Kentucky has paid off a $972 million federal loan two years ahead of schedule, shedding one of the last vestiges of the recession and saving businesses an estimated $165 million in taxes.
At the height of the recession, Kentucky had so many people filing unemployment claims that it did not have enough money to pay them all. Kentucky was one of about 30 states that began borrowing money from the federal government to keep paying benefits to people who were losing their jobs in massive numbers.
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In December 2008, Kentucky had more than 87,000 people file unemployment claims, the most ever recorded in one month. Since 2009, Kentucky had borrowed nearly $1 billion from the federal government.
The debt kept Kentucky's unemployment insurance trust fund from running out of money, but it also meant higher taxes for business owners to help pay off that debt. This year, businesses had to pay $126 in taxes for every employee they hired. Next year, now that Kentucky has paid off its federal loan, businesses will owe $42 per employee.
"This milestone demonstrates in clear terms that this critical fund is on the path to solvency," Beshear said.
While the fund has a positive cash balance, it is still not solvent. That only happens once the fund has enough in reserve to cover another surge in unemployment benefits in case another recession hits.
"So we cannot stop and retreat," Beshear said.
Lawmakers restructured the fund in 2010 and again in 2012 to make sure the state were not paying more in benefits than it collected in taxes. And the economy has recovered, with the unemployment rate at 5.1 percent from a high of 10.9 percent in 2009. Beshear's office said the number of workers covered by the unemployment trust fund has risen by 36,700.
"Our people that are hiring and creating jobs and paying into the (unemployment insurance) trust fund have caused the lines not move in the directions you see here," said Republican state Sen. David Givens, who worked on a committee assigned with coming up with a solution to the problem.
Kentucky joins many states that have already paid back the loan. Seven states plus the Virgin Islands still owe the federal government. Another eight states borrowed money to pay off the loan. They don't owe the federal government, but they are still paying bondholders.
Beshear said paying off the debt is another sign that Kentucky's economy is recovering. The state finished the 2015 budget year with a $165.4 million surplus, of which $82.5 million went into the state's reserves. State budget officials reported Monday that state tax collections in July were up 4 percent compared to last year.