Gov. Kaine asks feds for unemployment loan

Governor Tim Kaine says the Commonwealth needs help from the federal gvoernemnt to pay unemployment benefits.

According to a news release from the the Governor's office, Kaine filed a request with the U.S. Department of Labor for an advance of $252 million from the Federal Unemployment Account to meet the obligations of the Virginia Unemployment Compensation Program through December 2009. The Governor's office predicts the Virginia's Unemployment Compensation Trust Fund will run out of money in the middle of October.

Kaine blames the economic downturn for an increase in demand for unemployment benefits, and a reduction in employer contributions to the state's unemployment insurance trust fund for the move. The Governor's office says 69,000 Virginians currently receive unemployment benefits, and Virginia assess the third lowest unemployment tax rates in the county.

The economic crisis has also triggered a special provision in the state code that will hit state businesses. It's called a "fund builder tax," and is designed to replenish money in Virginia's Unemployment Compensation Trust Fund.

According to the Governor's office:

When the fund falls below 50% of the level deemed “sufficient” by the state code, as is expected to occur, a mandatory fund builder tax is automatically added to all employers’ contribution rates. This additional levy will begin January 2010 and remain in place until the fund is rebuilt to at least 50% solvency. The projected employer contribution for 2010 is approximately $171 per employee. Virginia currently has the least expensive unemployment tax rates in the region, and this increase would still leave its rates lower than all but two regional neighbors.

The activation of the mandatory Fund Builder tax also adjusts unemployment benefits for some recipients. Those who receive unemployment benefits and Social Security will have their weekly unemployment benefit reduced by 50% of their Social Security Act payment. If, for example, someone received $250 from Social Security and $200 from unemployment, they will still receive $250 from Social Security, but will receive $75 from unemployment.

As for paying the money back, the Governor says the economic stimulus act (The American Recovery and Reinvestment Act, ARRA) waives interest accrued through December 31, 2010 on the unemployment loan. But if Virginia has an outstanding balance on the federal loan on the first day of two consecutive calendar years, businesses in the Commonwealth will be assessed an additional federal tax of #21 per employee starting in 2011.

Kaine's news release takes a shot at the Republican controlled House of Delegates, claiming: " If Virginia had been eligible for the second tranche of assistance from the ARRA, approximately $125 million, the state’s compensation fund might have been able to delay requesting loans until after January 1, 2010, which would have delayed the additional federal tax until 2012." The House voted down that part of economic stimulus act earlier this year. At the time, Republicans claimed it would cause Virginia to be responsible for future unfunded mandates.

In response to the economic crisis, Virginia extended unemployment benefits up to 72 weeks, and extended COBRA health insurance benefits from three to nine months for employees from small businesses who are laid off. The governor's economic crisis strike force also plans to launch a series of resource fairs to give job seekers advice and techniques they can use to stand out to potential employers.

The stresses placed on our unemployment compensation program reflect the stresses placed on many Virginians who have been swept up in the worst economic crisis in generations,” said Governor Kaine in the news release. “Virginia will take advantage of every available resource to help citizens who lost their jobs through no fault of their own get through these difficult times,” Kaine added.