Nevada ran out of money to pay unemployment benefits.
But don’t worry if you are among the hundreds of thousands without a job and who receive or want to receive a salary without a job: you will still receive your check without a hiccup.
On Thursday, the Nevada Department of Employment, Training and Rehabilitation said the unemployment insurance trust fund ran out this week.
In the week ending December 5, there were 783,384 new unemployment claims filed in 2020, of which 761,732 were filed since the week ending March 14.
Nevada, which joins 22 other states, is demanding advances from the federal government to pay unemployment benefits.
“DETR will continue to lend funds as required under Title XII of the Social Security Act, similar to what was done in the last recession, to ensure that eligible claimants receive their benefits without interruption,” said Rosa Mendez, the carrier. of the agency, in a statement. . “Borrowing money from the federal government in this way is typical in times of economic recession.”
Experts say the long-term impact will be felt by employers, who are likely to face higher pay taxes, and even by new applicants, who may see stricter eligibility requirements in the coming years.
The trust fund is financed by payroll taxes for employers.
“I think there’s a very good chance that an increase in unemployment insurance tax will pay off these loans,” Thoran Towler, CEO of the Nevada Employers’ Association, told Review-Journal.
“There have been significant reductions in unemployment insurance tax in recent years, because the fund has accumulated so much” surplus “in a long period of economic growth. There has been no increase this year due to the pandemic, but it is likely to increase next year. “
Matt Weidinger of the think tank American Enterprise Institute previously mentioned that future unemployment insurance claimants could be affected even more directly.
“You can either raise taxes to support the level of benefits you want to offer, or reduce benefits (to a depositor) in some way – you can reduce the number of weeks, you can reduce the amount in dollars – there are all sorts of ways in you can adjust the benefits, but there is a balance, ”he said.
Borrowing again
On Thursday, the state borrowed $ 14.57 million from the federal government to pay off debts. States can borrow money when their UI trust funds have been exhausted under Title XII of the Social Security Act.
This isn’t the first time Nevada has done it.
It took the state seven years to reimburse $ 773 million from the federal government to cover unemployment benefits during the Great Recession, when the state saw 175,000 jobs dried up and the unemployment rate rise by more than 14 percent.
This year, Nevada’s unemployment rate rose to the highest in the country, by 30.1% in April, according to the US Department of Labor. In November, Nevada’s unemployment rate rose to 10.1%.
Mendez said the Nevada trust fund lasted nine months of “extraordinary activity” due to the agency’s actions to build reserves before the COVID-19 pandemic.
In a July 2020 report, the agency said the UI trust fund was “well positioned” at the start of the COVID-19 pandemic response, with “the healthiest balance of just over $ 2 billion in February 2020.”
The loans Nevada took out to pay unemployment benefits will not have accrued interest until the end of the year as part of the Families First Coronavirus Response Act.
The agency said it is working with the state’s Security Council on Employment to set employer contribution rates that balance current and future needs and rebuild the trust fund where appropriate.
Towler, of the Nevada Employers’ Association, said that if there was an increase in taxes, the real impact on employers would depend on their current rate.
“Employers currently pay within a set time, which depends on their past history of receivables. The real growth felt would vary for each employer, “said Towler. “That being said, employers are afraid of any tax increase in Nevada’s current economic situation.”
Contact Jonathan Ng at [email protected]. Follow @ByJonathanNg on Twitter.