JEFFERSON CITY -- On Thursday, the General Assembly approved legislation sponsored by Sen. John Loudon, R-West St. Louis County, designed to make Missouri's Unemployment Compensation Trust Fund solvent.

Among the provisions of Senate Bill 2, the state would have an alternative to borrowing from the federal government to cover shortfalls in the unemployment insurance fund.

"Federal law requires this coverage, which is financed by employer-paid premiums," said Loudon. "If state reserves become depleted, the federal government lends revenue to the state, which is repaid by a 30 percent surcharge on employer premiums. The bonding provision gives us an alternative."

The federal government charges approximately 6 percent interest on these loans. The rate on the bonds is estimated at between 2.5 and 3.5 percent.

According to Loudon, by using the bonding approach interest costs would drop by half, sparing consumers and businesses the additional expense the employer surcharge would entail.

The state has already borrowed $10 million and is expected to need $100 million by year-end. The state debt could grow to $300 million if the legislature fails to act.

"The major function of this bill is that employers are stepping up to the plate with $100 million per year of new funding," said Loudon. "In exchange, the bill reduces some of our more liberal payouts. A worker fired for misconduct would have to get another job in order to be eligible for benefits in the future. This brings us in line with 40 other states. Our current system provides for a minimal penalty and then these problem employees are entitled to benefits."

The reform is expected to save the system $50 to $100 million annually.

This legislation has the backing of a number of Missouri's business organizations, including Associated Industries of Missouri and the National Federation of Independent Businesses.

Other provisions contained in this bill:

• Requires on a monthly basis the Division of Employment Security cross check Missouri unemployment compensation recipients against available federal and state databases containing wage information.
• Changes existing law making the waiting week prior to receiving unemployment benefits never compensable. Under current law the waiting week is compensable after the ninth compensable week.
• State departments, divisions and agencies that fall under the purview of the Wagner-Peyser Act will have the power to contract with private entities for the purpose of providing employment and reemployment services.

Having been passed by the General Assembly, SB 2 will be sent to the governor for his signature.