By Andrew Doughman, Nevada News Bureau: Nevada state legislators may catch a break under a debt-relief proposal from President Barack Obama.
Obama has proposed deferring interest payments on money the states have borrowed to pay unemployment insurance benefits.
The federal government began to charge interest on those loans this past month. Gov. Brian Sandoval included $66 million in his proposed budget to cover the 4 percent interest Nevada would owe during the next two years.
Suspending interest payments would mean the governor appropriated $66 million to make payments that the state would no longer owe during this budget session. Legislators would be able to redirect the $66 million to restore cuts Sandoval proposed, or they could cut it from the budget, reducing state spending.
Obama has yet to release his proposed budget, but the Washington Post reports that the plan has a catch.
Starting in 2014, the proposal would require states to increase the portion of workers’ wages subject to the unemployment insurance tax from $7,000 to $15,000. This is a tax that employers pay.
The proposed moratorium on interest payments does not appear to cancel any debt outright.
Nevada’s unemployment benefits reserves were $757.5 million during August, 2008, but the state quickly drained these funds as the recession worsened.
Nevada now owes the federal government $645 million for the money it borrowed to pay out unemployment benefits.
Nevada’s unemployment rate is still the highest in the nation at 14.5 percent, and the fund currently pays out regular unemployment benefits to 50,000 Nevadans.
Following a meeting today, Sandoval said it is to early to comment on the proposal because he has not analyzed the long-term effect of the plan.