Virginia Doesn't Want $125 Million in Federal Stimulus Money

If you were offered $125 million would you turn it down? That's what happened this month when the Virginia Republicans voted to reject $125 million in federal stimulus money to help fight unemployment. This wasn't a slim victory – in fact the House voted 53-46 to reject Virginia Governor Tim Kaine's proposal which would extend unemployment benefits.

The Virginia legislators were the first in the country to override a governor's decision for stimulus money. The Democratic Party of Virginia who have the majority, and pushed for the proposal, expressed their distaste for the results in the following statement:

"Unfortunately, Virginia families will pay the price for today's political decision by Virginia Republican leaders to block federal stimulus funds," said Jared Leopold, communications director for the party. "Yet again, House Republicans have chosen to play political games rather than deliver results for Virginians who are suffering through this tough economy."

"Bob McDonnell and the Virginia House Republicans have made it clear that they would rather see federal stimulus money go to other states than to Virginians who have lost their jobs. We applaud Governor Kaine and the members of the House and Senate who stood up today for Virginia's working families," he added.

Virginia was the first state to refuse these funds, but not the only one. Other states who followed suit were Mississippi, Louisiana, South Carolina, Alaska and Texas. Characteristically, states are begging for federal aid; what could motivate them to refuse such an offer?

The money did not come without provisions. It was earmarked for modifications to the unemployment assistance program which would allow laid-off workers to receive an additional 26 weeks of benefits while enrolled in continuing education programs, extension to the regular unemployment benefits, health insurance and food stamps. Under the new policy, even those only seeking part time work would be eligible for unemployment insurance benefits.

It was the consensus among all the states that once the money ran out, the local businesses would be faced with increased taxes in order to fund the new program. In Virginia, representatives from the House Republican leaders, several local businesses and the Chamber of Commerce, claimed employers would be facing an increase of payment to the unemployment trust fund of up to $4.50 per employee per year. They were concerned the short term gain would result in long term regret in later years.

"The effect of these two provisions, individually and cumulatively, is not well known at this time, but eventually they will increase Virginia's taxes on jobs and employers and further deplete the state's UI trust fund," the Virginia Chamber of Commerce had said.

This sounds eerily similar to a "don't pay for a year" event; it's great for the promotional period, but after that interest rates go sky high. Isn't that how we got in this trouble to begin with?

On the other side of the fence, Virginia workers pay an average of $98 per worker a year for unemployment benefits. Compare this to the national average of $258, even if the rates increase to $4.50, they're still fairing pretty well.

In the mean time, the $125 million that the state has refused will simply go in a pot and be divided up amongst other states. Currently, there are almost 300,000 Virginia residents facing unemployment, many of which would have received extended benefits as a result of this program. I wonder what these Virginia residents, struggling to make ends meet would say about the decision?