9 states seek $36B in federal advances for unemployment claims - POLITICO

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Department of Labor | John Shinkle/POLITICO

SACRAMENTO, Calif. — Nine states have told the Department of Labor they plan to ask for $36 billion in federal advances to cover the astronomical cost of unemployment payouts amid the coronavirus pandemic, according to new information provided to POLITICO Tuesday night by federal officials.

Illinois, which had fiscal problems before the coronavirus, tops the list with an $11 billion request in May and June.

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California, the first state to borrow, plans to seek the next-highest amount over the same two months: $8 billion.

Texas will ask for advances totaling $6.4 billion in May, June and July and New York will ask for $4.4 billion in the same three months.

Connecticut, Hawaii, Massachusetts, Ohio and West Virginia have also signaled an intent to borrow between May and July to fund their unemployment systems. Some of the states, like Illinois and California, only requested advances for May and June.

There is no approval process for the advances, a department spokesperson said. States notify the Departments of Labor and Treasury of their needs, the spokesperson said, and the Department of Labor certifies those amounts to the Treasury Department.

States are able to draw down advances as they need them, but won't necessarily end up using the full amounts.

California took out its first $348 million unemployment insurance loan last week, slipping into the red just two years after repaying the $65 billion it borrowed from the federal government during and after the Great Recession. It was one of about three dozen states that took out federal loans to weather the last downturn, a scenario likely to repeat itself in the coming weeks and months as unemployment numbers soar nationwide.

The latest national figures last week showed that more than 30 million had filed jobless claims since mid-March.

California's unemployment insurance system, funded by payroll taxes, was barely solvent before the pandemic blindsided the economy, with less of a cushion than any other state or territory except for the U.S. Virgin Islands, according to the Department of Labor's Trust Fund Solvency Report.

Besides Hawaii, all of the states requesting advances also fell well below the department's recommended solvency level.

Since mid-March, California Gov. Gavin Newsom said Monday, the state has issued $7.8 billion in unemployment relief, and more than 4.1 million people have filed claims — about 21 percent of the state's pre-pandemic workforce.

Newsom stressed that the state was "good for our word," but called for direct federal aid. "This pandemic is bigger than even the state of California," he said. "The economic consequences of this pandemic are such that we can balance our budgets without substantial cuts, unless we get additional federal support."

States won't accrue interest on these federal loans through Dec. 31, under the federal Families First Coronavirus Response Act. But the last round of unemployment fund borrowing cost California $1.4 billion in interest payments, according to the state's Department of Finance.

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