In less than two months, Pennsylvania has saved more than $12 million on its unemployment compensation debt through interim refinancing.
The commonwealth worked with Citibank to clear its debt to the federal government, Gov. Tom Corbett said Wednesday. In late September, Pennsylvania will go to the bond market to permanently finance the debt and repay Citibank.
Pennsylvania had owed about $3.9 billion to cover unemployment benefits during the recession. In June, Corbett signed a bill that allows for the bond issuance with hopes of getting the state’s unemployment compensation fund solvent by 2019.
Through the bond issue, Pennsylvania does not take on new debt. The debt will be paid through employers who pay state unemployment compensation taxes.
A low fixed interest rate on the bonds could save employers about $175 million to $200 million, state officials said.
A major part of the reform included eligibility changes.
Workers who made 50.5 percent of their annual income or more in one quarter are no longer eligible for benefits under the new law — a change from the 63 percent limit. The maximum weekly benefit has been frozen at $573 through 2019.
The eligibility change is expected to affect less than 10 percent of the unemployed and save the system $276 million annually, state officials said. “As a result of UC reform and this refinancing, Pennsylvania businesses will be left with more to reinvest in growth and new job creation, and that means a stronger state economy,” state Department of Community and Economic Development Secretary C. Alan Walker said in a statement.