Where State Unemployment Compensation Trust Funds Stand in December

With 2020 nearing its close, state unemployment compensation trust funds continue to struggle under the weight of so many pandemic-created beneficiaries, though some funds are beginning to stabilize as people increasingly return to work.

As of December 17th, 20 states and the U.S. Virgin Islands have drawn a collective $44.3 billion in Title XII Advances—federal loans which will ultimately need to be paid back with interest—and another two are already pre-authorized to begin taking advances when necessary. States entered 2020 with aggregate trust fund balances of $75 billion. On net, these balances now stand at $25 billion, with 19 states and the Virgin Islands in the red. (Indiana’s current trust fund balance slightly exceeds its indebtedness.)

From worst to least bad, on the basis of how many weeks of current payments in arrears they are, the states (and one territory) with negative balances are the Virgin Islands, New York, California, Hawaii, Texas, Kentucky, Illinois, Massachusetts, Ohio, Colorado, Connecticut, West Virginia, Minnesota, New Mexico, New Jersey, Louisiana, Pennsylvania, Virginia, Georgia, and Nevada. Several other states—Indiana, Maryland, Arizona, and Oklahoma leading the way—are closing in on insolvency. Idaho, Mississippi, North Carolina, Arkansas, Utah, and Wyoming are currently in the best shape.

A faster-than-expected jobs recovery has helped many states remain solvent. In May, active unemployment claims peaked at 22,794,145. As of December 12th, they stand at 5,294,701—still over 3 million more claims than pre-pandemic, but a dramatic improvement from the early months of the pandemic. (Claims have begun to spike again as states have reimposed tighter restrictions, with new jobless claims the week ending December 12th hitting the highest levels seen since early September.) In July, the CBO projected that the U.S. would return to 6.7 percent unemployment in the first quarter of 2023, a level in fact reached in November 2020, over two years ahead of schedule. These significantly lower unemployment levels have stretched unemployment compensation trust funds further than many would have initially expected.

Unemployment insurance taxes are imposed on a taxable wage base that is generally fairly low, so in many states, the majority—sometimes the overwhelming majority—of all UI tax revenues arrive in the first quarter of each calendar year. States can, therefore, look forward to a substantial boost in trust fund balances in the early months of 2021. Nevertheless, outlooks in some states remain gloomy.

The following table shows states’ current trust fund balance (net of any outstanding Title XII Advances), the number of current unemployment compensation beneficiaries, and the average weekly benefit the state pays per beneficiary. States will ultimately need to raise UI taxes to pay back these Title XII Advances and replenish their trust funds—often the increases are automatic—but for now, states should take a page from their Great Recession playbook and delay substantial UI tax hikes as long as possible to avoid penalizing rehiring.

Errata: A spreadsheet error affected calculations for some states initially; numbers have been corrected since initial posting.