Iowa’s unemployment compensation trust fund has shrunk 17% since Jan. 1
Iowa can continue paying unemployment claims for about 30 weeks before draining the state’s unemployment compensation trust fund and reserve fund, an analyst for the state’s Legislative Services Agency said.
“At this point, I’m not seeing the trust fund running out of money,” said Ron Robinson, a senior fiscal legislative analyst for the agency.
Robinson cautioned that his estimate could change if jobless claims paid to out-of-work Iowans exceed $50 million a week or if revenue from Iowa employers falls below 2019’s weekly average of $8.5 million.
The balance in Iowa’s unemployment compensation trust fund is being watched closely as record numbers of Iowans filing jobless claims continue to rise due to the economic shutdown caused by the pandemic. During the week that ended May 2, 206,051 Iowans — about 13% of the state’s workforce — filed unemployment claims, data for Iowa Workforce Development shows.
The large number of claims means the trust fund is being drained at a record pace.
Iowa’s unemployment compensation trust fund balance has shrunk to $1.04 billion, a 17% decline since Jan. 1, state data shows. The state also has $150 million in reserves that can be tapped, Robinson said.
So far in 2020, the state has paid more than $379.7 million in unemployment benefits to jobless Iowans, records from the state agency show. The amount exceeds the $364.7 million paid out in 2018 and is nearly as much as the $381.7 million paid in 2019.
But while the state’s unemployment compensation trust fund is shrinking, Iowa officials are not currently considering borrowing from the U.S. Department of Treasury, a move taken by nine other states.
“Our trust fund is too healthy for that to be necessary at this time,” Beth Townsend, Iowa Workforce Development director, wrote in an email.
Iowa employers, a majority of which continue to operate with full staffs during the outbreak of the highly contagious virus, have until May 15 to deposit unemployment insurance payments into the trust fund. Through May 7, employers had deposited about $130 million, about the same amount that was deposited during the first quarter of 2019, according to Townsend.
As Iowa’s businesses begin reopening, there is the expectation that fewer Iowans will file unemployment claims, alleviating pressure on the fund, Robinson said. In most instances, jobless Iowans can receive unemployment benefits for up to 26 weeks.
If Iowans exhaust their unemployment benefits, that will also decrease the amount of money paid out of the fund, Robinson said.
In early April, state officials announced Iowa Workforce Development would resume charging companies for unemployment claims if the trust fund’s balance dropped to $950 million.
“We have not hit the [$950 million] trigger and won’t for a few weeks,” Townsend wrote in an email. “We are discussing all available options when/if the trust fund hits that amount.
“I would expect more information to follow in the next few weeks, but this is such a fluid situation I won’t speculate now about what will happen then.”
Jared Walczak, director of state tax policy for the Washington, D.C.-based nonprofit Tax Foundation, said he expects most states to be forced to take out loans from the federal government.
“Unless the public health crisis abates far more rapidly than most anticipate, very few states are likely to avoid taking out loans this time,” Walczak wrote in an email. Some businesses that reopen and recall laid off workers may be forced to lay them off again because the public is not patronizing businesses because of health concerns, he wrote.
The U.S. Treasury Department reported last week that California, Connecticut, Hawaii, Illinois, Massachusetts, New York, Ohio, Texas and West Virginia all have been approved for federal loans in anticipation of using up all of their trust fund money.
The states must repay the loans with interest beginning in 2021. If the loans are not repaid, in-state businesses face paying higher unemployment insurance taxes, according to info on the Treasury website.