By MELINDA DESLATTE
BATON ROUGE, La. (AP) — Louisiana’s unemployment trust fund, a healthy $1.1 billion account before the coronavirus pandemic, is on track to run out of money by mid-September, with hundreds of thousands of people out of work and collecting benefits because of the outbreak.
Draining the trust fund doesn’t stop benefits flowing to unemployed Louisiana workers. But it will trigger undesirable spillover effects as the state and national economies are struggling.
Weekly benefit payments will drop in a state that already has one of the lowest unemployment payouts in the country. Taxes charged on businesses to finance the payments will grow higher, even as many businesses are struggling because of the pandemic. And Louisiana will have to borrow money from the federal government to keep paying benefits, which is expected to be repaid through surcharges on businesses.
“This is obviously not a good time to increase taxes on businesses,” Gov. John Bel Edwards said at a recent coronavirus briefing, as he highlighted concerns about the dwindling trust fund balance.
This isn’t a problem unique to Louisiana, as the outbreak of the COVID-19 disease caused by the coronavirus has threatened the solvency of unemployment programs around the country.
Edwards is asking Louisiana’s congressional delegation to push for unemployment trust fund aid in the next federal coronavirus relief package. The Democratic governor requested either forgiveness of the federal loans needed to replenish unemployment funds or direct aid to fill up states’ trust funds.
“By providing this assistance, Congress will be ensuring that our workers can be given the bridge needed for them to return to work, while ensuring that Louisiana businesses are able to focus their efforts on recovering safely from the COVID-19 pandemic,” Edwards wrote to the delegation.
The federal government paid for the $600 weekly unemployment benefit that Congress added to state unemployment payments in the pandemic — a federal payment that has expired and whose extension is the subject of negotiations in Congress. Louisiana has paid out nearly $4 billion in federally financed unemployment benefits since March 22, according to the Louisiana Workforce Commission.
But states still picked up the tab for their own weekly unemployment benefits.
In Louisiana, the state’s weekly unemployment payment maxes out at $247, one of the nation’s lowest weekly maximum benefits. That state payment is covered by the Unemployment Insurance Trust Fund. Companies pay into the trust fund through a tax based on the number of workers they employ and on wages.
The trust fund neared $1.1 billion earlier this year, the highest the fund had been since 2009 and a point of pride to the Louisiana Workforce Commission, which administers the unemployment program.
The pandemic upended the balance of taxes in and payments out of the fund. A trust fund that usually paid benefits to a few thousand people each month suddenly was inundated with claims as businesses shuttered or limited by coronavirus restrictions laid off hundreds of thousands of Louisiana workers.
More than 450,000 people currently are collecting unemployment checks in Louisiana, compared to fewer than 20,000 at this point in 2019, according to Louisiana Workforce Commission data.
Faced with that level of need for unemployment aid, the trust fund balance had fallen to $352 million by the last week of July, Edwards said, and at its current pace of spending was fewer than seven weeks away from running dry.
That means Louisiana is expected to drop its maximum weekly benefit even lower to $221 within a few months, and the taxes charged on employers will go up.
Louisiana lawmakers passed a bill to lessen the severity of the short-term tax hikes that will fall on businesses. But Edwards warned that when Louisiana exhausts its trust fund, it will have to borrow dollars from the federal government, with eventual repayment through additional charges on businesses.
The president of the Louisiana Association of Business and Industry, Stephen Waguespack, also is calling on the state’s members of Congress to help address the problem.
“The precipitous and unprecedented decline in what was among the healthiest of such funds in the nation ... is staggering, even when considered alongside the unemployment wrought by Hurricane Katrina in 2005 and the unemployment arising from the oil bust in the 1980s,” Waguespack wrote to the congressional delegation.
EDITOR’S NOTE: Melinda Deslatte has covered Louisiana politics for The Associated Press since 2000. Follow her at http://twitter.com/melindadeslatte