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.
With the remaining list of FUA debtor states nearly halved, prospects are good for the state of the nation’s unemployment insurance trust fund health.
Other positive signs come from South Dakota and Wisconsin. The Rapid City Journal reported that South Dakota’s state UI trust fund balance for the 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.
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. However, 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.
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.
It has been a long road to unemployment insurance trust fund health. To fully appreciate the gains, here is a quick look back at the past few years.Get a solution for all unemployment insurance challenges and manage effectively unemployment costs with a simple and cost effective unemployment claims management software.
Various Points over the Course of UI Fund Debt Recovery
|Month||Year||No. of States Borrowing||States Using ER-financed bonds for Title XII loans||States with less than 6 mos. of positive balance||States with more than 6 mos. of benefits|
|April||2008 (beginning of economic downturn)||0 (but Michigan insolvent)||n/a||19||14 with at least 6 mos. of reserves; 17 with at least 1 yr. of reserves.|
|February||2010||27 (plus Virgin Islands)||n/a||n/a||n/a|
|February||2011||31 (plus Virgin Islands)||n/a||n/a||n/a|
|January||2012||25 (plus Virgin Islands)||n/a||4||21 (plus Puerto Rico)|
|April||2013||22 (no territory info)||n/a||5||23|
|June||2014||10 (plus Virgin Islands)||7||8||25 (plus Puerto Rico)|
|June||2015||6 (plus Virgin Islands)||n/a|
Current State of Unemployment Insurance Trust Fund Health
UI is structured as a partnership between the federal government and the states and territories. States and territories set the parameters of their unemployment programs within federal guidelines, including payroll tax rates and wage bases for covered workers. State unemployment insurance taxes are paid by employers and remitted to the federal UI trust fund, where each state has a separate account for covering normal unemployment insurance benefits.
The federal unemployment insurance (UI) trust fund finances the costs of administering unemployment insurance programs, loans made to state unemployment insurance funds, and half of the extended benefits during periods of high unemployment. Unemployment insurance programs pay benefits to covered workers who become involuntarily unemployed and meet specified eligibility requirements, such as actively looking for a job.
When the Great Recession and the long period of high unemployment that followed hit state UI reserves particularly hard, 36 states borrowed from the federal fund. By the start of 2018, all states but California and the US Virgin Islands had repaid their outstanding balances. Loans from the federal fund can be repaid by reducing the credit employers can claim against FUTA taxes and through other add-ons. States can also take private loans to shore up reserves. At the beginning of 2018, Michigan, Pennsylvania, and Nevada had outstanding private loans.Manage your unemployment claims with a software that is efficient, cost-effective, and easy-to-use, while meeting all federal and state guidelines.
Editor’s Note: This post has been updated for accuracy and comprehensiveness.