Pennsylvania Bill Would Let Bonds Pay for Unemployment Debt

Pennsylvania’s House of Representatives on Wednesday passed a bill allowing the state to borrow up to $4.5 billion in a bond issue to pay off lingering unemployment compensation debt. Gov. Tom Corbett has said he would sign the measure, which he anticipates will make the state’s unemployment-compensation fund solvent by 2019. The economic downturn and the insolvency of the unemployment compensation trust fund have forced the borrowing from the U.S. Department of Labor to pay for the benefits. Pennsylvania law now has no provision that permits bond issuance to pay off the loan advances to the fund. More states are issuing bonds for this use, taking advantage of lower interest rates. “I expect you’ll see more of these deals in the coming months,”said LPL Financial market strategist Anthony Valeri. “From a credit perspective, you’re exchanging one form of debt with another, so you’re not adding debt per se, but you’re locking in a lower interest rate. State revenues are higher, but their budgets are still under stress, so why not save money?”  –  Bond Buyer

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