The Arizona Department of Economic Security will borrow $200 million on the private lending market to pay off loans from the federal government to cover unemployment benefits, the agency said Monday.
The private-sector borrowing is at lower rates than the federal government charges, DES officials said in a press release. It said the move will save the state and its employers in two ways:
Private-sector interest rates are lower and thus the state will pay $670,000 less in interest on the borrowing, which is scheduled to be repaid in eight months.
Because the money will be paid back to the federal government, it won't raise unemployment insurance rates on the state's employers, saving them $100 million in 2014.
The state had to borrow from the federal government starting in 2010 when its unemployment insurance trust fund was depleted as the state's unemployment rate soared past 10 percent. An estimated 300,000 Arizona jobs were lost in the recession.
Arizona will issue tax-exempt securities later this week to pay off the debt to the federal government, the press release said.