Louisiana senators grapple with unemployment fund bankruptcy

BATON ROUGE, La. (AP) — Louisiana senators Tuesday began moving legislation to keep the bankruptcy of the state unemployment trust fund from triggering business tax hikes and a drop in benefits for jobless workers during the coronavirus outbreak.

But lawmakers and Democratic Gov. John Bel Edwards still have no plan for refilling the depleted fund as Louisiana will begin to borrow money from the federal government Wednesday to pay unemployment benefits.

“It’s probably the worst situation you can imagine, because every way you turn, it’s bad,” said New Orleans Sen. Troy Carter, the Democratic chairman of the Senate labor committee.

The panel advanced a package of measures sponsored by Senate President Page Cortez, a Lafayette Republican, and Sen. Mike Reese, a Leesville Republican. The measures, approved without objection, would keep the current levels of taxes on businesses that pay into the unemployment fund and of benefits paid to the unemployed in place through 2021.

Louisiana’s trust fund topped $1 billion before the state’s coronavirus outbreak began in mid-March. The state labor department, known as the Louisiana Workforce Commission, said Tuesday it had $100,000 remaining after hundreds of thousands of people in Louisiana were forced out of jobs because of pandemic closures and restrictions.

Workforce Commission Secretary Ava Dejoie said Louisiana will start receiving cash advances Wednesday from the federal government to pay unemployment claims. Nearly half the nation’s states are doing similar federal borrowing to stay afloat.

Under current law, the trust fund’s draining will require businesses to pay more taxes into the fund to refill it, and benefits to jobless workers — which at a maximum of $247 per week are already among the nation’s lowest — would decline to the country’s bottom rate of $221 a week.

Lawmakers said they don’t want that to happen, arguing that fragile businesses and struggling out-of-work residents shouldn’t be further penalized because of a pandemic. The legislation heading to the full Senate for debate would stop those triggers from taking effect through 2021.

“We’re just trying to buy a little time,” Reese said.

But Reese and other senators acknowledged they haven’t yet come up with any plan for pouring more dollars into the trust fund, repaying the federal government loans and getting back to solvency. And it sounded Tuesday like they didn’t expect to come up with a financing plan in the monthlong special session that must end by Oct. 27.

Instead, senators and labor department officials talked of trying to find solutions in the 2021 regular session when they have a better sense of how deep their borrowing hole will go. The state, Dejoie said, will have to start repaying the federal loans with interest by September 2021.

Edwards and lawmakers have said they are hoping Congress might intervene to help states deal with their bankrupt unemployment funds. Carter urged lawmakers to start thinking of other ideas if that doesn’t happen.

“We just can’t erase it. We can’t just look away,” he said. “We have a responsibility to fix it.”

Dejoie reminded the Senate committee that Louisiana took more than a decade to repay all the borrowing done for unemployment claims in the 1980s when the trust fund went broke. The current tax and benefit structure was put in place after that insolvency.

Lawmakers Tuesday also worked on other ideas aimed at helping businesses in the pandemic.

A separate Senate committee advanced measures that would lessen permit fees for businesses required by the governor to temporarily close operations. Meanwhile, the House voted 68-22 for a severance tax break for oil well drillers that is estimated to cost Louisiana $157 million in lost revenue over five years if passed by the Senate.