Unemployment Compensation Solvency Legislation Passes

(HARRISBURG) – – Legislation sponsored by state Senator John R. Gordner (R-27) to provide for the long-term solvency of the state’s Unemployment Compensation Trust Fund passed the Senate today in a bi-partisan vote.  Senate Bill 1310 is expected to receive concurrence from the House of Representatives and be signed into law by Governor Tom Corbett.

“This legislation will provide for solvency of the Fund by 2019 and, more importantly, provide for long-term solvency in the Unemployment Compensation system,” said Senator Gordner.  “Senate Bill 1310 will eliminate our debt to the federal Unemployment Trust Fund, allow us to stop borrowing from the federal Fund and in the long-term, provide for important systemic changes that will ensure the continued financial health of the system.”

Pennsylvania has borrowed about $3.9 billion from the federal Trust Fund to cover benefits for the unemployed during the recent recession.  Senate Bill 1310 allows the Commonwealth to borrow up to $4.5 billion in a bond issue to pay the debt.  Currently, employers are paying an interest surcharge to the federal government to cover the debt, and issuance of the bond to satisfy that debt will mean employer contributions will remain in Pennsylvania to pay the bond issue.

“Even without the recession and increased unemployment, our system was headed for a structural deficit because revenues to the Fund were capped while benefits increased based upon the average weekly wage,” said Senator Gordner.  “This legislation corrects the imbalance.”

Senator Gordner stressed that unemployment benefits will not be reduced for current beneficiaries.  Eligibility and growth of benefits will be reformed beginning in 2013, and are targeted to higher wage earners.  Additionally, funding is provided for a new Re-employment Fund that is targeted to those who are affected by the reforms.

From 2006 through 2011, Pennsylvania paid out the second most amount of unemployment compensation benefits in the nation, despite being the sixth most populous state and maintaining a rate that has been consistently below the federal unemployment rate since late 2006.