Employers picking up the tab for loans to states

By KEVIN FREKING | October 3, 2011 | 2:40 PM EDT

WASHINGTON (AP) — States that borrowed billions from the federal government to keep unemployment benefits flowing through the recession now have to start paying those loans back, and they're hitting businesses with new assessments and higher taxes to make that happen.

In all, 27 states owe the federal government nearly $38 billion. The first interest payments on those loans were due by the end of September and totaled about $1.1 billion.

Most states charged employers a one-time assessment to cover the interest charge. But the assessment is only part of the story. Most states have also increased the payroll taxes that go to paying for basic benefits that laid-off workers receive.

Business groups say the new assessments and higher unemployment insurance taxes are making it particularly hard for small businesses to expand.