Arkansas’ unemployment fund in ‘bad shape’

In one year, Arkansas’ unemployment trust fund fell from a balance of $98.9 million to $0, with state officials borrowing federal dollars in a frantic effort to keep unemployment funds flowing to Arkansans in need.

“Bad shape,” was the phrase Arkansas Department of Workforce Services Director Artee Williams used before a legislative committee this week to describe the condition of the state’s unemployment trust fund.

Bad shape, indeed. The state expects to seek more than $82 million in federal “advances” to cover its unemployment funding obligations.

(Roby Brock, a content partner with The City Wire, breaks this important story at TalkBusiness.net.)

FUND SHORTFALL

The fund – which is supported by business owners through state unemployment tax assistance (SUTA) contributions – pays for unemployment benefits to laid off workers for a period of 26 weeks.
 
At one time, the balance of the fund used to stay around $200 million, but in recent years has declined. Certainly as Arkansas’ unemployment rate has climbed and the number of layoffs has risen, claims from the fund have jumped sharply.
 
According to state workforce officials, the current number of Arkansans drawing regular unemployment benefits from the state fund is around 48,000 jobless, but able-bodied workers. Payouts to those individuals are averaging about $12.4 million a week.
 
One year ago, the numbers were nearly one-half those levels. Approximately 25,000 workers were drawing benefits costing the state roughly $6 million a week.
 
FEDERAL SUPPORT

The condition of the trust fund has worsened so significantly that on Mar. 9 the state received an advance from the U.S. Department of Labor to cover unemployment insurance benefits, according to Kimberly Friedman, spokeswoman for DWS.

The fund was at zero – which triggered the federal request – but the advance brought the balance to roughly $17.8 million. One year ago, the trust fund had a balance of $98.9 million.
 
Currently, about 18,750 dislocated Arkansas workers – nearly one-fourth of the overall unemployed — are drawing the emergency benefits at a cost of $4.4 million a week.
 
Arkansas is eligible to draw more money from the feds and it intends to. With jobless benefits averaging $12.4 million a week, the Mar. 9 borrowing of $17.8 million from the federal government won’t last long.
 
Friedman said the state expects to ask the federal government for an additional $35 million in advances in March to keep pace with demand. Workforce officials will ask the feds for $20 million more in April, and $10 million more in May, according to current projections.
 
By that time, SUTA payments are expected to seasonally rise, but many still anticipate a shortfall for the year.
 
A bill advancing through the Arkansas Legislature, Senate Bill 429, could add as much as $70 million more to the state unemployment trust fund in part by raising the taxable wage base for SUTA from $10,000 a year to $12,000. Arkansas employers will pay more into the SUTA fund to cover the growing drain on it.
 
If that bill passes – and it has the backing of business and labor groups – it could still leave the state with a projected shortfall of $230 million if the economy doesn’t improve, according to legislative estimates.