FRANKFORT — Kentucky has paid off early a $972 million federal loan that kept the state's unemployment insurance program from collapsing in 2009, saving businesses millions of dollars in taxes.
Gov. Steve Beshear said Monday that the early payoff, at least two years ahead of schedule, will save employers about $165 million in federal unemployment insurance taxes. That's a reduction of $105 for each employee, he said.
For the first time since January 2009, Kentucky's Unemployment Insurance Trust Fund has a positive balance and is on the path to solvency, Beshear said at a Capitol news conference with lawmakers and business leaders.
"Throughout my time in office, I have partnered with lawmakers and business leaders to grow Kentucky's economy and to manage us through the worst recession of our lifetime," Beshear said. "I appreciate and thank their continued commitment to work with us on the unemployment insurance issue these last six years so we could honor our commitments to working families."
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Beshear said the early payoff is another example of the state's economic progress.
At the lowest point of the recession, in June 2009, Kentucky's unemployment rate hit a high of 10.9 percent. Since then, Kentucky's job market has steadily improved: The unemployment rate dipped to 5.1 percent in June, the lowest it has been since June 2001.
The number of workers covered by state unemployment insurance laws has increased by 36,700, Beshear said.
By paying off the loan and creating a positive balance in the Unemployment Insurance Trust Fund, Kentucky employers will pay a lower tax rate when they file their federal unemployment taxes in January 2016, the Democratic governor said.
Even before the recession began, Kentucky's unemployment insurance fund was on rocky financial ground.
Beginning in 1999, Kentucky paid out more in unemployment benefits each year than it had taken in through employer contributions.
The difference had been made up by drawing down accumulated reserves.
By Jan. 28, 2009, the trust fund had been depleted, and Kentucky, along with more than 30 other states, began borrowing from the federal government.
Beshear established the Governor's Task Force on Unemployment Insurance, which recommended several changes that were enacted by lawmakers in 2010.
Beshear said the early payoff was due to fewer unemployment insurance claims and changes lawmakers made that reduced benefit payments.
Of the states and territories that borrowed federal money to pay insurance benefits, he said, eight still owe money to the federal government and eight issued bonds to pay their federal loans.