The pool of money used to pay unemployment benefits ran dry once again this week while the number of new unemployment claims nearly doubled compared to the week before.
Federal law requires any eligible unemployment claims will continue to be paid regardless of how much is in the state's unemployment trust fund. Beyond that, it won't likely stay empty for long, since this week the state will begin collecting first quarter unemployment insurance taxes from businesses. It is likely to borrow more from the federal government to boost its coffers, which must be repaid with some interest which began accruing on its $150 million debt in January. Legislators steered $85 million to the unemployment trust fund in November 2020 from the CARES Act, but that's now gone.
Meanwhile, there were 12,140 new unemployment claims applications across Louisiana, up from 6,468 one week before, according to U.S. Department of Labor data released on Thursday.
There were another 3,229 new claims filed for Pandemic Unemployment Assistance, a special federal program for the self-employed such as independent contractors, compared to 2,630 claims one week before. There were 37,832 continuing existing unemployment claims for the week ending March 20, the latest state data available. Food services and accommodations continue to lead both new unemployment claims and those still without a job, according to Louisiana Workforce Commission data.
The state has administered more than $8 billion in unemployment benefits since March 2020 and paid another $99.6 million in unemployment benefits for the week ending March 20.
More than 100,000 small businesses may be on the hook for higher unemployment taxes once a temporary stay expires in early August.
There are 80,300 businesses with fewer than 10 workers and nearly 23,000 businesses with fewer than 50 workers across the state impacted by the potential tax hike.
If there is between $400 million and $750 million in the state trust fund by September, businesses should expect in January to pay taxes on the first $8,500 in wages, rather than the current $7,700, in addition to a 10% increase on the employer's tax base. Maximum benefits going to unemployed workers would drop from $247 per week to $221, which would be the lowest in the nation.
“My first priority is to replenish the unemployment insurance trust fund because without that we’re going to cause automatically by operation of law a tax increase on every employer in the state that feeds into that fund come September,” said Gov. John Bel Edwards in a press conference Wednesday about the state’s allocation of the American Rescue Plan.
Conversations with legislative leadership have just begun, Edwards said.
It's unclear whether the state will collect enough before the deadline to change the outcome. The state collected $269 million in business taxes during 2019.
“That’s going to be a considerable amount of money to get to the point where those tax increases are not necessary," Edwards said. "On top of that we don’t yet have the rules issued by the (U.S.) Treasury (about the American Rescue Plan allocation) so we don’t know how much funding we get in the first year as opposed to year two or three."
Before the coronavirus pandemic began, the trust fund had $1 billion in the bank.