Showing posts with label covid unemployment insurance. Show all posts
Showing posts with label covid unemployment insurance. Show all posts

Sunday, July 12, 2020

Georgia pays out record unemployment claims even as number of initial claims declines

The Georgia Department of Labor paid out a record amount of unemployment insurance benefits in the shortened July 4th week. The payments in the holiday-shortened week were almost 3x the amount issued for all of 2019.

Georgia Unemployment Rate, Seasonally Adjusted

Regular state and federal unemployment insurance benefit payments totaled over $857 million. Since mid-March, total unemployment benefits payments in Georgia have exceeded $8.5 billion.

In the first week of July, $148,071,716 in regular weekly state unemployment benefits were paid. Since March 21, over $2 billion has been paid in regular state unemployment insurance benefits.

The news comes even as Georgia reports a drop in initial claims for unemployment with 13,985 fewer initial claims in the week ending July 4th than in the previous week. For the week, initial claims totaled 103,590.

For the week ending June 20, the state counted a total of 661,233 people on its insured unemployment rolls compared to 24,973 for the same week in June 2019.

Georgia Unemployment Insurance Fund

Although the federal goverment is covering much of the cost of unemployment benefits currently through the month of July, regular state unemployment benefits continue to be paid by the state and are funded through a tax on employers. 

Normally, the rate an employer pays into the fund is based on their experience rating -- the number of workers drawing unemployment from a given employer.

As the state draws down the money in its unemployment insurance fund, it needs to determine if rates need to increase so the fund does not run out of money. Georgia has already decided that Covid-19-related claims will not be counted when calculating experience ratings.

Some states have already asked the federal government for assistance because their drawdowns of their unemployment insurance funds are already running low.

In Georgia’s case, despite the recent spike in claims, the state’s unemployment insurance fund remains solvent. Georgia is estimated to have sufficient funds to be able to pay between 1.0 to 1.5 years of benefits associated with an average recessionary period.

Solvency of State Unemployment Insurnace Funds Ability to Pay Over 12 Months 
Based on An Average Recession, as of January 2020

Looking ahead to 2021

Although Georgia’s unemployment fund is currently in good shape, it will need to be replenished. 

After the last recession, Georgia reduced the number of weeks for unemployment benefits from 26 to 14 weeks to reduce the need to increase taxes on employers.

Assuming that the state’s economy will not quickly recover from the current economic downturn, in 2021, the state will have to consider another reduction in benefits coverage, higher taxes on employers, lower weekly payout rates, or a combination of these options.

In addition to needing to rebuild the fund, there will be pressure to modernize the system, as workers complained that the current system left them without benefits for multiple weeks due to breakdowns in the processing system. The state will need to determine whether its computer infrastructure needs t be modernized or replaced and if so, how to pay for the changes.

Not only is the current downturn stressing employers and employees, it is also putting pressure on state politicians next year to find ways to rebuild the state’s unemployment insurance system so it can better serve employers and workers in the future.