If Michigan did not have $3.3 billion to pay out unemployment benefits from 2006-2009, exactly how do you suppose it has enough cash in 2011 to pay 2011 unemployment benefits plus the $3.3 billion short term federal loan for the 06-09 benefits!?!
It doesn't. Hence the $3.3 billion variable-rate bond auction can-kicking exercise.
Surely Michigan will have the funds to pay back these $3.3 billion in VARIABLE-INTEREST RATE bonds, right?
This is a debt death spiral that over 1/2 of the states have entered. The states' fiscal situation is parallel to the PIIGS, but unreported by the MSM.
Michigan, whose joblessness led the nation during 2006-09, will issue $3.3 billion of variable-rate bonds -- its largest-ever sale, according to treasury officials -- to repay federal unemployment-benefit loans.
The two-year bonds underwritten by a unit of Citigroup Inc. (C) were selling at a yield of 0.24 percent, said Tom Saxton, deputy state treasurer. That compares with estimated 3 percent interest on federal loans next year, Saxton said. Repaying the U.S. government by Dec. 31 will save as much as $100 million in interest and avoid federal penalties, he said.
“This is a good deal for the employer community,” he said.
The sale through the Michigan Finance Authority closes today. The state joins Texas and Idaho in tapping debt markets to repay unemployment loans after the 18-month recession that ended in June 2009. Michigan’s 9.8 percent jobless rate in November marked the first time in two years it’s been below 10 percent. The national rate for November was 8.6 percent.
Twenty-seven states and the Virgin Islands owed the federal unemployment trust fund a combined $39.3 billion as of Dec. 22, according to the U.S. Department of Labor. California owes the most, $9.7 billion, followed by New York and Michigan.