Assuming that current unemployment claims activity remains steady or lower, Michigan’s Unemployment Insurance Agency is predicting today that “it is highly unlikely” the agency would need to borrow from the federal government to cover unemployment benefits in 2021.
In fact, the UIA contends that “Michigan has one of the healthiest trust funds in the nation, with over $500-million available for unemployment benefits,” and adds that the state, “is one of the few states that has yet to borrow from the fund.” Meanwhile, state such as California, Ohio and Texas started borrowing in the spring of 2020.
Each individual state maintains its own Unemployment Insurance Trust Fund (UITF) reserve to pay for state unemployment insurance benefits. The fund is built from state taxes paid by employers. States can take on a title XII loan from the federal government if their own reserves are insufficient.
The solvency of the UITF is dependent on the benefit claims load and employer tax collections. While the UIA has paid over $29B in benefits since March 15, 2020, only $5.1B has been paid in state UI benefits. The remaining benefit payments have come from federal programs, including Pandemic Unemployment Compensation ($16.1B) and Pandemic Unemployment Assistance ($4.5B). Payments from those and other federal programs have no effect on the state’s trust fund.
Acting UIA Director Liza Estlund Olson says, “A key reason for the continued health of the trust fund is our successful Work Share Program,” and adds, “Work Share saved the UITF over $80M and helped inject over $500M into the economy when you include the federal benefits paid to these workers.”
The federally funded Work Share program allows job providers to retain their skilled workforce, avoid layoffs, or bring back workers at reduced hours while employees collect partial unemployment benefits to make up for their lost wages.
Mike Johnston, Michigan Manufacturing Association Vice President for Government Affairs, says, “We are encouraged to hear the UIA projects the UITF will not need to borrow funds in 2021, which means employers will avoid increased employment costs due to borrowing.” He adds, “One of the best solutions to solvency is getting people back to work, through Work Share, and filling open positions in manufacturing through work search.”
Work Share has helped 2,700 Michigan businesses and almost 97,000 employees at the peak of enrollment, far outpacing even the combined totals of larger states like New York, Ohio and Texas.
Estlund Olson contends, “Financial stewardship has always been a top priority for the Agency,” and adds, “We’ll continue to encourage employers to participate in Work Share and do everything we can to protect the integrity of the UITF.”
