Unemployment Fund Will Need Loan

Tennessee’s unemployment fund may need to borrow money to cover the cost of unemployment benefits. The question for legislators is whether that loan should come from the federal government or from within the state itself.

Money for the unemployment trust come comes from taxes levied on the first $9000 each Tennessean earns in a year. Most workers hit that mark in the first quarter, which means the fund gets the bulk of its revenue in the second.

Now, with so many on the unemployment rolls, the funds’ balance may zero out before that second quarter influx arrives.

At a Thursday hearing of the Joint Committee on Business Taxes, legislators asked Labor Commissioner James Neeley whether he thought it would be better to take out a federal loan or to temporarily shift money from another part of the state budget until the taxes come in. Neeley says the federal option is much more attractive.

“There’s no interest charged and we could pay that back before the end of the fiscal year real easy. I just think that would be simpler.”

The money would have to be paid back in full before the end of June. The state constitution does not allow the government to carry a loan over from one fiscal year to another.