WisBusiness: State expects $1.6B deficit this year in unemployment fund

By WisBusiness Staff

The state expects a $1.6 billion deficit in its unemployment insurance reserve fund this year, a DWD official told an Assembly committee today.

Andrea Reid, deputy administrator of the DWD’s UI division, said the agency expects that shortfall to improve slightly next year and projects a deficit of $1 billion in 2013, a total that’s “better than we anticipated a year to 18 months ago.”

But Reid also told the Assembly Labor and Workforce Development Committee the state could face an interest payment of nearly $50 million this fall after borrowing from the federal government to cover unemployment claims since early 2009. After two years of federal exemptions for states’ unemployment loans, Wisconsin began accruing interest on Jan. 1, with a payment due at the end of September.

Although Reid said the Obama administration has proposed another two years of deferred interest on those loans, the state may face more than $200 million in payments over the next five years without that extension.

Reid also said lawmakers should take steps to make improvements to the UI funding and benefit system to keep the program solvent going forward.

Although the national recession took a huge dent out of the UI fund, Reid noted that the state hasn’t taken enough revenue in to offset UI claims since 2003. She also noted that despite the improvement in the state’s shortfall in coming years, she doesn’t expect unemployment rates to reach normal levels until after 2014.