President Barack Obama is considering seeking aid for state unemployment-insurance programs burdened by debt because of high jobless rates, according to a person familiar with the discussions.
As part of the 2012 fiscal budget, Obama will seek a delay of state tax increases and a suspension of interest payments owed to the federal government, the person said on condition of anonymity before the budget is released next week.
Under existing law, some states would be required to raise taxes next year because of federal rules covering shortfalls in unemployment-insurance funds. Obama is proposing a moratorium on those tax increases and interest payments in 2011 and 2012, the person said.
States, led by California, Michigan and Pennsylvania, have borrowed $42 billion from the federal government as of Feb. 4 because their unemployment trust funds have run out of money, according to the Labor Department. From 2009 until this year, the loans had been interest free under a provision of the economic-stimulus program.
U.S. states face budget deficits of at least $125 billion next fiscal year and have responded with proposals to cut education, healthcare and other programs, according to the Center on Budget and Policy Priorities. Every state except Vermont is constitutionally required to balance its budget.
The nation’s unemployment rate was 9 percent last month, down from a high of 10.1 percent in October 2009. The rate has been at 9 percent or higher for almost two years. State and local governments cut 12,000 workers from payrolls last month, according to the Labor Department’s Feb. 4 jobs report.
Obama will also propose raising the federal minimum level at which income is taxed for unemployment insurance to $15,000 in 2014, the official said. The current level is $7,000, although most states exceed the required amount.
Obama will send his multitrillion-dollar budget for fiscal 2012 to Congress on Feb. 14. The document will put into precise language the administration’s priorities for increasing economic growth and creating jobs.
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