State plans to borrow from Federal Government for unemployment

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FORT WAYNE, Ind. (WANE) – Due to a depleted trust fund used to fulfill unemployment claims, Indiana plans to start borrowing federal funding in the coming weeks.

In the past, Indiana has relied on a state trust fund to pay for unemployment benefits, however that money is running out–and employers are the only funding mechanism to increase the trust fund.

At the beginning of 2020, Indiana’s trust fund had nearly a billion dollars. Now, after months of pandemic related unemployment claims, the fund is as low as $70 million and is expected to run out in the next two to three weeks.

“There are a couple of different ways to look at it, but one key economic indicator is the number of initial claims for unemployment benefits,” said Josh Richardson, Department of Workforce’s chief of staff. “That is new people coming to us saying ‘hey, I just lost my job and I need your help going forward’.”

On March 14, the state’s initial unemployment claims were 2,596. The state saw a massive increase after Governor Eric Holcomb announced the ‘stay at home order’ on March 23.Within one week, initial claims increased by nearly 57,000. The last week of March, claims peaked at 139,174.

“We are down now to where that number is closer to 10,000 or 11,000 of initial claims,” Richardson said. “We expect for that and hope for that to continue to decline.”

Richardson told WANE 15’s Briana Brownlee that the state is good to pay the regular unemployment until the end of the year. He stressed that those receiving unemployment shouldn’t experience any interruption, even if the trust fund runs out.

In the coming weeks, the state plans to take out a federal advance to continue paying unemployed Hoosiers as federal assistance is running out.

“Nobody should worry that their ability to continue to collect benefits would be in jeopardy. This process is in place for that reason, and they won’t even notice the difference when the funding source changes over,” Richardson said.

State Representative, 50th House District, Dan Leonard said Indiana has borrowed money three or four times in the history of the unemployment system.

“In the depths of the recession in 2008 and 2009, we actually borrowed $2.2 billion dollars from the federal government to pay unemployed Hoosiers,” Rep. Leonard said.

When that advance was taken out, there was a zero balance in the trust fund according to Leonard.

However, the state paid off that loan by 2015, and Indiana is in better shape now compared to 2008, Leonard explained.

The borrowing comes at a time while the department is also dealing with federal changes to unemployment benefits. During the beginning of the pandemic, the CARES Act provided an additional $600 for Americans seeking unemployment benefits. In late July, the extra $600 expired.

The President then signed an executive order to provide an additional $300 through FEMA as an emergency response. As of now, Congress has yet to reach an agreement on a new bill to fund additional money for those who are still unemployed.

However, this federal funding is expected to only last another five to seven weeks. Leonard said the additional money should start rolling out in the next two weeks.

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