States hit hardest by rising unemployment claims could soon run low on funds
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With new government data Thursday, around 22 million people have now signed up for state unemployment benefits in the last month during the COVID-19 emergency.
In just the week ending Saturday, it’s 5.245 million new unemployment claims. States pay out these benefits — and states are strained.
Each state pays out unemployment benefits from a trust fund paid for by taxes on employers.
“In good times, you have significantly more going in than is going out. But you’re supposed to save up for times like the one we’re experiencing now,” said Jared Walczak, a researcher with the Tax Foundation.
Walczak says according to federal data, several of the hardest hit states, like California, New York and Texas, could be running low on funds in a matter of weeks.
“And some of these same states struggled with this during the Great Recession and only very recently paid off the debt that they accrued,” he said.
When unemployment funds run out, states still have to pay the benefits, they just have to borrow the money from somewhere else — usually the federal government.
“If this lasts more than three or four months just about every state will have to borrow,” said Chris O’Leary, an economist with the Upjohn Institute for Employment Research.
Borrowing could result in higher taxes for employers or reduced benefits down the line. But, O’Leary says, the federal government could just give the money to states — it has before as part of disaster relief.
COVID-19 Economy FAQs
Which businesses are allowed to reopen right now? And which businesses are actually doing so?
As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.
Will you be able to go on vacation this summer?
There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.
When does the expanded COVID-19 unemployment insurance run out?
The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.
You can find answers to more questions here.
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