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State pays last $44 million on loan covering recession-era unemployment benefits

TThe state has finally paid off the last of the money it had to borrow to pay unemployment benefits to workers during the recession.

The last $44 million was paid off this past week. With the exception of a small period of time last year, that means the state is out of debt – at least for this purpose – for the first time since 2010.

Other state debts from the recession remain, including the state buying back the buildings it sold off and leased back to get quick cash. That includes both the state House and Senate buildings.

But Mark Darmer, who handles unemployment benefits at the Department of Economic Security, believes that the payoff of the last loan on jobless benefits should eliminate the need to borrow at least through the end of the year – and beyond if there are no surprises in the economy.

The need to borrow happened because a special trust fund, which pays benefits, went broke in 2010.

That fund, which at one time had more than $1 billion, is financed through a tax on each worker’s salary.

Rates range from a fraction of 1 percent to 5.4 percent of each worker’s first $7,000 in wages. Each company’s rate is based on its own history of how often employees are laid off and are eligible to collect benefits.

What happened is the recession – and the high unemployment in Arizona, which actually topped 11 percent in 2009 – lasted longer than anticipated. It drained the fund, which had close to $1 billion.

So the state, to keep meeting its obligations, had to borrow money from the U.S. Department of Labor.

At one point the state was nearly $600 million in the red.

That wasn’t a big problem at first as the loan initially came without interest. But the feds eventually started charging.

State lawmakers put a surcharge on employers to pay off the note, one that reached $42 per worker.

At one point the state, finding it cheaper to borrow from private sources, paid off the feds. But after that note was paid down, Arizona again found itself asking for a loan from Washington.

That obligation now is gone. And with most companies making their biggest payments at this time of the year, Darmer said the current fund balance actually is more than $160 million.

To maintain that, though, and rebuild the fund, Darmer said he expects the current levy on employers to remain as high as it is now at least into 2016 if not into 2017. Only when the fund is rebuilt – assuming no new recession – will the rate drop.

Those who have lost their job through no fault are entitled to collect half of what they were making for up to 26 weeks. But Arizona law also caps benefits at $240 a week; only Mississippi at $235 a week pays less.

At this point Darmer said about 23,000 Arizonans are collecting jobless benefits. He said that compares with a peak of about 90,000 getting checks at any one time.

That number, however, does not reflect the true number of folks who out of work and looking for employment, as some had exhausted their benefits without finding new jobs. State officials put that figure at 333,000 at its peak.

The most recent figures put the state’s seasonally adjusted unemployment rate at 6.2 percent. That compares to the pre-recession rate of 3.7 percent in 2007.

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