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Gov. Rick Scott opposes president's plan to put off states' jobless debt payments

WASHINGTON — President Barack Obama's plan to give states more time to pay back billions borrowed for jobless benefits ran into a key obstacle Wednesday: Florida Gov. Rick Scott.

The newly elected Republican, and frequent Obama critic, is pursuing his own ideas to deal with the crushing debt caused by persistently bad unemployment, a spokesman said.

He wants to use state money to cover some of the interest owed to the federal government and reduce the benefits a person can get — a proposal advocates for the unemployed plan to protest today in Tallahassee.

"Band-aids and quick fixes from a federal government that spends money faster than it is printed will not solve real problems," said Scott spokesman Brian Hughes.

Scott's reaction could be trouble for Obama, who is counting on support from hard-hit states to pressure reluctant Republicans on Capitol Hill. His plan is part of his 2012 budget to be released Monday.

Under Obama's plan, Florida over the next two years could hold onto between $400 million and $500 million. The state unemployment rate is 12 percent, among the highest in the nation, and represents more than 1 million people out of work.

The president views his plan as a way to provide relief to states until the economy improves. In 2014, though, the federal government would require states to tax employers on the first $15,000 of an individual's earnings. That's more than double the current level of $7,000, which has been in place since 1983.

That money goes into state trust funds to pay unemployment benefits. The federal government also taxes the first $7,000 of earnings; that money goes into a federal trust fund.

The federal tax rate would be cut in half, meaning the federal government would not see an increase in revenue from the adjustment. But states would be allowed to use the new income level to raise more money from employers, allowing faster repayment of debt and refilling of unemployment coffers.

Republicans on Capitol Hill are skeptical or outright critical, casting it as another federal "bailout" and warning of future tax increases.

"This is what happens when short-sighted borrow-and-spend policies finally catch up with us," said Sen. Marco Rubio, R-Fla.

Some states embrace the idea. "We'd like to see the specific details, but would likely welcome the much-needed relief," said Sara Wurfel, spokeswoman for newly elected Michigan Gov. Rick Snyder, a Republican.

"We're slicing state government again this year and the interest payment is part of our FY 2012 budget," said Brian Robinson, a spokesman for Georgia Republican Gov. Nathan Deal. He "would much rather use that money for his education priorities in Georgia's teachers and students."

In Florida, Scott is urging legislative leaders to approve a plan that would cut unemployment taxes for businesses by $630 million over two years, and he wants to cover the interest payment due on the federal debt this year with state general revenue funds.

His plan calls for reducing the maximum time a jobless person can get state benefits to 20 weeks from 26 weeks. The limit would fall as Florida's unemployment dipped, down to 12 weeks if the rate is at or below 5 percent. Other provisions being considered by the Legislature would make it easier for employers to challenge whether workers are eligible for unemployment and require the unemployed to do community service.

"Instead of blaming the victims, elected leaders should be finding ways to make sure our state is fair and providing opportunity for unemployed people," said Joseph Phelan of Florida New Majority, which plans to protest today. "Cutting unemployment insurance at this time would be catastrophic to middle class and working families in the state."

The state trust fund used to pay unemployment benefits went insolvent in the summer of 2009, forcing Florida to borrow $2 billion from the federal government. Under Florida law, employers were supposed to quickly cover the fund's shortfall. In fact, the minimum annual rate would have jumped twelvefold to $100.30 per employee a year ago had the Legislature not intervened to postpone the worst of the pain for a couple of years.

But the unemployment tax rate has gone up significantly nonetheless. The minimum annual rate — charged to an employer with a solid history of retaining employees — rose from $8.40 per employee to $25.20 in 2010. This year, it jumped to $72.10 effective Jan. 1. The first quarterly payment at the higher rate is due in April.

Businesses also received a second mailing this month: a special assessment of $9.51 per employee to cover a $61 million interest payment on the federal loan that's keeping the unemployment fund afloat. Employers would have to pay the assessment by June 30 unless one of the relief plans is enacted.

"Obviously any new taxes at this time are bad medicine, really," said Rob Wallace, president and founder of Environmental Engineering Consultants, a 31-year-old Tampa firm with eight employees, down from a pre-recession peak of 13 employees. "So if they can postpone it, that would be a good thing. I'm in the frame of thought that we pay a lot of taxes now as it is. We're kind of exhausted taxpayers."

Times/Herald staff writer Marc Caputo contributed to this report.

Gov. Rick Scott opposes president's plan to put off states' jobless debt payments 02/09/11 [Last modified: Thursday, February 10, 2011 9:56am]
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