States' Unemployment Funds Begin To Dry Up

May 6, 2020
Originally published on May 6, 2020 8:19 am
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State unemployment funds are starting to run dry. They simply can't keep up with the flood of unemployment claims coming in right now. Some 30 million people have applied for benefits since the middle of March. Here's NPR's Jim Zarroli.

JIM ZARROLI, BYLINE: Not so long ago, Colorado was in the middle of a jobs boom. The unemployment rate sank to a historic low. So few people were out of work that the state had to pay out a paltry $8 million in unemployment benefits each week. Then, in March, the dam broke. Joe Barela heads the state Department of Labor and Employment.

JOE BARELA: We jumped up to about 30 million. And then ever since then, we've been climbing. So April 11 - 62 million, weekend ending April 18 - 74 million, weekend ending April 25 - 86 million.

ZARROLI: And Barela says he expects the dollar amount to keep climbing. Unemployment benefits are costing Colorado so much that it's starting to run low on money to pay them. And it's not alone. In California, 3.7 million people have filed for unemployment since mid-March. Governor Gavin Newsom isn't mincing words about the state's plight.

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GAVIN NEWSOM: Today I stand in front of you sobered by the reality of the last few weeks. We are now in a pandemic-induced recession here in the state of California.

ZARROLI: Like other states, California operates an unemployment trust fund. Employers finance the fund through taxes, and the money goes to pay for jobless benefits. But the current job losses have been so savage that even states that prepared well for a downturn are seeing their funds get quickly depleted, says Michele Evermore of the National Employment Law Project.

MICHELE EVERMORE: They have enough money on hand to pay an average recession year of benefits. Well, this is so far from average that I do anticipate most or all states spending their trust fund.

ZARROLI: States that run out of money can borrow from the federal government. California has already done so. Illinois has been approved for a loan. And Jared Walczak of the Tax Foundation says a handful of other states will soon follow suit.

JARED WALCZAK: States like Ohio, West Virginia, Massachusetts, Kentucky, Texas only have maybe a week or two of further funding before they will also exhaust what they have and require federal loans.

ZARROLI: These loans do have to be paid back with interest after a year. During the Great Recession, a lot of states racked up huge federal debt so they could replenish their trust funds. Jared Walczak says some have only just paid it off.

WALCZAK: Pennsylvania only finished paying off its debt this year in January of 2020 and now is about to slide back into debt again.

ZARROLI: Walczak says, to pay the federal government back, a lot of states raised business taxes. Michele Evermore of the National Employment Law Project says that's often led to a political backlash. Businesses have balked at paying higher taxes. And they've pressured state governments to lower benefits. Evermore says Florida sharply restricts who can qualify for unemployment.

EVERMORE: And those benefits are very low, around $250 on average. So their trust fund is solvent but only by virtue of not paying out benefits.

ZARROLI: But the current collapse of the job market is so severe that states have no choice but to ask the federal government for help, and worry about paying the money back down the road.

Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.