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Governor Jindal Declines Stimulus Provision that Would Result in An Unemployment Tax Increase on Businesses

Press Release

Location: Baton Rouge, LA

Governor Also Accepts Stimulus Provision for $25 Unemployment Benefit Increase, Reaffirms Acceptance of Transportation Funding in Bill for Shovel-Ready Projects in State

Today, Governor Bobby Jindal announced that the state will not change its law to use a part of the $787 billion federal stimulus bill that would result in an unemployment insurance tax increase on Louisiana businesses. The Governor also announced that the state will use a provision in the legislation to increase state unemployment benefits for recipients by an extra $25 per week, and reaffirmed his acceptance of the transportation funds included in the bill to fund shovel-ready transportation priorities in the state.

Governor Jindal said, "Our state is facing a serious budget situation and it would be irresponsible to enter into an expansion of benefits right now that would ultimately increase taxes on the very businesses we are working to support during these tough economic times. The federal money in this bill will run out in less than three years for this benefit and our businesses would then be stuck paying the bill. We must be careful and thoughtful as we examine all the strings attached to the funding in this package. We cannot grow government in an unsustainable way.

"I strongly suggest that other states also look closely at this provision in the bill so they can also avoid ultimately passing on a significant tax to businesses that will be left paying for this expansion of benefits when the federal money dries up.

"We will use those provisions, however, that help our people and our businesses in their time of need, in a way that does not add an undue burden to the current financial situation in our state. For example, we will use a part of the legislation that will increase unemployment benefits through our existing unemployment benefit system by $25 a week to recipients, and DOTD Secretary Bill Ankner has already proposed a plan for putting the federal transportation funds in the bill to work as quickly as possible. We have shovel-ready projects ready to go. We already invested hundreds of millions of dollars in one-time surplus funds in transportation projects here last year, and if the legislature agrees to a plan, these one-time federal funds will build on that critical investment.

"We are continuing to review the strings attached to the funds coming to Louisiana in this legislation. I have instructed each state agency to look closely at all the provisions in the bill."

State Will Not Use Provision that will Ultimately Increase Taxes on Businesses

The Governor said the state will not use a portion of the stimulus package that requires the state to change its law to expand unemployment insurance (UI) coverage to qualify for up to $32.8 million of the federal stimulus funding because it ultimately would result in a tax increase on Louisiana businesses. Qualifying for the $32.8 million provision is a precondition for being considered for another $65.6 million of federal unemployment insurance funds in the federal package, which would also require permanent changes to Louisiana law and additional annual spending.

According to the Louisiana Workforce Commission (LWC), based on claims filed during 2008, the $32.8 million would run out in under three years and from that point on, the state would be required to pass along the cost of more than $12 million a year for supporting this expansion of benefits to Louisiana businesses.

In fact, if the national economic downturn worsens its effect on Louisiana's economy and unemployment figures increased in the state, the cost of this stimulus provision on Louisiana businesses could increase even further beyond the calculated $12 million annual price tag.

Governor Jindal said, "Increasing taxes on our Louisiana businesses is certainly not a way to stimulate our economy. It would be the exact wrong thing we could do to encourage further growth and job creation."

LWC Executive Director Tim Barfield said the LWC will continue to evaluate the employment situation in Louisiana in light of the federal stimulus package. However, he said, "Our goal at the Louisiana Workforce Commission is to help make Louisiana a better place to do business. Increasing unemployment taxes on businesses when they might already be struggling to keep their employees on the payroll would be counterproductive."

The Louisiana Association of Business and Industry (LABI) also opposes acquiescing to the requirements for receipt of the federal unemployment compensation (UC) funds provided in the stimulus legislation. LABI Employee Relations Council Director Jim Patterson explained, "LABI has for decades diligently worked to protect the solvency of Louisiana's unemployment compensation trust fund. The terms of the stimulus bill put that solvency in jeopardy, risking higher employer taxes and lower weekly unemployment benefits."

"Employers, who are the exclusive funding source for unemployment benefits, and unemployed workers, who are the benefit recipients, cannot afford this," Patterson said. "The effect of the stimulus bill could actually be contrary to its intent. It is also important to remember that the increased costs to our state's UC fund would remain long after the federal dollars from the stimulus bill vanish."

Provision to Increase Unemployment Benefits $25 a Week

The additional $25 a week for unemployment benefits provided in the federal legislation the Governor announced that the state will accept is set to take effect beginning with people already receiving benefits in the last week of February. They will be paid beginning in March, once the state's unemployment insurance computer systems are reprogrammed.

Contrary to the provision that would increase taxes on Louisiana businesses, this provision of the bill is fully funded by the federal government in the stimulus package. The Louisiana Workforce Commission, which administers unemployment insurance, estimates these payments will result in approximately $71 million flowing to Louisiana's unemployed workers through May 2010, when the program ends.

Transportation Funds in the Federal Bill

The Governor also reaffirmed his commitment to accept federal stimulus dollars coming to the state for transportation investment, subject to legislative approval. The Department of Transportation and Development has already crafted a plan to spend a significant amount of the funds on shovel-ready priority projects throughout the state.

The terms of the federal legislation say that half of the funds in the bill must be committed within 120 days and the rest within a year, and the Governor has instructed DOTD to meet these timelines.

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