A House subcommittee yesterday approved an expansion of the federal revolving fund that enables hard-hit states to keep paying unemployment benefits, even as a chorus of governors was telling another subcommittee that they cannot afford the interest payments on money they already have borrowed from the fund.
The Appropriations subcommittee unanimously approved an addition of $5 billion to the existing $6.8 billion unemployment trust fund, the "bank" from which high-unemployment states borrow to keep unemployment benefits flowing.
The expansion bill is expected to be approved quickly by the full committee, and could become a vehicle for other Democratic proposals to relieve unemployment.
In another hearing room nearby, meanwhile, Govs. James J. Blanchard of Michigan and Richard L. Thornburgh of Pennsylvania, among others, told a Ways and Means subcommittee that they are in urgent need of relief from the interest charges on their unemployment trust fund debts.
Pennsylvania owes the government $100 million in interest for its $1.1 billion loan from the fund this year alone, Thornburgh said. If the system is not changed, he added, "We estimate that Pennsylvania will have to pay more than $2.5 billion in interest on our federal loans by 1989."
Michigan has borrowed $2.3 billion from the federal government since 1980 to maintain its jobless benefits, Blanchard said. "Our interest charges are currently $216,000 per day."
The target of the governors' frustrations is a law enacted in 1981 which for the first time requires states to pay interest charges on trust fund borrowings. It was designed to encourage profligate states to get their own systems in order, by some combination of raising taxes or lowering benefit levels.
The governors argued that under current economic conditions, which the federal government failed to foresee and which are beyond the states' control, this system is "harsh and punitive" to areas of high unemployment. They urged that the interest payments, as well as related penalty taxes against employers, be suspended under certain circumstances.
The governors described the efforts they had made to reform their states' benefits systems, both among the most generous in the nation, acknowledging that, as Thornburgh put it, part of the problem was due to "state inattention" during the 1970s. The concept of the 1981 law, he said, "makes sense in normal times."
Labor Department official John F. Cogan had told the panel earlier that the administration is examining the causes of the solvency problem in the system and that it has no position on the question of deferring payments.
With subcommittee sources concurring, he said there was no truth to a news service report that quoted him as saying the administration might consider forgiving the interest charges to hard-hit states.
"The administration is adamantly opposed to forgiving any unemployment loans or interest," he said yesterday.
Some 30 percent of interest payments due from states in 1984 already are to be deferred, he added.
The most the governors can hope for is some temporary relief from the interest charges, possibly in the form of deferral, said a subcommittee aide. Subcommittee members indicated that the formula might limit such deferrals not only to the hardest-hit states but also to those that have taken steps to reform their own systems.
The package also is expected to include an extension of federal supplemental compensation for the long-term unemployed, the aide said.