Budget director: Georgia should continue to use COVID-19 relief funds to repay federal unemployment loans

(The Center Square) – Georgia Budget Director Kelly Farr said Thursday the state should continue to use its Coronavirus Relief Fund (CRF) to stabilize its unemployment trust fund.

Facing a record number of unemployment claims because of COVID-19 shutdowns, Georgia nearly depleted its $2.5 billion trust fund by August. The state has had to borrow more than $1.1 billion from the U.S. Department of Labor to continue paying the unprecedented number of Georgians who filed jobless claims.

Farr said those federal advances could turn into a tax burden for Georgians. Gov. Brian Kemp directed $1.5 billion in federal CRF funds in October to help the Georgia Department of Labor (GDOL) repay the loans.

“Unless we continue to leverage the CRF to repay advances as they are incurred, the state will otherwise be forced to rely on increased [unemployment insurance] taxes for Georgia to repay these federal loans, while covering any interest on those loans directly through our state budget,” Farr told the House and Senate’s Joint Appropriations Committee.

Congress earmarked $4.1 billion in direct aid for Georgia in the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was signed by former President Donald Trump in March.

Large municipalities received a total of more than $600 million directly from the federal government. The state reported transferring about $370 million to smaller local governments. States had until the end of 2020 to use the funds for COVID-19 recovery efforts before the federal government granted an extension until December 2021. There is about $440 million remaining in the CRF, Farr said.

The GDOL has used about $994 million in CRF funds to repay the federal advances to replenish the state’s unemployment trust fund, Farr said. As of last week, the GDOL had paid about $4.2 billion in state unemployment benefits since March 21 – more than the past nine years combined, officials said.

Georgia faced similar circumstances during the Great Recession and borrowed $1 billion from the federal government to continue to pay benefits to 10.4% of the labor force that was unemployed. It took about five years to repay the loan and interest. Interest is usually paid from the state’s general fund, which could lead to higher payroll taxes.

Georgia has regained 82% of the jobs it lost at the beginning of the pandemic, officials said Thursday. Georgia’s unemployment rate increased from 3.1% in February to 11.9% in April. In December, Georgia’s unemployment rate was 5.6%, GDOL Commissioner Mark Butler said.

“December is yet another month where we have seen job growth throughout the state,” Butler said. “We more than doubled our job growth from November, which is very promising, considering how challenging of a year this has been.”

Besides unemployment benefits, Georgia’s highest COVID-19 expenses were public health and medical costs. Farr said the state spent about $350 million on staff support for local hospitals and medical facilities. More than $300 million was spent on personal protective equipment, Farr said. Georgia also spent CRF funds on payroll expenses for first responders and government employees, distance learning and remote work, according to its CRF financial report.

Because of revenue shortfalls and the uncertainty surrounding the pandemic, Kemp directed budget writers in June to reduce spending in fiscal year 2021. Farr said the state would not have a full scope of its economic standing until the end of tax season. The general revenue fund estimate is about 2.5% below the revenue the state received in fiscal year 2020, and the fiscal year 2022 estimates reflect a 3.7% increase in revenue.

“We do expect refunds to be substantially higher this year as a result of individual job losses and corporate profit losses,” Farr said. “As a result, we will not know where we stand for this fiscal year until the end of May.”

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