* Route Fifty…
At least four states paid back money in the last week they borrowed from the federal government to cover unemployment benefits—narrowly avoiding additional interest on the loans.
Hawaii, Nevada, Ohio and West Virginia announced the loan repayments within the last week. A remaining 10 states have a combined outstanding balance of more than $45 billion that they will now begin to accrue interest on, according to the Treasury Department.
When states exhaust their unemployment trust funds, they are allowed to borrow money from the federal government to ensure benefits continue to be paid. Twenty-two states took out what are referred to as Title XII advances during 2020. The loans were initially interest free, but starting Monday, states with outstanding loans began to accrue 2.3% interest on the borrowed sums. […]
Unemployment benefits are paid for through taxes that states levy on businesses. When unemployment trust funds are depleted, state and federal laws trigger higher business tax rates on employers to replenish the funds. The 10 states that have outstanding loan balances California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania and Texas—could be poised to see significant tax hikes on employers next year if they do not pay the money back before increases are triggered.
Illinois has $5 billion in leftover federal stimulus money. A large chunk of that will likely be used to pay down its $4.2 billion debt unless the federal government somehow intervenes.