New Research Shows how Federal UI Boosts Strained State Trust Funds

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Naples, FL — State unemployment trust fund balances have plummeted by more than 96 percent since the beginning of the year, according to new research published by the Foundation for Government Accountability (FGA). The depletion in funds is a direct result of shutting down the economy and paying people more to stay home through the $600 weekly unemployment insurance (UI) boost.

As businesses shut down or were forced to issue mass layoffs in states that issued stay-at-home orders, unemployment skyrocketed—rising more sharply than in states that remained open. As a result, trust funds in the seven states that did not issue stay-at-home orders have weathered the COVID-19 pandemic much better than the states that shut down their economies, declining by just 15 percent between January and mid-August. Comparatively, the states that shut down their economies saw their trust funds fall by an average of 102 percent on average.

By mid-August, 11 state trust fund had run out completely, forcing them to take out federal loans just to pay out the remainder of benefits. Another unemployment bonus would push even more states over the edge and into the red. That not only means taking out massive loans from federal taxpayers just to pay out benefits, but would also likely lead to future tax hikes on employers to pay back the debt.

“A new unemployment bonus that pays people more to stay home than return to work could quickly bring America’s economic recovery to a screeching halt,” said Hayden Dublois, research analyst at FGA and the paper’s co-author. “Even a partial restoration of the $600 weekly boost would further decimate already depleted UI trust funds, open the door to unprecedented levels of fraud, and hang states out to dry.”

Read the full paper here.

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The Foundation for Government Accountability is a non-profit, multi-state think tank that specializes in health care, welfare, and work reform. To learn more, visit TheFGA.org.