Refinanced bonds will save Pa. employers $552M in 2020

Pennsylvania businesses will save an estimated $552 million in 2020 now that the state has finished refinancing 2013 federal loans that paid for the post-recession unemployment compensation fund.

Effective Jan. 1, 2020, the state Department of Labor and Industry slashed the 1.1% tax rate interest factor, reducing the unemployment tax rate to its lowest level since 1979. The interest rate of 1.1% was set in 2013 by Act 60 of 2012, to refinance bonds that funded state unemployment benefits at the lowest possible rate of interest, saving employers an estimate $57 million in interest costs during the last seven years.

Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, said the 2008 recession put the state’s unemployment compensation fund in “financial crisis,” which forced the state to borrow money from the federal government in the form of bonds. Pennsylvania’s businesses will be relieved now that one of the country’s highest unemployment tax rates has been removed from their expense line, he said.

“We were proud to work with a bipartisan coalition of legislators and the [former Gov. Tom] Corbett administration to shore up this critical safety net and refinance the federal loan, which employers were still responsible for paying off, but under more favorable terms,” Barr said. “We are pleased employers can start off the New Year with a lower unemployment compensation tax rate and thank Gov. Wolf for recognizing the need to drive down business costs in PA.”