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District Faces State Assessment for Unemployment Fund

The national recession and relatively stagnant economy has hit Americans hard. Stubbornly high joblessness has also devastated the New York State Unemployment Fund, which has borrowed more than $3 billion from the federal government to pay benefits to out-of-work residents.

The American Recovery and Reinvestment Act, better known as the federal economic stimulus program, gave states with insolvent unemployment trust funds interest-free loans in 2009 and 2010 in order to provide for the uninterrupted payment of benefits to qualifying jobless workers.

However, Congress declined to extend the interest-free loan program to 2011. New York now owes $95 million in interest on the federal unemployment insurance loans. The bill must be paid by September 30.

"In order to pay the interest due for 2011 on these federal loans, New York State is required by state law to assess a temporary charge on employers called an 'interest assessment surcharge,'" according to a notice sent to employers by the New York State Department of Labor. "Should Congress extend the interest-free loan provision, we will either credit your account or refund the money paid out."

The interest rate has been set at 0.25 percent of each employer's total taxable wages in the most recent payroll year – October 1, 2009 through September 30, 2010. "Therefore, the maximum amount that most employers will be assessed is $21.25 per employee," according to the state notice to employers.

David H. Grackin, the Huntington School District's assistant superintendent for finance and management services, said he reviewed the state memo with the district's unemployment insurance consultant.

"I have done an initial calculation and this bill will amount to something in excess of $15,000," Mr. Grackin said. "This is obviously a surprise to everyone in the industry, as well as to employers. Of course, we are compelled to pay this, although it is something that we had no prior indication of during the 2011/12 budget process."

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