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Florida might give up $1 billion in federal jobless aid

The state is on the verge of forfeiting more than $1 billion in federal stimulus funds that could help about 250,000 Floridians whose unemployment benefits are running out.

The problem: The federal aid comes at a price many in the state Legislature are unwilling to pay.

To receive the money, Florida has to pass a law widening the pool of people receiving extended unemployment benefits. No legislation has been introduced.

The federal government would pick up most of the estimated $776 million cost of providing the extended benefits through December 2009. But state agencies and local governments would be on the hook for about $71 million between now and June 30, 2010 for their share of the costs.

In addition, the federal stimulus only runs through the end of 2009. After that, the burden would shift to Florida to pay for the program. That tab could be about $200 million for the first six months of 2010, according to an estimate from the Florida Agency for Workforce Innovation, which oversees unemployment benefits.

Senate Republicans, led by Sen. J.D. Alexander, R-Lake Wales, don't want to leave the federal money on the table, given Florida's unemployment picture.

The state's unemployment rate stood at 8.1 percent for January and is expected to be higher for February.

Top House Republicans, however, are urging their membership to reject the federal funding.

"The strings attached to this money are strings that could make the situation worse," said Rep. Adam Hasner, R-Delray Beach, the House majority leader. "Businesses could lay off more people. This isn't an issue about being callous or compassionate. It's about not making a short-term decision that could have long-term consequences."

On Monday, the House leadership sent an e-mail to members telling them how to respond if constituents are upset that the state would turn down more than $1 billion in aid.

The e-mail said taking the money now would mean a hardship later for Florida companies that pay into the state's unemployment insurance fund. "These higher costs on businesses that will directly pay the increased taxes, will force companies to layoff workers," the e-mail said.

Tammy Perdue, general counsel of the business lobbying group Associated Industries of Florida, is concerned the state would be on the hook to pay out at least an additional $74 million annually in unemployment benefits if it amends its unemployment laws to get the federal money.

"We don't believe the pot of money is really worth that long-term exposure," Perdue said.

Among those seeking the federal dollars is John Hall, executive director of the Florida Center for Fiscal and Economic Policy, which analyzes the impact of budgetary decisions on low- and middle-income Floridians in particular.

"Yes we should take the money," Hall said. "Economically it makes sense."

He cited studies indicating that for every dollar spent in unemployment compensation, $2.15 is put into the economy. Plus, Hall said, eventually the state will need to charge businesses higher unemployment insurance taxes to bolster the fund used to pay unemployment benefits. The federal money could reduce that tax increase to businesses by up to 15 percent, he said.

According to the National Employment Law Project, Florida is one of 14 high-unemployment states that has yet to act to receive the federal injection of extended unemployment benefits.

"Over half a million jobless workers will run out of unemployment benefits in March and April if their states do not act now," said Christine Owens, executive director of the project.

If adopted by Florida, the stimulus program could provide up to 20 additional weeks of unemployment benefits to up to 250,000 people who would otherwise use up their benefits this year if they remain jobless. The state estimates an additional 112,800 people could become eligible for benefits in the second half of the fiscal year, between Jan. 1 and June 30, 2010.

The estimated $1.1 billion in federal help —including the $776 million to extend benefits — is separate from $1.34 billion to help Florida's jobless that doesn't require legislative approval.

Underscoring the gravity of the economic crunch is that the state's trust fund used to pay unemployment claims is draining quickly. A year ago, Florida's unemployment fund had about $2 billion in its coffers. But the steady draining of unemployment claims — and fewer companies paying unemployment insurance — has cut its balance by more than 60 percent. Florida currently has about 500,000 people receiving unemployment benefits.

As of Friday, the unemployment fund balance had fallen to $740 million, down 25 percent in just three weeks. A dozen other states have already taken federal lifelines to shore up their funds. Regardless of any federal intervention, state officials are still discussing whether Florida companies will need to pay higher unemployment insurance rates next year to keep the fund afloat.

Gov. Crist on Wednesday said he'll seek an interest-free loan from the federal government for about $600 million for three months to shore up the unemployment insurance trust fund. The governor's office is looking for legislators in the House and Senate to sponsor the measure.

Crist said he was briefed Wednesday on the unemployment compensation fund. He said that fully expanding unemployment benefits under the federal stimulus package might require a tax increase, but he wouldn't say if he supports that.

Instead, Crist prefers borrowing money from the federal government. "That's the most attractive mechanism," he said.

Times/Herald Tallahassee Bureau staff writers Alex Leary and Marc Caputo contributed to this report. Jeff Harrington can be reached at jharrington@sptimes.com or (727) 893-8242.

Florida might give up $1 billion in federal jobless aid 03/25/09 [Last modified: Saturday, March 28, 2009 12:43pm]
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