Unemployment debt savings

Nevada owes the federal government more than $700 million, borrowed to cover the unexpectedly high cost of state unemployment benefits since the start of the Great Recession.

In June, the state Board of Examiners agreed to pay $62.6 million to the Labor Department to cover interest payments to date. Nevada's initial interest rate on the debt was 4.9 percent. The rate declined to 2.94 percent in fiscal 2012-13, and it is expected to be 2.5 percent in the 2013-14 fiscal year.

So when the Nevada Legislature convenes in February, it's expected to consider a measure granting the governor authority to approve the issuance of unemployment compensation revenue bonds to pay off about $688 million of the state's remaining debt to Washington. (The state borrowed money to cover its share of benefits, which run up to 26 weeks. The federal government picked up the full cost of extended benefits, which ran up to 99 weeks.)

Nevada Treasurer Kate Marshall predicts Nevada should be able to sell bonds at a rate below 2 percent. Capital from bond buyers would be used to retire the federal debt immediately, saving the state millions of dollars in long-term interest costs.

Other states have led the way. In August 2011, Idaho sold roughly $200 million in unemployment revenue bonds, a decision that reduced its interest rate from 4.1 percent to less than 3 percent. By paying off the debt all at once - the other option was to raise unemployment insurance premiums - Idaho expects to save its employers $157 million by the time those bonds mature in August 2015.

In June, Colorado Gov. John Hickenlooper signed a bill authorizing the sale of bonds to refinance Colorado's $435.2 million in unemployment debt. The bonds were sold at 1 percent - a considerable savings from the 3 percent that Washington had been charging the Centennial state.

And last month, Pennsylvania issued $2.6 billion in unemployment compensation revenue bonds to cut $100 million off its interest bill.

Nevada's state Employment Security Council recently recommended a 12.5 percent increase in unemployment taxes on Nevada employers for fiscal year 2013. Such a tax hike presumably would allow Nevada to pay off its debt by 2016 without issuing bonds.

But if the solution is to slap higher taxes on our remaining, struggling businesses, how on earth is that supposed to spur new job creation? An added tax burden is bound to affect those fortunate enough to still have jobs through stagnant wages and, possibly, more rounds of Layoff Roulette.

Ms. Marshall says the Legislature should look "very seriously" at giving "themselves the flexibility to consider selling these bonds," before the state rushes to raise taxes on businesses to pay off the debt. Lawmakers and Gov. Brian Sandoval should follow her advice.