As Trust Fund Dwindles, La. Senate Votes to Freeze Employer Taxes and Benefits
BATON ROUGE – A Louisiana Senate committee on Tuesday began the process of suspending laws that call for raising taxes and cutting benefits when the state’s unemployment trust fund balance runs low.
Taken together, the bills and resolutions essentially freeze business taxes that pay for unemployment insurance and worker benefits at their current level, while lawmakers figure out how they’re going to replenish the fund. The state also would continue funding a worker training program that otherwise would have been suspended.
The fund has dwindled from more than $1 billion to nearly zero since the COVID-19 pandemic began.
“We’re just trying to buy a little time,” Leesville Republican Sen. Mike Reese said.
The Louisiana Workforce Commission this week will begin borrowing money from the federal government to pay legally required unemployment benefits. LWC Secretary Ava Dejoie currently expects the debt to be about $236 million; state officials will draw down the money as needed rather than all at once.
Under current federal rules, the money will be interest-free until the end of the year, and repayment must begin in September 2021.
“How the hell are we going to pay for this?” Sen. Jay Luneau, an Alexandria Democrat, asked.
Many states are facing the same issue, and it’s possible the federal government will change its rules or make new funding available by the time the Louisiana Legislature’s regular session begins in April. Other states have replenished their funds with federal CARES Act money, but Louisiana already has allocated the $1.8 billion it received to pay pandemic-related expenses for state and local governments and small businesses and for one-time “hazard” payments to frontline workers.
Using surplus dollars and borrowing money through a bond issue may be considered. Luneau suggested cracking down on employers who dodge paying taxes into the fund by misclassifying employees as contractors might also help.
Dejoie agrees misclassification is a problem. She says businesses that cheat the system effectively are raising taxes on others that play by the rules.
By David Jacobs of the Center Square