Indiana requests federal advance to cover unemployment insurance benefits

The state is quickly running out of money to pay unemployment benefits. And it's not alone.

Indiana is one of nearly two-dozen states and territories that are now seeking a bailout loan from the federal government to cover a shortfall in its unemployment insurance trust fund resulting from the novel coronavirus pandemic.

Josh Richardson, chief of staff for the Indiana Department of Workforce Development, said the state requested $300 million in advances because the trust fund is expected to be out of money by the end of the month. Interest on the loans has been waived through December.

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The unemployment insurance trust fund is the source of payouts for state jobless claims. So, once that fund runs dry -- it is financed by taxes employers pay on employee wages -- there will be no money to meet the state's obligations to unemployed Hoosiers.

Approximately 157,500 Hoosiers continued filing for unemployment insurance benefits that are paid out through the fund as of the week ended Aug 29. Another 169,000 claimants again sought benefits through the federal pandemic unemployment assistance program, which expanded coverage to workers traditionally ineligible for state benefits, as of Aug. 22.

Without borrowing from the federal government, Indiana could not afford to cover the state claims at their current level. Richardson said the state has paid out roughly $5 billion under the state and federal programs since March 1. Of that amount, more than $1.2 billion was in state benefits.

The U.S. Department of Treasury website notes that Indiana joins at least 21 other states and territories in seeking federal help to pay unemployment insurance claims during the pandemic.

The state asked and received authorization for a $60 million advance for September. However, only a portion of that, roughly $35 million, would be used, Richardson said, adding that the state likely won't borrow the money until Sept. 28 -- the last Monday of the month.

"The remainder doesn’t roll over," he said via email. "We then project October spending based on what we are seeing at the time. At any point, we only draw what is necessary to pay benefits."

Indiana has also asked for $120 million each for October and November. Richardson said the numbers are essentially placeholders that potentially could be revised up or down. Next month Indiana intends to make a projected loan request for December payments.

"We just draw down whatever is necessary," he said.

The pandemic has spurred Great Depression-era unemployment and a need for jobless benefits that drained state UI trust funds. At its peak, Indiana's unemployment rate was 17.5% in April. It has since dropped to 7.8% in July.

UI experts previously told Indystar they expected Indiana to borrow funding from the federal government to pay claims before the end of the year.

The state's trust fund was below the recommended solvency level at the beginning of the year at roughly $895 million. And though money continues to flow into the account, it's not enough to meet the current need.

The fund had less than $40 million as of Wednesday, Richardson said.

There is no limit on how much money states can borrow to cover deficits, he added.

Indiana borrowed nearly $2 billion in federal interest-bearing loans to cover unemployment insurance benefits during the Great Recession. It paid off the loans in 2015.

Contact IndyStar reporter Alexandria Burris at [email protected] or call 317-617-2690. Follow her on Twitter: @allyburris.

This article originally appeared on Indianapolis Star: Indiana requests federal advance to cover unemployment insurance benefits

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