President Barack Obama has a reasonable plan to help states like Florida that have borrowed billions from Washington to cover jobless benefits during this period of record unemployment. But Republican Gov. Rick Scott would rather force Florida taxpayers to subsidize business expenses and cut state spending on education and other state needs. He would inflict more pain on Floridians to avoid accepting help from the Obama administration.
Florida is in this fix along with 29 other states because it didn't set aside enough money during the good years to cover a period of sustained unemployment. The state trust fund used to pay unemployment benefits ran dry in 2009, and Florida borrowed $2 billion from the federal government to continue paying state-backed benefits for the first 26 weeks of unemployment. State law requires employers to make up the shortfall quickly. But because that would have meant a huge increase in unemployment tax rates, from a minimum of $8.40 per employee in 2009 to $100.30 in 2010, state lawmakers temporarily limited the extra taxes that had to be collected to replenish the trust fund.
Still, the minimum annual rate per employee rose last month from $25.20 in 2010 to $72.10, because state law automatically raises rates based on the prior year's benefits. Businesses also will be on the hook for a special assessment of $9.51 per employee to cover a $61 million interest payment on the federal loan.
If passed by Congress, Obama's plan would grant states a two-year reprieve on the interest payments. That would relieve Florida employers of the special assessment, and principal payments would be delayed until 2014. At that time, states would have to tax employers on the first $15,000 of an employee's earnings, rather than the current $7,000 minimum.
The boost in future unemployment taxes under Obama's plan is needed. It pushes antitax states like Florida to replenish their trust funds and better prepare for the next economic downturn. Even so, unemployment taxes would be no more than what they were in 1983, when adjusted for inflation.
Estimates are that Obama's plan would mean Florida could hold onto between $400 million and $500 million — money that would remain here to stimulate the state's economy. But Scott wants to cover the interest payment on the federal loan with general revenue money, shifting a cost that businesses should be paying onto Florida taxpayers and using money that should go to education and other state services. The governor also wants the Legislature to cut unemployment taxes for businesses by $630 million over two years, while reducing state jobless benefits to a maximum of 20 weeks from the current 26 weeks. And he'd like to see those benefits curtailed even more as the state's 12 percent unemployment rate goes down, potentially granting the unemployed as little as 12 weeks of help. This package passed a House subcommittee Thursday, positioning Florida to be the stingiest state in the country.
Obama is offering states an interest-free bridge loan that Florida could really use. For Scott to summarily turn down the help would be foolish and unnecessarily painful for Floridians who are hurting enough.