Georgia Unemployment Migraine: “Right Now We’re In The Trauma Room”
Mike Klein
Georgia has an unemployment migraine. Evidence of that is almost everywhere you look.
The percentage of jobless Georgians – now 10.2% — has been higher than the national average for 39 consecutive months. Georgia recently posted the nation’s worst weekly increase in initial unemployment claims. And, the state expects to owe $820 million to Washington because it has borrowed federal funds to help write unemployment checks since December 2009.
“Right now we’re in the trauma room,” said Mark Butler, the former state legislator who was elected last November to become Georgia’s first new labor commissioner in twelve years. Butler presides over a $416 million budget of mostly federal dollars and 4,000 employees.
These numbers matter most to Butler: 388,000 out-of-work Georgians received unemployment checks last year. Fifty-four percent are long-term unemployed, which means they had no work for at least 27 weeks. The U.S. Department of Labor reported last week that Georgians filed 10,335 initial unemployment insurance claims during the week that ended January 22, the most new claims in any state.
State labor officials do not have data on the number of Georgians who exhausted all state and federal unemployment benefits after 99 weeks. But labor officials estimate some 300,000 jobs were lost during the recession. That placed an enormous burden on benefit payments.
The state unemployment insurance trust fund is worse than broke. Once flush with nearly $2 billion, it was depleted because the state made decisions to reduce contribution taxes paid by employers. Then two recessions within 10 years took their toll, especially the 2008 economic collapse.
“We had a plan, an insurance level. The (2008 recession) was much worse than insurance could protect against,” said state economist Kenneth Heaghney of Georgia State University.
Unemployment compensation trust funds are a federal-state partnership created by the Social Security Act of 1935. Washington has oversight but states design their programs within federal requirements. States that exhaust trust fund reserves can borrow without limit from the Federal Unemployment Account.
Trust fund accounts are forward-funded. Employers pay taxes based on formulas that include employee total earnings and the company’s layoff history. The theory is funds that accumulate during good times will be used to write checks during bad times.
Georgia employer contributions have not kept pace with benefit claims. The state received $620 million in employer taxes last year but checks totaled $1.165 billion. Still, that was better than the 2009 calendar year when checks reached $1.725 billion. Trust fund reserves were used to bridge the gap until they ran out 14 months ago.
How big a deal is this nationally? The U.S. Department of Labor’s new update last Friday said 30 states and the Virgin Islands have outstanding loan balances that total $42.3 billion. Georgia borrowed $588 million through January 21. That became $620 million through last week, then $634 million through Monday. Butler predicted the level could reach $820 million this spring.
How did we get here? In part, the answer is purely mathematics – Too many people have been out of work too long and there is not enough money going into the fund – but policy decisions made in Georgia dating back to the early 1990’s also played a significant role in the fund going broke.
Forty years ago – before a stunning population explosion – Georgia’s unemployment trust fund had less than $500 million. It grew rapidly over 20 years in step with population and business community growth. By the early 1990’s the fund was at $1 billion and buoyed by the robust economy, there was political sentiment to cut unemployment taxes paid by businesses.
The state made a $45 million cut in 1994. Massive reductions happened during the Governor Roy Barnes administration: $92.2 million in 1999, another $30.6 million in 2000 and a decision by Barnes to reduce corporate trust fund taxes by $1 billion more over four years.
Contributions went onto a state tax holiday at almost the precise moment that the first of two recessions arrived. The fund held $1.93 billion in December 1999 but four years later just $701,900 remained. The tax holiday ended at the start of 2004, but that same year the state announced another $50 million cut.
An economic analysis by the Georgia State University Fiscal Research Center in March 2006 said Georgia’s fund had never approached insolvency during 35 previous years, but FRC also concluded the fund would have “a tough time financing future payouts especially if the state suffered a fairly quick downturn in 2006 or 2007.”
The Fiscal Research Center cast its scrutiny elsewhere in this warning, “Experts draw a close comparison with New York, Texas, Illinois and other states whose UI Trust Funds are now insolvent following UI tax cuts during the celebrated economic times of the 1990’s.”
Georgia would soon learn that painful lesson. The $1.28 billion trust fund balance in December 2007 was completely gone less than two years later. Federal Unemployment Account loan funds are drawn down as needed and Georgia borrowing that began in December 2009 averaged $42 million per month through January of this year.
Where would the fund be today without that $1 billion tax holiday? “We would probably be in better shape than any state in America,” Butler said. “Everyone would be saying, we wish we were Georgia. We would have a little more than $500 million sitting in the trust fund right now.”
Here is what the next few months look like. Georgia expects to collect more than last year’s $620 million in employer contribution taxes. Most receipts will be posted after the first quarter because the tax is levied on the first $8,500 of a worker’s income. Butler said that should enable the state to stop borrowing money from Washington.
Then there is the $18 million question, which is the estimated size of Georgia’s first interest payment owed to the federal government before the end of September. Federal law prohibits the state from using employer contribution funds to cover the interest. Translation: The state must find $18 million inside the general fund or other monies at the Department of Labor.
“The best I can tell, there wasn’t a whole lot of emphasis on planning to take care of this,” Butler said. “I hate to be critical, but I think there were some assumptions made that the state would come up with the money.” Butler is looking first at department accounts to find some dollars.
The Wall Street Journal reported Wednesday that the White House will propose waiving those interest payments for two years. The Journal also said the federal government would propose to more than double the amount of employee wages that are subject to unemployment taxes.
Then there is the $634-to-$820 million question. Washington has not established a repayment deadline but the federal loan rate increases each year principal goes unpaid. Butler has asked for a legal opinion about whether the state can issue bonds to retire the debt. The state pays about 4% on federal loans and Butler said state bonds could be sold for perhaps half that rate.
“We would save millions of dollars in interest,” Butler said. “We have to be very careful about paying this back. If we’re irresponsible, if we don’t make the payments as soon as possible, our businesses are on the hook for this money and the rates will increase dramatically on the federal side.” Butler said benefit reductions are not an option; “That’s off the table.”
Georgia must also decide how much reserve to maintain when the trust fund is solvent. Today’s economy is more volatile than forty or twenty years ago. The choices will include whether to raise rates paid by employers so the fund can withstand any downturn or choose solvency for most needs with a choice to borrow federal funds again during an economic collapse.
Butler said he would like to convene “a fairly large tent from the private sector” to think about a system that “needs some basic tweaks.” He added, “This is not something that we want to tackle right now but it is something we do want to take a look at (to create) the most fair, most sound system with the least amount of burden on Georgia businesses.”
Georgia Data:
Georgia Unemployment Rate: 10.2%
National Unemployment Rate: 9.0%
December 2009 Long-Term Unemployed: 168,200
December 2010 Long-Term Unemployed: 252,200
November 2010 Statewide Payroll Jobs: 3,849,000
December 2010 Statewide Payroll Jobs: 3,827,000
December 2009 Initial Claims: 100,896
December 2010 Initial Claims: 75,635
Source: Georgia Department of Labor
Mike Klein is Editor at the Georgia Public Policy Foundation.
Georgia Republicans Finish the Drill; Trauma Care Amendment Loses
This article was published by StatehouseNewsOnline.Com and Watchdog.Org.
Georgia voters provided Republicans arguably their greatest statewide victory ever Tuesday as the GOP administered a whipping to Democrats like nothing they had seen, literally, since Reconstruction after the Civil War. This was the political equivalent of what football coaches preach: Finish the Drill!
Republicans won every state constitutional office starting with Governor. Retired nine-term congressman Nathan Deal ended Democratic former Governor Roy Barnes’ comeback bid by 53% to 43%. Georgia requires a majority margin to win. Georgia sent Republican U.S. Sen. Johnny Isakson back to Washington by an even wider margin, 58% to 39%.
That was just the beginning of a great night for Republicans, a fright night for Democrats.
Republicans retained seven Congressional seats and took one from Democrats. Former GOP state legislator Austin Scott defeated four-term Democrat Jim Marshall 53% to 47% in central Georgia’s 8th Congressional district. Republicans will hold both Senate seats and eight of the state’s 13 House seats in the next Congress.
Republicans seized three state executive offices from Democrats: attorney general, agriculture commissioner and labor commissioner. The GOP retained lieutenant governor, secretary of state, insurance commissioner, state school superintendent and public service commissioner.
As Wednesday dawned over Georgia, Democrats could only wonder, what now?
Historians will consider whether Tuesday was more significant than eight years ago when Sonny Perdue became Georgia’s first Republican governor in 130 years. Democrats held many state offices after 2002 and 2006 elections. Now the GOP will hold every state government office for the next four years. The party retained state Senate and House majorities.
The evening began with many predictions Deal and Barnes would face a gubernatorial run-off on Tuesday November 30. Analysts predicted African-American support would break to Barnes and Libertarian candidate John Monds would take votes from Deal. Barnes did carry the African-American vote but Monds could not get over 4% and Barnes conceded just before midnight.
Deal told supporters, “Georgia has placed its faith in the Republican Party and we are not going to let them down.” Barnes quoted the Apostle Paul, “I have fought the good fight. I have run the good race. I have finished the course. I have kept the faith and so have you.”
An amendment to fund trauma care with a special $10 tax that would be added to annual vehicle registration was defeated 53% to 47%. This high-profile measure was supported by the Georgia Chamber of Commerce and the state’s major medical organizations. A major final weekend media blitz was not enough to save it from voters who rejected the new tax.
Mike Klein is Editor at the Georgia Public Policy Foundation.
Georgia Early Vote Should Pass 800,000; Far Less Than 2008 Election
Georgia early voting seems certain to pass 800,000 ballots cast, a sizable number by its own merits, but still down from nearly 2.1 million in the presidential election two years ago.
More than three-quarter million early ballots have been cast, according to the Georgia Secretary of State’s elections division. Total ballots cast were 761,042 with 643,936 voted in person, 117,106 mail-in ballots and 58,606 mail-in ballots outstanding. General voters can return mail-in ballots through Tuesday. Military personnel ballots will be counted through Friday.
This is the second general election and the first mid-term in which all eligible Georgians are permitted to vote early in-person or by mail-in without having to provide a reason or excuse.
Two years ago the state recorded 2,084,1279 early ballots and that represented 53% of total ballots, said Matt Carrothers, director of media relations for the Secretary of State’s office.
Presidential election years generate more voters than mid-term elections. Georgia turnout in the three most recent presidential elections was 69% in 2000 when Texas Governor George W. Bush defeated Vice President Al Gore, 77% four years later when President Bush defeated Massachusetts Sen. John Kerry and 76% two years ago when Illinois Sen. Barack Obama defeated Arizona Sen. John McCain.
Fewer Georgians vote in mid-term election years. Governor Sonny Perdue upset incumbent Governor Roy Barnes in 2002 with 54% of eligible Georgians voting. The total voter percentage declined to 48% when Perdue won re-election over Democratic challenger Mark Taylor in 2006.
Election history dating to 1988 is available on the Secretary of State website, www.sos.ga.gov/elections.
Mike Klein is Editor at the Georgia Public Policy Foundation.
Georgia Palette Likely To Become Redder; Deal – Barnes No Sure Thing
This Georgia election preview was written for the Franklin Center for Government.
Georgia’s political palette will likely become deeper Red after next Tuesday, but whether that includes the Republican Party winning its third consecutive Governor’s Office election is uncertain.
Two national organizations released polls this week that show Republican Nathan Deal up 10% over Democrat Roy Barnes but should those vote projections become vote percentages, they would not be enough to avert a late November run-off on the Tuesday after Thanksgiving.
The Rasmussen Reports 2010 Gubernatorial Scorecard and SurveyUSA produced identical results with Deal leading Barnes 49% to 39%. A majority vote – 50% plus one vote — is required to win statewide office in Georgia. Deal is a retired nine-term congressmen and Barnes served one term as Governor from 1999 to 2003 after eleven terms as a state senator or representative.
Rasmussen moved Georgia from “Leans GOP” to “Solid GOP” after a Sunday, October 24 telephone poll of 750 likely voters statewide. Libertarian Party candidate John Monds received 5%. The remainder indicated preference for another candidate or said they are undecided.
The SurveyUSA sample was larger, 1,100 persons interviewed by telephone over four days, Thursday, October 21 through Sunday, October 24. The SurveyUSA outcome was identical to Rasmussen, 49% for Deal and 39% for Barnes, but Libertarian candidate Monds polled 8%. Some analysts believe the likelihood of a November 30 gubernatorial run-off would increase if the Monds vote exceeds 5%.
The Deal campaign strategy has been to criticize nearly everything about the first Barnes administration. It has tried to portray Barnes as an over-the-top President Barack Obama style liberal Democrat. The Barnes strategy has been to question Deal’s personal and business ethics. Lately, Barnes has attacked Deal for his position on a Georgia rape shield law during Deal’s tenure in the state Senate.
Down the ballot, Republicans are poised to turn an already Red state an even deeper shade of Red. U.S. Senator Johnny Isakson is heavily favored over Democrat Michael Thurmond whose candidacy has not generated traction. SurveyUSA shows Isakson ahead by 24% and Rasmussen has Isakson ahead by 15%. The incumbent Isakson raised some $9.1 million and Thurmond raised less than $300,000.
Republicans currently hold seven of the state’s 13 congressional seats. Three Republican incumbents are unopposed and Republicans are favored to retain the other four seats. Two incumbent Democrats are also in the GOP sights, Jim Marshall in central Georgia and Sanford Bishop in southwest Georgia.
The 62-year-old Marshall is running an 8th Congressional District toss-up race against 40-year-old Republican state legislator Austin Scott. Marshall is a four-term economic conservative who supports extension of the George W. Bush tax cuts. The former Macon mayor also has strong military credentials and he has been a strong advocate for Robins Air Force Base but all of that aside, Marshall might be swept away by anti-Democrat, anti-incumbent sentiment.
Republicans also believe they can prevail in southwest Georgia’s 2nd Congressional District where state legislator Mike Keown will try to unseat nine-term Democrat Bishop. The congressman might be hurt by recent reports that Bishop steered congressional caucus scholarship money to his own family.
Republicans will continue to hold solid state Senate and House voting majorities after next Tuesday. The party fielded strong candidates in eight other contested statewide office races. Democratic incumbents are not seeking re-election in three of those eight races.
Much less certain is how Georgia voters will respond to a ballot measure that would fund statewide trauma care expansion by imposing a new $10 annual fee on nearly all privately owned vehicles.
The business community, the hospital industry and a wide range of Republican and Democratic leaders support the new fee. But some recent sentiment suggests voters are not much interested in new fees and taxes, even though large sections of Georgia have little or no available trauma health care. Business leaders launched Yes2SaveLives.Com to support the trauma care measure.
Mike Klein is Editor at the Georgia Public Policy Foundation.
Karen Handel: Enact Performance Pay for State Government Employees
A rejuvenated and re-energized Karen Handel said Friday that all state government employees should be subject to pay-for-performance standards. Her comment created applause when Handel addressed a Pocketbook Politics luncheon at Kilpatrick Stockton in midtown Atlanta. The luncheon was a rare public appearance for Handel since she barely lost the Republican nomination for governor to Nathan Deal.
Handel was replying to an education question when she said, “I think a performance based approach for teachers is appropriate… People should be judged on how they do their job… The private sector does it. If the private sector can get to it, we could get to it… And I’ll tell you this, if it’s good for teachers, it ought to be good for all the state employees.”
Handel also told 75 luncheon guests the state should make certain that programs created with Race to the Top education grant dollars do not become an unfunded mandate. Race to the Top is a federal grant program that will provide $400 million to Georgia in four equal installments that begin this year.
“Let’s make sure that we don’t put in place programs that are ongoing expenditures to the budget that are being funded by one-time dollars,” Handel said. “If you do that, then all of a sudden two, three years down the road, when the Race to the top Dollars are gone, you have a big hole and how are you going to fill that?” Handel is a strong advocate for charter schools.
Handel admitted to being “amused” that a large contingent of Atlanta media were in the room. She endorsed the Republican Party ticket, without ever once mentioning Nathan Deal by name, and Handel made clear she strongly believes former Governor Roy Barnes would be an unacceptable choice.
She took a swipe at Barnes, asking, “Who do you want making the judicial appointments in this state? What if a vacancy opens up on the Georgia Supreme Court? Who do you want making that appointment? And, heaven forbid, what if something should happen to one of our fine U.S. senators? Who do you want making that appointment?”
Handel did no media interviews and she left through a side entrance that enabled her to avoid the clutch of reporters waiting near the main elevator. She did take audience questions. One of those questions referred to the Georgia Tax Reform Council that is working on writing a new revenue plan.
Handel commended the Council for seeking local opinion. She supports moving toward consumption-based taxes and less reliance on business and income taxes revenue. “I would hope that’s a direction that they would go. But remember folks, that’s just a first step. The real heavy lifting will be convincing to the people of this state.” She added, “It’s important to show people what they will be getting.”
Handel has avoided public spotlight since her August primary run-off defeat. “I have transitioned from ‘Bring It On!’ to ‘Live a Little, Love a Lot and Have Some Fun!’ And I’ll tell you, I recommend it for each and every one of you from time to time. What you’re going to find is it’s going to leave you rejuvenated, re-energized and absolutely ready to take on whatever is next with even greater determination.”
Karen Handel has exited the stage for now, but it sounds like she won’t be gone for long.
Mike Klein is Editor at the Georgia Public Policy Foundation.
Tri-State Water War: Deal Dings Florida, Barnes Suggests Down Under
Not surprisingly, business themes dominated the conversation when gubernatorial candidates Roy Barnes and Nathan Deal addressed a sold-out luncheon audience Wednesday at The Commerce Club in downtown Atlanta. This article will focus on discussion of the tri-state water wars. Later articles will discuss their comments on education, transportation and health care.
There was also a touch of humor Wednesday when moderator Jeff Hullinger asked the candidates how to help Georgia Bulldogs football coach Mark Richt. But more on that later.
Georgia, Alabama and Florida are at odds over water that flows through Georgia to the two other states. The issue has been in litigation for several years and in dispute for decades. Currently, the three states are under a federal court order to resolve their water war within two years or the issue will be settled in Congress. A federal judge has ruled that Atlanta cannot use Lake Lanier as its water supply and that is the central part of what this argument is all about.
Deal, who served nine terms as a Republican congressman, said Georgia’s water crisis is not likely to be favorably solved in Washington until governors in the three states demonstrate they can create the solution. With an eye on Florida participation in water talks, Deal said, “Quite frankly, I don’t think they have been very engaged in the process.”
Deal has proposed construction of four or perhaps five new reservoirs across north Georgia, dredging Lake Lanier which has lost about 18% capacity due to silt, new investment to repair aging water systems, continuation of new conservation measures and returning more treated water to river basins.
“In the short term Georgia needs to do everything we can,” Deal said. “The starting point was conservation legislation the General Assembly passed this year. If we’ve done these things and time runs out on us, and we have to go back to the court and ask for either an extension or an alternative ruling on the original issue, we’ve at least shown clean hands, we’ve done what we can do in the time frame we’ve been given. It is a multiple approach that we have to take.”
Barnes, the former Democratic governor who wants his old job back, said, “We don’t have anything to negotiate with. What are we going to give up? We’ve lost the case. This idea that, you know, all the governors are going to hold hands and sing kumbayah and its going to be settled, it’s fantasy. We have to show, before this matter is ever resolved, we have to show that we can solve it ourselves without having to beg Florida or Alabama.”
During his first administration that ended in January 2003 Barnes proposed creation and funding for 17 reservoirs positioned across north and west Georgia. That plan did not go forward under Governor Sonny Perdue. Barnes said aging water systems lose between 15% and 40% due to leaks. Rebuilding local water systems will cost hundreds of millions of dollars and process will be lengthy, many years. He believes it is partially, a state responsibility and Barnes says this project is too large for communities to go it alone.
Like Deal, Barnes proposed expansion of existing reservoirs. The former governor described himself as “intrigued” by underground water storage, similar to how Florida stores fresh water. He said expanding aquifers likely would not require the same federal approval process that is associated with new reservoir construction.
On a lighter note, moderator Jeff Hullinger closed the luncheon by asking both candidates if they had any advice for UGA football coach Mark Richt. Only Barnes answered, and with his own question: “Is Vince Dooley still alive?”
Mike Klein writes about contemporary issues as Editor at the Georgia Public Policy Foundation.
Barnes, Deal Education Agendas Should Emphasize Online Learning
Education agendas proposed by Georgia’s two major candidates for Governor leave wide open a hole that any running back would appreciate. Nathan Deal and Roy Barnes put forward plans that give only slight mention to online education. That misses a significant education priority for Georgia children.
Georgia’s candidates have the opportunity to take a bold step. They could declare Georgia will become a national leader in online education offered by the Department of Education. They could say every high school student will participate in at least one online course each semester. They could say it will happen within their first term. Georgia is a long way from being able to provide those resources, but Georgia can get there. One of them could make it happen. Continue reading
Roy to Nathan to Karen … Who’s Gonna Put Us Back to Work?
Georgians can safely bet the farm their next governor will say he or she can put Georgians back to work.
One candidate is a former governor. One was investigated for allegedly trying to influence lucrative deals that would directly benefit him and a business associate. One is Georgia’s former secretary of state who proved a strong woman really can break through the glass ceiling without going to college.
Democratic nominee Roy Barnes is a multi-millionaire trial attorney. He served a single four-year term as governor but his reign ended when Barnes was upset during his 2002 re-election bid. The governor alienated teachers during his tenure but now Barnes is campaigning as their friend. Barnes is a fiscal conservative who is media savvy, a masterful speaker and he has the state’s largest war chest. Continue reading
Michael Thurmond Prepares For His Biggest Political Challenge
Michael Thurmond will soon either make history, or perhaps see his political career wash away.
A source familiar with his plans says the Democratic Labor Department commissioner will enter the U.S. Senate race in an announcement expected Wednesday. Thurmond will be the favorite in the July primary against one political novice, setting up a November race against Republican incumbent Johnny Isakson. Thurmond will spend the weekend at home in Athens discussing this with family.
Thurmond against Isakson for a U.S. Senate office could eclipse the state’s gubernatorial race in media attention, voter interest and potentially, millions of dollars raised and spent. A victory over the popular and respected Isakson would make him an instant national political celebrity. A source close to Isakson said Thurmond “would be swimming in a pool beyond his depth.” Thurmond has run three successful statewide campaigns but nothing with the intensity, political knifing or media scrutiny of a United States Senate race. Continue reading
Losing Job Leaves Colleague “Feeling Bruised”
This past week two more colleagues joined the half million plus Georgians who are out of work. They toiled for big companies, Coca-Cola and the Atlanta Journal-Constitution, who apparently have not heard we are in an economic rebound made possible by the Barack Obama administration.
They entered the ranks of newly laid off professionals the same week the White House admitted the inevitable: Official unemployment will remain around 10% nationally all year and that is not good news for any politician, Republican, Democrat or Tea Party. One told me she is “feeling bruised.”
Perhaps they are just a bit fortunate. Now they can reinvent. Think about all the poor folks back in the office who sit around all day, fearful someone has painted a target on them. The best part is they no longer have to get up in the morning and wonder, is this the day they send me home? Continue reading
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