With more than 10 million Americans jobless—twice the number at the beginning of the COVID-19 pandemic—state unemployment resources are historically strained.
“A year into the economic fallout, 23 states have utilized federal funds for state unemployment insurance trust funds,” NCSL’s Jon Jukuri, federal affairs counsel in NCSL’s State-Federal Relations Division, said during the session “Unemployment Insurance: Compensating for Tough Times,” part of NCSL’s State Policy 101 series.
Twenty states have taken out interest-free loans from the federal government and states have used almost $7 billion for trust funds, he added.
“Clearly this is going to be a massive issue for state budgets moving forward,” he said.
During the Great Recession about 31 states became unemployment insurance-solvent and borrowed in excess of $35 billion, resulting in the repayment of trust funds with interest added on. States had to increase payroll taxes during a weakened economy and, in some cases, lowered benefits by reducing their duration.
“Currently states are more than $50 billion in debt to the federal government, and there are going to be more states continuing to take out loans as far as we can tell,” Jukuri said. “This is a national predicament, not solely a red- or blue- or purple-state issue.”
Unemployment Claims Spike
During the second half of March 2020, initial weekly unemployment claims went from 300,000 to almost 15 million, said Zach Herman, a policy associate in NCSL’s Employment, Labor and Retirement Program.
“The graph looks almost straight up,” he said. “During the peak of 2008-2009 (the Great Recession), the number topped out at 1.2 million.”
Besides the claims, a number of new federal programs were changed and states had to adapt.
“States had to not only ramp up to deal with all these new claims, they also had to build out these new programs,” Herman said. “States continue to have high rates of new applications. We’re seeing it hover around 800,000 to a million new claims each week.”
In addition, multiple states are experiencing millions of dollars in fraud, and every state has a backlog of claims.
“Some states are doing better than others but no state is getting 100% of their new payments out within two to three weeks after that initial claim is submitted,” Herman said.
Mark Wolf edits the NCSL Blog.