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Maryland's unemployment fund is running out of money

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Posted at 6:00 PM, Jul 09, 2020
and last updated 2020-07-09 18:10:36-04

BALTIMORE — Another 66,000 people filed for unemployment insurance in Maryland for the week ending on July 4. As of June 27, the Department of Labor had processed more than 601,208 claims.

While the state works to keep up with all the claims, the Unemployment Insurance Trust Fund is running out of money.

As of July 7, the UITF balance was $615 million. Since March 9, $600 million in benefits had been paid out from the fund.

In an oversight hearing on Thursday, Maryland Secretary of Labor Tiffany Robinson told lawmakers that the Division of Unemployment Insurance would need to borrow money from the U.S. Department of Labor in the next several weeks.

The Division created a model to predict when and how much will need to borrowed. Out of the seven scenarios, the best case scenario is that the Division has to borrow $1.2 billion from USDOL in the fourth week of August. The worst case scenario is that the Division has to borrow $1.87 billion in the third week of July.

USDOL is providing states with interest-free loans through the end of the year.

In a letter sent to USDOL Secretary Eugene Scalia, Robinson asked for an extension on interest-free loans through September 2021, or to issue a grant to replenish the Trust Fund. Robinson hasn't yet heard back.

"We are doing everything in our power to maintain a healthy trust fund and work with our federal partners to support our Maryland employers in this crisis and push for that trust fund replenishment, which would be the biggest bonus for the state of Maryland in terms of tax rate," Robinson said.

Employer tax rates for 2021 will be calculated in September. The last time the state had to borrow money from the government was in 2010 during the Great Recession. Following the loan, employer tax rates jumped to the highest tier.

"I feel the state’s in a good place to pay people, but it’s going to rack up this enormous debt and that debt will then be passed along to the businesses," said Senator Katie Fry Hester (D-Carroll & Howard Counties).

Hester is among several legislators pushing an alternative approach to reduce the financial burden on employers by encouraging them to participate in the Workshare Program.

"If you were a 10-person business and had to reduce your hours by 50 percent, you could either layoff half of your employees completely and they’ll be gone and you lose that future talent and it might be hard to bring them back, or you could workshare all 10 of them and they all work 50 percent of the time." said Hester.

The employer pays half of the employees salaries, the state provides a portion through unemployment insurance, and the worker would also get $600 a week as long as it's still around. The Federal Pandemic Unemployment Compensation program will expire on July 31. The last paid week for this program in Maryland is July 25.

Only around 272 employers and 5,681 employees are currently on the decades-old program. Hester estimates if those numbers grow to 100,000 claims, the state could potentially see savings of $225 million to $609 million.

She calls it a win-win for every party involved and believes with a boost, it'll make a resurgence.

"It’s a really great partnership with very few downsides, and it needs to be marketed much more aggressively across the state," Hester said.

Employers would still need to pay benefits, but that could change if employees become part time.

Also, claimants shouldn’t worry about not receiving their benefits. Claims will be paid regardless of the state's financial situation.

For more information on the Workshare Program, click here.