Kentucky has borrowed nearly $950 million from the federal government since 2009 to cover a shortfall in the state’s unemployment insurance trust fund.
The commonwealth wasn’t alone when benefits skyrocketed and the commonwealth’s unemployment insurance fund became insolvent in 2009. At least 30 states borrowed money from Washington to beef up their funds during the recession.
Kentucky’s balance on a nearly $1 billion loan is expected to be around $675 million dollars by year’s end. Thomas Zawacki, secretary of the Education and Workforce Development Cabinet briefed an interim legislative committee in Frankfort last week. He told lawmakers Kentucky’s unemployment benefits fund is now on a "path to solvency" and the state is on target to pay off the federal loan by 2017, five years earlier than originally anticipated.
The General Assembly in 2012 passed a bill allowing the state to borrow funds to pay interest on the federal loan and save employers $600 million in tax penalties. Funds borrowed will be paid with a 0.22 percent surcharge on employers based on their employees’ wages. The surcharge will be implemented January 1st.