INDIANAPOLIS (AP) — Indiana’s unemployment insurance trust fund will be depleted in September if Hoosiers continue seeking assistance for joblessness at the current pace due to the coronavirus pandemic, a state official says.
The fund, which provides jobless benefits for the unemployed, had about $886.8 million in early March, before the pandemic, according to data from the U.S. Department of Treasury. But the fund’s balance had fallen to $171.8 million as of Aug. 5, The Indianapolis Star reported.
The Indiana Department of Workforce Development projects the fund would become insolvent sometime in September because of the pace that the state is burning through the remaining money.
“We’ve only probably got a handful of weeks if we continue the current pace of payments,” said Josh Richardson, the state agency’s chief of staff.
Hoosiers have filed 948,000 new requests for unemployment insurance benefits over the course of about 10 weeks due to the economic fallout from the pandemic, according to a tally of initial claims by The Indianapolis Star. More than 200,000 people have continued to file for benefits after submitting an initial claim.
Because Indiana’s trust fund is financed by payroll taxes, money is consistently added to the fund. But those taxes haven’t been enough to keep up with the unprecedented level of pandemic-related job losses.
The Treasury Department maintains Indiana’s unemployment insurance trust fund. There are no federal requirements for the number of funds a state should keep in its unemployment insurance trust fund.
When the fund is depleted, Indiana can borrow money from the federal government to cover unemployment insurance compensation.
“There’ll probably be a grace period where there’s not going to be any interest charged, probably for a couple of years,” said Christopher O’Leary, senior economist with the W.E. Upjohn Institute for Employment Research. “The state will have a chance to pay it (the loan) back without incurring any interest, so it’s just a very simple mechanism.”
Indiana has borrowed from the federal government before to cover unemployment insurance benefits. In the early 1980s, the state used a loan to cover an unemployment insurance fund deficit.
Indiana also depleted the fund during the Great Recession, when unemployment skyrocketed and demand for compensation exceeded reserves. The state borrowed upward of $2 billion to pay unemployment claims. It finished repaying the loan several years ago, according to published reports.
Indiana’s looming trust fund insolvency isn’t unique. Numerous other states have applied for federal advances to cover unemployment insurance benefits. According to Ernst & Young LLP, 13 states and jurisdictions applied to receive federal Title XII advances to cover unemployment insurance benefits by July 1. They are California, Massachusetts, Colorado, Delaware, Hawaii, Illinois, Kentucky, Minnesota, New York, Ohio, Texas, the Virgin Islands and West Virginia.