A deal to help Kentucky repay a federal loan is officially on the table.
During the recession, the commonwealth borrowed more than $900 million from the federal government to shore up the unemployment insurance fund. In 2010, the General Assembly approved a plan to repay the debt over time. But when that measure passed, lawmakers and the governor believed the federal government would defer interest payments. That didn’t happen, and the state was left on the hook for millions of dollars in interest. If Kentucky doesn’t make the interest payments, employers will face government fees and the loss of federal tax credits on unemployment insurance.
House Bill 495 was proposed this week to address the problem. It allows the state to take a loan from an outside source to pay down the interest. It appears that Kentucky Employers Mutual Insurance—which helps fund workers’ compensation to employers—will provide that loan.
“There’s some talk that they would, that they would in effect use some of that reserve money and pay this back and then that money would be paid back through the assessment mechanism. So KEMI would become, yeah the bank so to speak,” says House Speaker Greg Stumbo.
The KEMI loan would handle the payments up front, sparing employers from any penalties. But the loan will only last two years, and the state must have a payment plan for the interest in place by 2015.
Kentucky Chamber of Commerce President Dave Adkisson says the deal is the best that could be hatched by the unemployment insurance task force Beshear appointed to find a way to repay the original loan. Adkisson says the group talked seriously over at least “a dozen different scenarios, most of which called for an immediate tax on businesses.” Adkission supports the KEMI loan proposal.
“We expect strong bipartisan support in the House,” he says. “And if it passes the House and goes to the Senate we’re optimistic.”
Even though many employers, unions and members of the Beshear administration support the KEMI loan, Adkission says the floor is still open for possible changes.
“If anyone has any better ideas, we’re all ears,” he says.