The state Department of Labor and Industry said today it has saved at least $150 million for employers through a better-than-expected interest rate on its $3.2 billion unemployment compensation bond sale that it completed Thursday.
“Even with interest rates near an all-time low, this rate is exceptional,” Labor & Industry Secretary Julia Hearthway said in a statement. “Borrowing at this rate is comparable to refinancing a mortgage at a ridiculously low rate. Who wouldn’t want to pay off a mortgage at a 1.29 percent interest rate?”
The state had expected to save about $100 million over seven years on the bond sale, the department said earlier this year, when it owed about $3.9 billion to the federal government for UC benefits.
The state paid down the debt to $2.8 billion once the majority of tax revenue came into the state, said Kirk Basehore, a Labor and Industry analyst. The total $3.2 billion in bonds covers that debt, the costs to issue it and benefits through the rest of 2012, which prevents the state having to borrow again, he said. It also includes a $75 million bond reserve.
The bond sales were part of a comprehensive UC reform bill in June that included reduced weekly maximum benefits and limited who could receive benefits based on the amount of severance.