The Pennsylvania House of Representatives recently approved Senate Bill (SB) 1310, which would allow the commonwealth to issue bonds through the Pennsylvania Economic Development Financing Authority to repay federal unemployment benefit loans. Pennsylvania’s Unemployment Compensation (UC) Trust Fund has borrowed $3.8 billion from the U.S. Department of Labor since 2009. Repayment on the loans began in January 2012, triggering an interest tax on employers.

SB 1310 would allow the state to seek up to $4.5 billion in bonds at lower interest rates, saving employers millions in surcharges. It would also give the state greater flexibility to pay debt service on the bonds.

According to Pennsylvania Representative Bill Keller, this would be the largest bond issue authorized by any state for repaying federal unemployment loans. Texas issued $2 billion in bonds; Idaho issued $200 million; Illinois will issue bonds for $2.4 billion; and Michigan is working on legislation to borrow up to $3.2 billion, Keller said.

Of course, refinancing alone will not restore the state’s bankrupt UC trust fund. Pennsylvania “has been stuck in a time warp when it comes to addressing the long-term needs of our unemployment compensation system,” Keller said, pointing to Pennsylvania’s low taxable wage base, arbitrary caps placed on the fund in the 1980s, and UC tax breaks in the 1990s, all of which left the fund unprepared for hard economic times.

State Representative Ron Miller said, “This is a true jobs bill, as the insolvency of the unemployment compensation system impacts the ability of Pennsylvania businesses to hire new employees and maintain … staff.” Passage of SB 1310 is “imperative if we are going to attempt to maintain the status quo until we can begin to turn things around economically,” Miller said.

The legislation moved back to the Senate for consideration.