OLYMPIA — Washington state could make a request for a federal loan as soon as August or September to secure funds by the end of the year in order to keep its unemployment trust fund solvent as it continues to pay out benefits to those affected by the coronavirus shutdowns, Employment Security Department Commissioner Suzi LeVine said Monday.
The state’s unemployment trust fund — which had more than $4.7 billion at the start of March — is currently down to $2.8 billion, according the latest numbers from the agency.
LeVine said that the state’s unemployment trust fund has been strong over the years, and she noted that Washington was one of the few states that did not require a federal loan to bolster the system during the Great Recession.
“When you look, however, at the fact that the demand for unemployment benefits are seven to 10 times what they were during the recession, it really draws on this pool of funds dramatically,” she said during a phone interview. She said that while she didn’t want to say that the need for the loan was inevitable, it was “highly likely given the volume and demand and potential length of time for utilization of this system.”
Nearly 1.2 million people in Washington state have filed claims for unemployment since early March, when the pandemic job losses began. To date, the state has paid more than $6.5 billion in benefits to more than 875,000 people who filed initial claims.
Two-thirds of that amount is federal money that is providing the unemployed with an additional $600 a week on top of the state’s weekly maximum benefit of up to $790 per week, the second highest in the nation.
In May, the Employment Security Department revealed that it had paid out up to $650 million through tens of thousands of fraudulent claims, of which the state has recovered $357 million. A West African fraud ring using identities stolen in prior data breaches, such as the massive 2017 Equifax breach, is believed to be behind the fraud, which has targeted several other states during the pandemic. Earlier this month, members of the National Guard were brought to help with ID verification on claims.
About a dozen states have already been approved by the federal government to receive loans, and several have already received funds, including California, New York and Texas.
While the projected shortfalls won’t prevent unemployed workers from getting government aid, the federal loans could lead to higher taxes for businesses in future years to repay the debt.
State unemployment benefits are funded by special taxes on employers and paid through state trust funds. Each state sets its own tax rate and benefit payment amounts. When trust funds run low, states can get federal loans that must be repaid with interest.
The federal government’s coronavirus response package includes a provision allowing states to borrow money at zero interest for the rest of the year to cover unemployment benefit costs. Remaining balances and any future loans would be subject to interest payments, although states are hoping that federal officials extend the interest-free provisions — or forgive the loans entirely.