New Hampshire’s unemployment trust fund already feeling the strain

As claims flood in and fund shrivels, tax on employers could jump

The coronavirus pandemic and the state’s loosening of unemployment eligibility to include self-employed people and others, have created a sudden deluge of claims that threatens to wipe out New Hampshire’s unemployment trust fund and raise unemployment taxes on all businesses, if federal help does not arrive soon.

Some 34,000 additional people registered for unemployment last week, New Hampshire Department of Employment Security Deputy Commissioner Richard Lavers told NH Business Review on Monday night. That number could more than double the current 20,000 people currently collecting benefits. It’s a huge jump from just 500 initial claims in the previous week, he said.

The state cannot say how many of the latest registrations – all filed online, since DES offices are closed due to the crisis – will translate into claims because the federal Department of Labor has prohibited states from releasing such data because the Trump administration is worried that dire statistics would further scare investors from the turbulent stock market.

“The state is not allowed to report claim numbers,” said Lavers, adding that they will be at least embargoed to Thursday, as the department awaits further guidance.

But the department released the number of those who registered for eligibility instead “because we want the public of understand that this really means in real dollars going back into community, and its effect on the fund.”

DES staff worked though the weekend to keep up, not only with the number but with the new eligibility rules – so that those who filed last week will see the money in their bank account on Wednesday, said Lavers.

“It has been all hands on deck. We are on the financial front lines of this crisis,” Lavers said.

Average claim

In the past, registration usually translated into claims, but this current surge is “unprecedented,” said Lavers, a word also used by Gov. Chris Sununu during a Monday afternoon press conference. Also unprecedented are the 19 new groups that are eligible for benefits, thanks to Sununu’s emergency executive order issued on March 17.

In addition to the self-employed, a category that includes all business owners, it also includes farmworkers, domestic helpers, several groups that get paid only via commission, student financial aid workers, paid interns and those working for a family member. Some members of those new groups could have registered to get in the system but might still have their jobs.

The department won’t know the benefits these new registrants will receive until their claims are processed, though that data might also be available at the end of the week. The average claim before last week was $333. If you multiply that by 34,000 registrants, that comes out to more $11.3 million a week.

At that rate, the unemployment trust fund would be depleted in nearly a half a year, but there is a good chance that the average claim will be higher.

With the state’s known coronavirus caseload doubling over the weekend to more than 100 and with the first death reported on Monday, Sununu warned that the crisis will continue to escalate, along with the state’s efforts to contain it. That could close even more businesses, resulting in more layoffs. And as the word spreads of loosened eligibility rules, it is likely many more will apply.

Lavers said the average claim is likely to result in larger benefit than before, closer to the maximum of $427 a week. If all of last week’s registrants collected the maximum benefit, that would be $14.5 million weekly drain of the trust fund.

Higher taxes

The more that the trust fund is depleted, the higher taxes are needed to try to keep it filled. Because the fund has been above $300 million for so long – all of 2019 and the first quarter of 2020 – employers have enjoyed a 1.5% discount on the tax. That means the 2.7% rate for a new employer with no “experience” laying off people has been cut to 1.2% of payroll.

DES, which projected the fund would dip below $300 million in the second quarter before the deluge in claims, had expected a rate increase to 1.7%. But if the fund goes below $275 million, the tax rate will go up to 2.2%, depending on how many and how large this month’s claims are.

If the fund below falls before $250 million, there won’t be a discount at all, and if it goes below $150 million, surcharges kick in. If the fund is in danger of being totally depleted, the federal government would bail it out with interest-free loans to the states, though that wouldn’t effect the tax rate.

If Congress passes the trillion-dollar-plus stimulus and the president signs it into law, that could prevent the tax increase on employers, since those left unemployed because of the coronavirus – nearly all of the new claims – would end up drawing their benefits against the federal rather than the state trust fund. But nobody knows yet how much New Hampshire will get and when those funds will arrive.

Nor is known yet sure how many of these claims are because of traditional layoffs, such as the closing of restaurants, gyms and other businesses, and how much are due to the expanded eligibility.

Lavers said that data may be available by Friday.

Under Sununu’s emergency order, DES will not give benefits to self-employed independent contractors, but the owner of a large business with hundreds of employees. No matter how high an income that business owner made, he or she could only collect the maximum of $427 a week (as long as that doesn’t exceed 60% of income) for 26 weeks, though that time period is likely to be extended.

The department has never given out benefits to business owners before, so it is now working on a pdf form to explain the rules. Those with questions can call the department’s new hotline – 603-271-7700 – which is open 8 a.m. to 8 p.m. weekdays and 9 a.m. to 5 p.m. on weekends. Last week, some 10,000 people took advantage of it, said Lavers.

Other people eligible for benefits for the first time are people who have had to leave their job to take care of a loved one suffering from the virus or because they were required to self-isolate as part of the state’s makeshift medical leave policy. Those benefits would be based on 60% of wages, similar to how the department normally computes them for other workers.

The state also is waiving the experience surcharge that businesses normally have to pay due to layoffs, if they were caused by the virus. This is an especially a big deal for nonprofits, which have to pay dollar-for-dollar for what their workers collected.

Categories: Government, News

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