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Virginia is slowly refilling its unemployment trust fund.
BY CHELYEN DAVIS
At the height of the recession, with thousands of Virginians out of work, Virginia's unemployment trust fund dipped into the red for the first time since 1982.
Now the fund is slowly refilling, although state leaders say they're still borrowing some money to keep it solvent.
Virginia, like many states, borrowed millions from the federal government over the past few years to pay out unemployment benefits. It has been repaying those loans when it receives infusions of money from the taxes each employer pays into the fund, and paid off its last loans with a $352 million payment this past May.
But to get the fund through till next May--when most of its unemployment tax revenues come in--the system will have to borrow money again.
This fall, employment officials are borrowing not from the federal government, but from the state.
The unemployment trust fund has borrowed $18 million from the state treasury for the month of October, and can borrow a maximum of $63 million through the end of the year. Officials aren't expecting to have to tap into that credit in November, because some employment tax revenues come in that month.
The state is avoiding federal loans through the end of the year because repeated borrowing from the federal government actually costs businesses in the state.
When a state borrows money from the federal government to pay unemployment benefits and doesn't repay all of the money by the end of the next year, employers in that state see a reduction in their Federal Unemployment Tax Act (FUTA) credits.
The extra money paid by those employers goes toward the state's debt. For Virginia businesses, it cost an extra $21 per employee for 2011, which reduced the state's debt by $63 million.
So employment officials sought a different way to borrow money this quarter, to avoid another FUTA credit reduction for employers next year.
"We will not be in debt to the federal government at the end of this year, and that keeps Virginia employers from losing a further deduction on their federal tax," said Virginia Employment Commissioner John Broadway in an interview this week. "So we thought that was the best course of action."