Behind the $635 million that Georgia owes the feds for unemployment benefits

Since 2008, the federal response to the Great Recession has resulted in a deficit that has become the focal point of Republicans and tea partyers alike.

Far less talked about has been our state government’s response to the downturn — and the borrowing of $635 million from the federal government to cover unemployment benefits for hundreds of thousands of jobless Georgians.

The bill is about to come due. Almost certainly, the result will be a hike in payroll taxes for businesses across the state, or a reduction in benefits for the hard-hit unemployed. Or both.

Other states, like California and North Carolina, owe far more. But Georgia’s case is special because of what was squandered. First by Democrats, then by Republicans.

Gov. Roy Barnes, early in his term. AJC file

Gov. Roy Barnes, early in his term. AJC file

In 1999, the state’s Unemployment Trust Fund — fueled by record growth — had squirreled away an astounding $2 billion for hard times. Far more than any recession required, thought the new governor, Democrat Roy Barnes.

He proposed and passed what he called the largest business tax cut in state history — a four-year payroll tax holiday that spared businesses $1 billion. (The tax hike applied only to state payroll taxes. Businesses also pay federal payroll taxes that roll into a separate fund.)

All was good until 9/11 and a 2001 shutdown of the American sky. Unemployment zoomed in airline-friendly metro Atlanta. The payroll tax holiday continued, which meant money gushed out of the trust fund — and none flowed in.

By the time the holiday and Barnes’ tenure expired in 2003, the trust fund was down by nearly two-thirds, to $703 million, according to a report released this week by the Georgia Budget and Policy Institute.

Labor Commissioner Mark Butler, who was elected in November. AP

Labor Commissioner Mark Butler, who was elected in November. AP

“If it wasn’t for that tax holiday, we’d be sitting great. That’s what got us. You don’t use an insurance fund for a tax holiday,” said Labor Commissioner Mark Butler, a Republican elected for the first time to the post last November.

There is truth in Butler’s assessment. But the story is not complete. If Democrats frittered away rainy-day money for political gain, Republicans were prodigal with time. For the same reason.

The problem with tax holidays is that ending them — and repairing the damage — can be characterized as a tax increase. Triggers built into state law, to raise the restored state payroll tax by as much as 100 percent to rebuild the trust fund, were suppressed time after time by the Legislature.

When Michael Thurmond, then the labor commissioner, warned of underfunding, newly empowered Senate Republicans inserted a provision that would let Thurmond — on his own — raise the state payroll tax by as much as 35 percent.

Let the Democrat do it, was the thinking. But Thurmond faced re-election, too — which GOP lawmakers knew very well. He would order occasional increases, but only small ones.

The Legislature, at Gov. Sonny Perdue’s behest, issued its last suppression of payroll tax hikes in 2009, with the “Georgia Works Job Creation and Protection Act.” Among the many lawmakers who voted for it was Butler, then a House member from Carrollton.

Payroll tax rates were set in place through the end of this year.

Georgia began borrowing in December 2009, attracting the attention of Fran Millar, R-Dunwoody, then a rank-and-file House member. He is now in the state Senate.

“What bothered me is we in the Legislature weren’t really made aware of this at all,” Millar said this week. “I don’t have a problem with us borrowing it, but this is the kind of obligation we need to be made aware of it. And we were not, when it was all said and done.”

He and other senators want a solution spelled out.

First, let it be said that unemployment checks offered by Georgia are rather Spartan — these are not the extended benefits generated by the federal government. They last an average of 15 weeks — time enough to arrange the move back into your parent’s house. Payments are about $269 a week.

Secondly, it must be noted that, when the federal government borrows from you, the terms that it sets for itself are quite generous. But when a state borrows from the federal government, it is another matter entirely.

Georgia owes $24 million in interest by Oct. 1. A spokesman for Gov. Nathan Deal says sources for the cash have been identified.

The principal of the loan is due by Nov. 10. By then the state will have borrowed well beyond $700 million.

President Barack Obama has proposed suspension of interest payments for states, and forgiveness of portions of the loans issued. But state officials worry about strings attached to the deal.

“We are looking at bonding the entire amount,” said Butler, the current labor commissioner. Attorney General Sam Olens is now examining whether that would be legal. Butler said the borrowed money could be paid back in five years.

In the meantime, Butler said he is recommending to state lawmakers that they allow increases in payroll taxes — the ones avoided for so long — to go into effect, as current law provides. If the state doesn’t permit a moderate increase in the payroll tax on businesses to address the debt, then the federal government will impose a very large one.

“The tax holiday they gave back then, businesses are going to have to pay for now,” Butler said.

- By Jim Galloway, Political Insider

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42 comments Add your comment

I heered he was an Ayrab

February 23rd, 2011
6:38 pm

so the same butler who is now holding the bag, voted to suppress the collecton of the tax to fill the bag back up. Then he has the nerve to complain about what should have been done right, when he had a chance to do right but didn’t?

Is hypocrite spelled B-U-T-L-E-R?

Cissy

February 23rd, 2011
6:42 pm

Any news on whether the billion-dollar payroll tax holiday resulted in more businesses hiring in Georgia? Or did we just give that money back (or, technically, not take it away) for grins? Did the number of contributions Gov. Barnes got from business interests increase as a result of the tax holiday? And how cowardly and irresponsible were the Republicans for not plugging the money drain? Finally…. are we ever going to find a group of honest, adult people to do the right thing and run this state courageously and responsibly?

Jim

February 23rd, 2011
7:26 pm

Imagine if we could buy alcohol on SUNDAY…

http://www.youtube.com/watch?v=6TOM_UuQzc0

Dirty Dawg

February 23rd, 2011
7:37 pm

Now you’ve gone too far, you’ve accused Roy of acting like a Republican…we don’t have to stand for that…oh yeah, I don’t think you mentioned the $700 billion-plus that Roy had in the Governor’s ‘rainy-day fund’ that Perdue managed to pi$$ away in the first six months when he came in on a Diebold-rigged election…and it didn’t require a 9/11 to make that happen, just an inept and greed goober of a Governor.

Maynard Brown

February 23rd, 2011
7:49 pm

DIRTY DAWG…I think you meant $700 MILLION surplus that Roy Barnes left for Perdue to squander, not $700 billion. Barnes was a very business-friendly Governor, but never got much credit for it. By the way, Perdue did not leave a NICKEL for Nathan Deal to spend.

stine

February 23rd, 2011
7:54 pm

re: Cissy. Yes, there are such people (and I’m not going to claim to be one of them), but the challenge is to get responsible people to run for, and get elected to, office since responsible people would consider it irresponsible to spend the money that it takes. As an example, look up the ammount of money spent in the latest California governor’s race…and ask yourself how we got here.

I’m not going to propose a solution because the solution I think is proper is not an easy, painless one.

The Collector

February 23rd, 2011
8:01 pm

“President Barack Obama has proposed suspension of interest payments for states, and forgiveness of portions of the loans issued”

I KNEW it! I knew there would be a push to forgive or suspend these loans, I just figured it would come from the states, not the president. Wow. If this happens the states will never again have to worry about fiscal responsibility, they’ll automatically look to Washington for free money.

eatmotacos

February 23rd, 2011
8:53 pm

Our political process has been compromised by the greedist, most ruthless members of society. The “unwashed” (Lord Isakson’s term for his constituents), only get involved in the process, after the special interest groups have chosen their candidates.

The skills they are looking for, are the same skills required to be a convincing confidence man, a con artist – tallented liars, with no conscience, or scrupples, who will do anything for a buck, regardless of what it cost or who it hurts.

The dilerious, air horn and pom pom toting, “unwashed”, then show up to root for their team, even though they had no input in choosing them, and really don’t know anything about them. They naively think that their promises are sincere, and that they will do their best to carry them out.

Then, after the honeymoon is over, when their candidate goes about doing what he intended to do all along – line his pockets at their expense – they still don’t get it.

double

February 23rd, 2011
9:22 pm

It’s all Obamas fault he should not have loaned them the money.Much less mention forgive the loan or interest.

td

February 23rd, 2011
10:07 pm

eatmotacos

February 23rd, 2011
8:53 pm

The skills they are looking for, are the same skills required to be a convincing confidence man, a con artist – tallented liars, with no conscience, or scrupples, who will do anything for a buck, regardless of what it cost or who it hurts.

Lawyers. Great definition!!!!!

cash it in

February 23rd, 2011
10:09 pm

Just borrow that $600 million from the chinese like they do in wash dc! Pay it back later. It will work out—the chinese have plenty of cash to loan out at “good rates.”

Question Man

February 23rd, 2011
10:36 pm

Do I understand correctly that Georgia Republicans are about to materially raise taxes? How can that be? Didn’t they ;promise us lower taxes? Is this story accurate?

Jason

February 23rd, 2011
11:44 pm

@The Collector, yep, and the more they suck at the Federal teat, the more they’ll claim to hate the taste of the milk. Funny thing is even with all this Federal money, the state has been going further and further into debt. They don’t run a deficit… they just sell bonds and pretend they never have to be paid back. Make for a pretty looking balance sheet but eventually some future administration has to foot the bill. GDOT has already bonded something like the next thirty years of gas tax revenue and Federal highway funds to pay for the disfunctional transportation system we have today.

Jaypat

February 24th, 2011
12:24 am

Do I understand that the state is actually considering turning down help from the federal government on the grounds that there may be “some strings” attached to it?

THe Sec. of Labor and the AG are going to “bond all of it,” according to the story above. That is at least $724 million that the ciiizens of Georgia are being obligated to pay over the term of the bonds.

And the Governor’s office says that they have “sources for the cash have been identified.”

This has to be the goofiest thing I’ve ever seen: A state official declines to save the citizenry a huge chunk of money on the grounds that the terms might be onerous. Don’t we have a written Constitution here, and might any stipulations be required to adhere to that Constitution?

The next time you hear that “we don’t have the money” coming from the state government, ask yourself how many more of these types of stories that PI described are out there.

eatmotacos

February 24th, 2011
12:45 am

@ Jason

“GDOT has already bonded something like the next thirty years of gas tax revenue and Federal highway funds to pay for the disfunctional transportation system we have today.”

You may not have heard, but we finally have an honest and dedicated public servant working on our transportation issues.

Speaker of the House, Brother David Ralston, Sister Ralston, and his entire family, selflessly, sacrificed their Thanksgiving holiday, to travel to Europe and ride a high speed train, on the behalf of all Georgians.

The word on the street is that Georgians can expect even more important fact finding missions from this inspiring family in the future. With all of that valuable information and a few hundred billion in studies, we might just get our own plan for high speed trains, and possibly even a scale model to display.

I probably wouldn’t put my car on Ebay, just yet.

mike

February 24th, 2011
3:52 am

Interesting it seems a lot of the goober posters here only got blame it on Obama and Barnes from reading this article. Do you conservatives ever accept responsibility for anything you do?

janetnmoyle

February 24th, 2011
4:26 am

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JW

February 24th, 2011
5:48 am

Dirty Dawg,
I couldn’t agree with you more. But you forgot to mention that, although Sonny may have been a pi$$ poor governor, he never let an opportunity to make a buck for himself pass him by, even if it required getting the general assembly to pass special legislation that would benefit only him (e.g, the land swap deal).
Betcha that Deal will manipulate the system to even greater extents than Sonny did.

Hamilton

February 24th, 2011
6:53 am

http://neighborhoodnexus.org/content/income-metro-atlanta

Worried? check this link. Atlanta metro per capita income declined more than any of the 30 most populous metro areas between 2000-2008. That includes Detroit. And we’re watching the lawmakers duke it out on immigration? Leaders, lead.

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Old Hippie

February 24th, 2011
7:03 am

eatmotacos, if that’s the way you feel about about our representatives, then put your money where your mouth is and run for office! Get out and tell people how you feel about things and see if the majority agree.
(If they did, the current reps would not be in office.)

Bob

February 24th, 2011
7:43 am

This is nothing compared to the fiasco that has destroyed the states trust fund for handling workers compensation for state employees. Same exact ploy just a few years later.

Mike Jones

February 24th, 2011
7:51 am

Just print the money and move on…What? We don’t have a printing press and cannot make our own money like the Federal Goverment.

Interesting Observation

February 24th, 2011
8:00 am

As long as politicians keep telling us that we can have all the government we want in the 21st century at twentieth century costs and that any tax increase will cause the sky to fall, there will continue to be gaping holds in state, local and federal budgets. We have seen the enemy and it is us. Tea anyone?

Road Scholar

February 24th, 2011
8:11 am

Old Hippie and eatmoretacos: Yeah, run for office! Your campaign slogan could be “A taco in every pot”! Er, wait a minute! The repubs will have a bill passed to check your citizenship! But we’ll still go down the drain because between the tax cuts for businesses and increase expenses, esp for unemployment insurance(unemployment in 2013 estimated to be 8.6%)will not provide adequate revenues for the state to stay on the status quo let alone grow!

How are those business tax cuts working for you? Oh, the fear!

R U Kidding Me?

February 24th, 2011
8:24 am

Jason:

“GDOT has already bonded something like the next thirty years of gas tax revenue and Federal highway funds to pay for the disfunctional transportation system we have today.”

COMPLETELY 100% FALSE! Not even close to being accurate. So if you don’t know what you are talking about, don’t just make up garbage. There are idiots who believe everything they read.

As for the unemployment trust fund, let me get this straight. Barnes acted like a republican and cut the unemployment tax rate during a time of record surpluses. Then the economy goes in the dump, and Sonny Perdoofus and his GOP anti-tax, anti everything legislature sat on their butts for 8 years and did nothing except amass more debt for the state. So what do Georgia citizens do in 2010? Elect even more republicans including the “threaten West Georgia College for firing my girlfriend” Mark Butler who now bitches about the trust fund being broke, while doing nothing about it for the previous 8 years. The inmates are running the asylum.

Lum

February 24th, 2011
8:34 am

Just goes to show that no politician (D or R) has the fortitude to do the right thing when it needs to be done. And now we all pay. Business as usual.

eatmotacos

February 24th, 2011
8:36 am

@ Road scholar

“Old Hippie and eatmoretacos: Yeah, run for office! Your campaign slogan could be “A taco in every pot”! Er, wait a minute! The repubs will have a bill passed to check your citizenship!”

Can’t run – it’s a closed club, for members only. Anyway, like Jack Nicholson’s Joker character, in the Batman movie, I think my jaws would lock if I had to maintain one of those fake smiles for the duration of the campaign.

As for the repugs passing a bill to check my citizenship – that is not how it works. As candidates, they promise to pass bills to address any issue that they feel will get them the most votes. As soon as they are sworn in, they begin to see the issue more clearly, and invariably, unforseen circumstances(lobbiest bearing gifts) arise, that make the passage of the bill impractical.

Road Scholar

February 24th, 2011
8:49 am

R U: You are correct in refuting the 30 year claim, but combining the debt payment for bonds sold AND returning to a pay up front accounting process has restricted dwindling revenue from projects. Remember they used to fund all projects up front, then went to a “credit card” approach (have enough money on hand to make a monthly payment based on the duration of construction), and then back to a “up front” system . Sweeping all future payments into an up front system has severely limited what GDOT can spend on projects until the balance is paid off!

Jose

February 24th, 2011
9:19 am

sonny waste our money.

Last Man Standing

February 24th, 2011
9:28 am

Jose:

Astute observation considering that Barnes is responsible for 2/3 of the unemployment compensation being spent. Sonny only got to spend 1/3 of the 2B dollars.

A pox on both of them!

Dirty Dawg

February 24th, 2011
9:40 am

I stand corrected…although the idea of millions, billions and even trillions all running together is scary as hell. Pretty soon it’ll just come down to ‘the haves, the have mores and the rest of us ‘nots’.

Booger Fling

February 24th, 2011
9:51 am

Republican / Democrat…. doesn’t matter, both “parties” are out of touch with reality and focused on re-election at all times.

We need to do away with the parties. There is no difference in them. They clam to be this and that but are they really? When the overseas puppet masters pull the sting they jump and people better start paying attention. All the debate is for show. A distraction from true reality!

http://www.infowars.com

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chicanery

February 24th, 2011
10:47 am

Instead of borrowing from the unemployment trust fund and providing grants to small businesses to grow their businesses and create jobs as some states did while we were giving tax cuts. that’s the same neanderthal thinking with us now getting bonds to pay the debt. /they are all the same. All (stuck in the 20th century) thinking politicians. No more bringing back losers. You lost stay home! You’re not relevant anymore. Georgia is doomed–They are all idiots!

Cissy

February 24th, 2011
11:40 am

Aw, stine, now you’ve got me all interested. What do you propose?

You are right about responsible people thinking that spending the sort of money it takes to get elected is irresponsible. The Founders’ “citizen legislators” idea is dead.

Natasha

February 24th, 2011
3:25 pm

So businesses got a tax holiday, and taxpayers are gonna be stuck with the bill? Sounds mighty familiar.

[...] GA: Behind the $635 million that Georgia owes the feds for unemployment benefits [...]

Same As It Ever Was

February 24th, 2011
7:04 pm

They’ve got a set of Republican waiters on one side and a set of Democratic waiters on the other side, but no matter which set of waiters brings you the dish, the legislative grub is all prepared in the same… kitchen.” Huey Long

SickatHeart

February 24th, 2011
7:24 pm

I get so tired of biased reporting…..oh yeah…that is not called reporting.

[...] GA: Behind the $635 million that Georgia owes the feds for unemployment benefits [...]