A closer look at the Unemployment Insurance (UI) program during this pandemic:
- The Federal government used the UI program as a funnel to distribute over $600 billion to “stabilize” the U.S. economy. For a program that was paying roughly $28 billion annually pre-pandemic, this was an incredible achievement by state public employees.
- In many states, the funnel cracked: as of June 1, 2021, 20 states had a total of over $51 billion in outstanding Federal loans (Title XII) to finance the payment of state UI benefits.
- The UI program in Hawaii was devastated. This small state suffered by far the highest relative level of UI claims and unemployment. The state now has a relatively enormous outstanding Federal loan of over $700 million, and is still borrowing, approximately $1 million per day in June, to pay state benefits.
- Not surprisingly, the states that cut benefit duration since the last recession, (FL, GA, ID, KS, MI, MO, NC, and SC), many of which borrowed heavily in the last recession, did remarkably well, financially, in this pandemic. In fact, these states have relatively healthy trust fund reserves and will not need to raise taxes any time soon.
- Creation of the Pandemic Unemployment Assistance program (PUA) was remarkable. The program (providing well over $100 billion to an average of 10 million people per week) was a recognition of the vast inability of the existing UI program to provide sufficient “stabilizing” funds to a large portion of the unemployed.
- Federal funds temporarily eliminated the most important crisis facing the program: the glaring level of inadequacy and inequity of state UI benefit payments. Now, however, it appears, the program may return to even higher levels of inadequacy and inequity, (see “UI Benefit Adequacy and Recipiency Report-2020”).
