As NH’s unemployment trust fund drains, questions about federal reimbursement

New Hampshire’s unemployment trust fund has been drained by about $30 million since the coronavirus crisis began – enough to spark a tax increase on businesses next quarter, if federal help does not arrive soon both in terms of cash and in terms of changing the law.

The bad news is the state would have been paying out more than it has but won’t because the federal government will reimburse it for some of the money. But currently New Hampshire appears to be currently on the hook for most of it.

All together, the state has paid out $31.7 million for some 114,000 unemployment claims since the crisis started the week of March 14, including $9.8 million to 35,000 people on Tuesday. That was the highest total of unemployment payments ever in a single day, Department of Employment Security Deputy Commissioner Richard Lavers explained to the Governor’s Office for Relief and Recovery (GOFERR) Wednesday. Indeed, he said, the state is paying out more each week then it had all year, pre-crisis.

The number of claims reported by the state doesn’t quite line up with the latest U.S. Department of Labor figures released Thursday morning. The federal agency reported 24,000 claims were filed in New Hampshire last week ending April 10, which is down from the previous week’s 39,000 claims. That all adds up to 124,000 New Hampshire claims since March 14. Nationally, the DOL reported another 5.5 million initial claims, down from 6.6 million the previous week, for a total of 22 million since the surge began.

The state has only paid out 70% of the amount it owes so far – not counting the extra $600 weekly payment guaranteed by the federal CARES Act, which it hopes to pay out next week, three weeks after it was originally due.

Even then, it has only paid out 70% of the amount it owes so far – not counting the extra $600 weekly payment guaranteed by the federal CARES Act, which it hopes to pay out next week, three weeks after it was originally due.

Lavers said the federal government is only responsible for 40% of the amount already paid. That’s because the rest –$19 million – is traditional unemployment insurance, paid to people who were eligible for state benefits before both the state and the federal government expanded eligibility in response to the pandemic.

In other words, when a restaurant shuts down – due to the pandemic, or for any other reason – its workers are entitled to collect unemployment. Therefore, the state must pick up the tab. If, however, they were self-employed, they would be eligible under the new rules, so the federal government would eventually pay for it.

Those new rules, particularly involving self-employed individuals, are delaying the state payout, Lavers said, particularly filings by those who didn’t post a net income in 2019. (Those businesses wouldn’t be eligible under the state self-employment expansion under Gov. Chris Sununu’s March 17 emergency order, but would under the CARES Act, which kicked in on April 4.) Another major holdup is those who worked in other states last year, since the federal system that keeps track of that has crashed due to the unprecedented volume nationwide, Lavers said.

State officials are lobbying the federal government to change the rules, or perhaps change the law, so that the federal government that would cover more payments. But in the meantime, the state unemployment trust fund dropped from $299.5 million on March 13 to $270.5 million on April 15.

The state unemployment tax had already ticked up a half percent (to 1.7%) this quarter because the fund dipped below $300 million, though that was unrelated to this latest surge in claims. But if the trust fund can’t get back to $275 million, the tax rate will go up another half percent next quarter, to 2.2%. And if it drops below $250 million it would go up another half percent to 2.7 percent, or more than double of what it was before March 31.

While the drain could be alleviated when federal reimbursement arrives, it should be accelerated when claims go down more smoothly, and especially once those $600 payments go out. The payouts would essentially be more than double the amount they are now, though that extra money would be fully reimbursed by the federal government as well – eventually

Still, said Lavers, “at the rate we are paying benefits, it would deplete the fund.” He added that the state could borrow from the federal government interest-free, but that would not be a desirable outcome.

Lavers pointed out that the federal government based the law on emergency unemployment aid for such natural disasters as a tornado.

“To try to take for a model from a program of a localize disaster and apply it to a global pandemic is not sufficient,” he said.