State Unemployment Insurance Trust Fund Health Shows Improvement

Until recently, ten different states (plus the Virgin Islands) were carrying UI loan balances from the Federal Unemployment Account (FUA). So far this year, four of those states have been able to successfully pay off their debt and continue on towards unemployment insurance trust fund health.

Employers in Arizona, New York, North Carolina and Rhode Island will be pleased to know that there is financial relief in sight for their elevating employment tax costs.
With the remaining list of FUA debtor states nearly halved, prospects are good for the state of the nation’s unemployment insurance system.

Other positive signs come from South Dakota and Wisconsin. The Rapid City Journal reported that South Dakota’s state UI trust fund balance for calendar year 2014 exceeded their goal by $8.8 million dollars. Wisconsin’s fund is doing so well that they are discussing a lower UI tax schedule for the first time since 2009 (State of Wisconsin’s Dept. of Workforce Development press release).

While it would be premature to say the UI crisis is over, the worst seems to be behind us. Employers in most of the country are now able to see an end to additional UI costs. As noted in our recent post on Arizona’s repayment, even after FUA debt is repaid, lowered tax rates may still be a few years out as states accrue an adequate balance in their reserves. In the meantime, though, costs should stop rising for employers in most states.

Here is a graph showing the progress made on cumulative state FUA debt since the start of the Great Recession (this doesn’t indicate where debt was paid off via employer-financed bonds, so it is not a whole picture of UI health or relief for employers).

Source: 2009-2015 FUA loan balances via U.S. Department of Labor data (including via the WaybackMachine).

Here’s a look at the how the total number of states carrying federal UI loan debt has evolved since the start of the economic crisis (the data for this chart was pulled out of the table below). By both measures, 2011 was the peak of the UI crisis for employers.

Sources: 2009-2015 data via U.S. Department of Labor data (including via the WaybackMachine) and legislative updates from SUCAP, the State Unemployment Compensation Advisory Program.

The only states and territories at this point with FUA debt are California, Connecticut, Indiana, Kentucky, Ohio and the Virgin Islands. An overwhelming 77% of the current cumulative debt balance is carried by the state of California alone. (U.S. Dept. of Labor, Employment & Training Administration).

It’s been a long road to UI fund health. To fully appreciate the gains, here’s a quick look back at the past few years.

Snapshot of various points over the course of UI fund debt recovery:

MonthYearNo. of States BorrowingStates Using ER-financed bonds for Title XII loansStates with less than 6 mos. of positive balanceStates with more than 6 mos. of benefits
 April2008 (beginning of economic downturn)0 (but Michigan insolvent) n/a 1914 with at least 6 mos. of reserves; 17 with at least 1 yr of reserves.
 July 200915 n/a n/a n/a
 February 201027 (plus Virgin Islands) n/a n/a n/a
 February 201131 (plus Virgin Islands) n/a n/a n/a
 January 201225 (plus Virgin Islands) n/a 4 21 (plus Puerto Rico)
 April 201322 (no territory info) n/a 5 23
 June 201410 (plus Virgin Islands) 7 8 25 (plus Puerto Rico)
 June 20156 (plus Virgin Islands) n/a

Sources: 2008 data via TaxFoundation.org, 2009-2015 data via U.S. Department of Labor data and legislative updates from SUCAP, the State Unemployment Compensation Advisory Program.

Thanks for reading. Does this assessment reflect your experiences, or do you think too much is being made of these signs of recovery? Use the comments to weigh in.

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