Week In Review

State Capitol Week in Review

LITTLE ROCK – One of the most difficult issues facing legislators in the upcoming regular session will be how to restore the state's unemployment trust fund.

The fund pays unemployment insurance to workers who have lost their jobs, and because of the severity of the economic downturn the number of unemployed Arkansans is much greater than usual.

The unemployment rate in Arkansas was 7.8 percent in October, slightly higher than the 7.7 percent rate in September. Nationally the jobless rate was 9.6 percent.

According to the state Department of Workforce Services, more than 104,000 Arkansas workers are without jobs. The civilian labor force in Arkansas is 1,344,600.

At the beginning of 2007 the unemployment trust fund was in relatively good financial shape with $160.9 million. Businesses pay a tax that builds up the fund. In recent years the amounts paid into the fund have been less than the amounts paid out by the fund to unemployed workers.

The amount in the trust fund fell to $142.8 million by the beginning of 2008 and it continued to drop as more Arkansans lost their jobs and qualified for unemployment insurance. Last year the fund was depleted and the state had to rely on a provision in federal law that allows it to borrow from the federal government.

The state trust fund is now more than $331 million in debt to the federal government, and it's estimated that the deficit will soon reach $450 million. Other states are in similar difficulties, and some are in even deeper holes.

Some officials in other states are hoping that the federal government will forgive the debt, but Arkansas business and government leaders don't expect that to happen.

In fact, Arkansas officials say that there is a need for urgency because if we don't take action there is a good chance the federal government will impose a solution that would be much more expensive for the business community.

The solutions that have been talked about include a reduction in benefits paid to jobless workers, as well as increases in the taxes paid by businesses into the trust fund. Labor organizations strongly oppose the idea of reducing unemployment benefits, and businesses strongly oppose the idea of raising taxes. Therefore, negotiations between the two sides have been moving slowly.

Legislators and the governor would prefer that business and labor reach an agreement on their own, and bring it to the General Assembly for ratification during the session that begins January 10.

Tax Credit for Single Parents

HB 1016, a bill to provide tax credits for single parents has been pre-filed in the House. It would correct an oversight that occurred in 2007 when the legislature granted tax relief to low income families, but inadvertently omitted single parents. The tax credits would be for parents with two or more children.

If enacted, it's estimated it would provide tax relief of about $3.6 million a year for low-income parents.

Another tax relief proposal that will come up in the 2011 session is the governor's plan to reduce the sales tax on groceries of half a cent. It would provide about $20 million a year in savings to taxpayers.