits; Detroit Loses $400 Million on $800 Million of Bonds; Detroit’s Easy Solution
Courtesy of Mish
Virginia is robbing Peter to pay Paul because it is plain flat out broke. Bankrupt is probably a better word. To pay unemployment benefits, Virginia will borrow $1.26 billion and pay it back plus interest by jacking up unemployment taxes.
Please consider Va. to borrow $1.26 billion for depleted unemployment funds.
As Virginia wrestles with ways to replenish its depleted fund for unemployment benefits, Hampton Roads employers expressed concern about the impact that higher unemployment taxes could have on the health of their businesses.
The sorts of tax increases described by the Virginia Employment Commission earlier this fall may be difficult for some small businesses to absorb without job cuts, said Jim Shirley, owner of Bennett’s Creek Farm Market in Suffolk.
The state’s average unemployment tax per employee will jump from $95 this year to $171 in 2010 and to $263 by 2012, the VEC said in a Sept. 29 presentation to the Commission on Unemployment Compensation.
For small retailers, the financial pressure from weak sales and higher unemployment taxes could be intense, Miller said. "You’ve got to have someone in the store, and if you’re down to one person in the store, you can’t cut any more."
In addition to boosting unemployment taxes on employers, Virginia will have to borrow more than $1.26 billion from the federal government in coming years to continue paying jobless benefits, the VEC said in its forecast.
That’s because the deficit in its unemployment-benefits fund will hit $194 million by the end of this year and balloon to $561 million by the end of 2010, the VEC said.
Two dozen states, including North Carolina, South Carolina, New York and Texas, have already borrowed about $21 billion from the federal government to pay jobless benefits, according to the Labor Department.
One problem with borrowing to pay jobless benefits, the VEC noted, is that interest payments on this debt cannot come from the unemployment trust fund or from federal money. The interest payments on its $1.26 billion of projected borrowing are likely to total $36.7 million and come from general state funds, the VEC said in its September report.
Yet Another Reason To Not Hire
Borrowing money while jacking up…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.