Louisiana governor, Legislature want to avoid unemployment program changes

Edwards suspended a business tax connected to the unemployment fund 

Louisiana Capitol Building
Photo by Julie O'Donoghue

Gov. John Bel Edwards and Louisiana’s legislative leadership are looking for ways to avoid the consequences of draining the state’s unemployment trust fund, which is set to run out of money Oct. 5.

Senate President Page Cortez, R-Lafayette, and House Speaker Clay Schexnayder, R-Gonzales, used a procedural vote to block official recognition of the unemployment trust fund’s meager balance Friday. Their move prevented a new round of business taxes and unemployment benefits’ cuts scheduled for 2021 from being formally set in motion. 

Separately, Gov. John Bel Edwards announced that he was suspending one of the same business taxes from taking effect in the first half of 2021 as well. Republican lawmakers — who are often at odds with the Democratic governor — had been considering suspending the same tax when they go into a special session Monday evening.

Everyone is in agreement that the state needs to find a way to backfill its depleted unemployment fund, which pays for residents’ unemployment benefits. Prior to the COVID-19 pandemic, the fund stood at over $1 billion. But after months of record-breaking unemployment, it’s dropped to just $49 million.

State law requires Louisiana to automatically stem that financial bleeding. The fund’s low balance should trigger a cut in unemployment benefits  next year — from a maximum of $247 to $221 per week. Business taxes and charges also automatically go up. Different employers face different amounts of penalties. 

Louisiana is also planning to borrow $200 million per month for the next six months from the federal government. When its trust fund completely runs out of money, it has to continue to pay out benefits under federal law. So the loan is required.

Lawmakers and the governor seem particularly concerned about the burden that higher taxes and charges might place on businesses that are already struggling during the pandemic. Cortez referred to the depletion of the unemployment trust as “the most important issue we have to solve” during a meeting Friday.

But the state doesn’t readily have hundreds of millions of dollars to replenish the fund and thereby avoid the triggers for higher business taxes and unemployment benefits cuts.

Gov. John Bel Edwards suggested Friday that the Legislature reallocate $175 million from a business COVID-19 relief fund set up by lawmakers — called the Main Street Recovery Program — to the unemployment trust fund. Several Republican lawmakers privately said earlier in the week they would also be looking at this funding as a potential resource for the unemployment trust fund.

But Republican State Treasurer John Schroder, who is in charge of Main Street Recovery, balked at the suggestion.  He said that information on his website indicating that at least $175 million of the $275 million program might still be available was inaccurate. He had publicly downplayed how much money had been spent out of the fund so that people wouldn’t get discouraged and not apply for the program, Schroder said. The treasurer said he expected to run through all of the money available by the end of the year.

“It’s hard to get to zero but I think we’ll get pretty close,” he said.

Following Schroder’s objections, Cortez and Schexnayder seemed uninterested in shifting money from that business grant program, but that leaves the Legislature with fewer options. The Edwards administration doesn’t expect any of the COVID-19 relief funds that have been allocated to local governments — close to $500 million — to be left over either.

A few lawmakers have floated the idea of borrowing money — possibly through selling bonds — to help replenish the trust fund, but no borrowing strategy has been publicly released yet.