Louisiana begins the process to borrow money as unemployment trust fund runs low
NEW ORLEANS, La. (WVUE) - The COVID-19 pandemic continues to adversely impact Louisiana’s employment picture and the state has begun the process to borrow federal dollars to replenish its unemployment trust fund which is expected to run dry later this month.
Ava Dejoie is Secretary of the Louisiana Workforce Commission. She says the demand for jobless benefits remains high.
“Right now, we’re at over 400,000 individuals. We’re also processing disaster unemployment assistance for those individuals that have been impacted by Laura, that have been declared eligible,” Dejoie said.
It has been known for months that the large number of people receiving jobless benefits is depleting the trust fund.
“Currently, we have a balance of a little over $160 million,” said Dejoie.
That is a huge drop compared to the amount of money the trust fund contained before the pandemic hit the U.S.
“This time last year we were at over a billion dollars, so to give you an idea of how much we’ve been spending. In all of last year, we paid out $153 million from the state unemployment insurance trust fund, this year we’ve paid out over a billion dollars,” Dejoie stated.
And soon the trust fund from which jobless benefits are paid will run out of money, so the state is taking steps to borrow funds.
“We have made an application to the federal government for borrowing money under Title X and we anticipate that Louisiana will begin borrowing money from the federal government, mid-to-late September or likely late September. It all depends on the amount of state unemployment claims we have,” said Dejoie.
She was asked if the fund will be depleted at that point.
“Yes, it will. This is an unprecedented situation. We enjoyed one of the most robust trust ones, one that was highly regarded as one of the best in the nation before COVID-19 and we were consistently ranked as one of the best in the nation, but we along with other states are now faced with unemployment the likes of which our country has never seen,” said Dejoie.
Dejoie also commented on the amount of money the state is expected to borrow.
“Well, the way the Title X Program is set up states borrow in three month increments, so we’ve requested $600 million which is $200 million per month based on our current burn rate and then from that point states can request additional funding from the U.S. Treasury,” she said.
The state had hoped more federal COVID-related money had flowed into the state.
“We done numerous presentations to the legislature, there were lots of discussions about if more federal funding, CARES [ACT] and the like might come down, those things, whatever pots of money could be used. Those things did not materialize, have not materialized as of yet, so we started the borrowing process,” said Dejoie.
She said borrowed funds would be interest-free early on.
“Until the end of the year the money is interest-free. At that point, we begin to look at what is defined in Louisiana law about how we pay back the money and the terms and that sort of thing.”
She said no matter what benefits will continue to be paid out by the state.
“We will continue to pay all of the claimants that are entitled to state unemployment insurance benefits. It’s the law and that is our commitment,” said Dejoie.
There is little appetite for increasing taxes on Louisiana businesses to shore up the trust fund. At a legislative hearing in August House Speaker Clay Schexnayder made that point.
“Protecting these small businesses and those businesses out there is our first priority,” said Schexnayder.
“All of us understand that increasing taxes on employers is not a prudent or a wise course of action at this juncture, so we are looking at other remedies,” she said.
She said there are thousands of jobs available on the state’s HIRE or Helping Individuals Reach Employment website and urges people who are able to return to work during the ongoing pandemic to do so.
“There are over 70,000 jobs on our HIRE websites and there are opportunities that people can take advantage of here and now within the region,” said Dejoie.
Dejoie said some other states have already begun borrowing money for their unemployment trust funds.
“It is not an option about whether states pay unemployment insurance benefits. It’s federal law, so we must continue to pay weekly benefits. Our weekly benefit in Louisiana is $247 per week,” Dejoie stated.
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