State repays $600M in debt
November 26, 2013
Using money generated by selling bonds, the state has now paid off its unemployment insurance debt to the federal government — a total of more than $600 million.
Using bonds will save Nevada employers an estimated $24 million, Employment Security Division Administrator Renee Olson said.
"Because the cost of borrowing was reduced, employers will see their tax rates stabilize over the course of the bond-repayment period," Olson said. "What's more, while the state was paying about 2.5 percent interest to the federal government, the bond interest rate is less than 1 percent."
At the peak of the recession, borrowing to pay benefits ran up a debt of $846 million owed to the federal unemployment trust. As the economy began to recover, ESD used employer assessments to pay back well over $200 million of that. In addition to the higher federal rate, Olson said, every year the state owed the federal trust money, the federal unemployment tax rate would increase three-tenths of a percent.
In October, the state Board of Finance granted ESD authority to issue up to $650 million in bonds to pay the debt immediately. The state ended up needing $612 million to get it done, Olson said.
Now that the debt is paid, the federal rate drops from 1.2 percent back to six-tenths of a percent.
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In addition, Nevada is charging employers 2.1 percent of payroll to rebuild the state unemployment insurance trust.
The Employment Security Council will review that rate and decide where to set the assessment at its next meeting.
The bonding idea was proposed in the 2011 Legislature by Treasurer Kate Marshall, but Gov. Brian Sandoval and lawmakers failed to approve the statute change to make that possible. Instead, they paid the interest — a total of more than $45 million over the biennium — from the state's general fund.
This past legislative session, Sandoval and lawmakers agreed with Marshall's bonding idea and changed state law to make it possible.