State leaders have grabbed at all of the available federal stimulus funding except for that from one program.

About $43.6 million that could be used to help pay for unemployment benefits is still unclaimed while state leaders decide whether the infusion of federal funds is worth potentially higher future costs.

The state can get the money by improving the state's unemployment benefits in two of four specific categories. But the improvements would likely mean increased unemployment insurance costs in the future.

Labor leaders support the improved benefits and don't see any reason to dawdle.

State business interests are still weighing the options, looking for a route that won't lead to higher unemployment taxes in the future.

And Gov. Dave Heineman, who must ask for the money, says he's not interested in this stimulus funding if it requires an eventual tax increase.

Nebraska has effectively missed the first deadline for the program, known as the Unemployment Insurance Modernization Act, and will not be getting the first installment of funding in September.

But labor and business interests have at least another year to come up with a solution. The Legislature could change state unemployment law in the 2010 session if business and labor come up with a compromise plan.

"It would be a simple decision if the only issue was putting money into the unemployment trust fund," said Ron Sedlacek of the Nebraska Chamber of Commerce.

But taking the money could lead to a permanent tax increase. And seeking the money will require changes in state law, he noted.

An initial analysis by the Department of Labor indicated that the federal stimulus money would keep unemployment insurance tax rates lower in the next few years. However, benefit expansions could lead to rate increases later, although a future Legislature could avoid tax hikes by repealing the benefits.

"We want to talk about training (a change that would increase benefits for 26 weeks for people laid off from declining industries and enrolled in specific training programs)," said Ken Maas, state AFL-CIO president. "They are afraid to raise taxes. That's where we're at."

"Retraining would be the most valuable change," Maas said. That would allow some people who are laid off to get retrained in something else, he said.

Another analysis, requested by business interests, indicates that the state could keep unemployment rates from rising by tinkering with current benefits. Currently, the maximum benefit can rise only $10 a year. That cap is supposed to end in 2011. Continuing it another three years would offset costs associated with benefit changes required to access the stimulus funding, including adding the training component.

Representatives of major business organizations are hesitant to talk about any specifics but say they will continue to look at the issue.

"We haven't come to any conclusion," said Jim Grotrian, vice president for public policy with the Greater Omaha Chamber of Commerce.

"We have to make a decision in the best interest of our members. We have to make sure that it doesn't include a tax increase," he said.

"We've still got a lot of talking to do," said Sedlacek.

Nebraska is not unique in questioning this $7 billion piece of the federal stimulus package.

At least six governors, all Republicans - in South Carolina, Alaska, Louisiana, Texas , Alabama and Mississippi - have said they don't want this money because of the potential future cost of raising benefits.

The U.S. Department of Labor has received applications for the modernization money from 19 states, so far, and eight states have been approved, according to a spokeswoman for the federal agency.

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.