Unemployment fund expected to ‘take a hit’ as claims increase amid outbreak

The state’s unemployment insurance trust fund is expected to suffer losses as many Wisconsinites are laid off due to coronavirus impacts. 

“I don’t think there’s any doubt that the unemployment insurance fund is going to take a hit,” said John Mielke, president of Associated Builders and Contractors and a member of the state’s unemployment insurance advisory council. 

During the council’s webinar meeting Thursday, Unemployment Insurance Program Administrator Mark Reihl said the number of claims has increased significantly this week after Gov. Tony Evers declared a public health emergency.

Between Sunday and Wednesday of this past week, about 29,000 unemployment insurance claims were filed in the state, according to preliminary federal figures. That’s compared to just under 3,700 for the same period of 2019. 

“It’s pretty clear we’ll be seeing sharp increases in unemployment insurance claim filings,” said Scott Manley, another council member and senior vice president of government relations for Wisconsin Manufacturers & Commerce. “The question that remains is how long will that last, and what will be the impact on the trust fund?” 

Dennis Delie, secretary-treasurer of the Wisconsin AFL-CIO and UI advisory council member, echoed Manley’s concern about the fund and noted the impact will be greater the longer the outbreak persists. 

After hitting a record low balance of negative $1.6 billion in 2011 following the Great Recession, Wisconsin’s UI trust fund has rebounded to around $1.9 billion at the end of last year. The state currently falls under the lowest tax rate schedule, meaning employers generally get more favorable rates across the board. The tax rate ranges from zero to 12 percent depending on the employer’s individual unemployment insurance account balance. 

“The good news is, we have a very healthy unemployment insurance fund going into this crisis,” Mielke said. 

Manley agreed the fund is in “a good position financially” and likely has enough reserve funds to “absorb this type of shock to the system.” 

Still, if the fund is reduced to between $900 million and $1.2 billion by June 30 of this year, the state will shift from Schedule D to Schedule C — the next lowest tax rate schedule — for 2021. Under that schedule, tax rates will still range from zero to 12 percent, but more employers would likely have to pay higher rates. 

“The tax rates themselves don’t change, it’s just the triggers for when you’d be required to pay that percentage that changes,” Manley explained. 

For example, a company with the same unemployment insurance account balance would have a higher percentage tax on Schedule A than on Schedule D, he said. 

“The tax system is experience rated and operates like an insurance program; the more charges against the employer’s account, the higher the tax rate. The fewer claims against the employer’s account, the lower the tax rate,” said DWD spokesman Tyler Tichenor in an email. 

In his most recent budget request, Evers had attempted to reverse unemployment insurance hurdles enacted under former Gov. Scott Walker, including the one-week waiting period and work search requirements. But the GOP-controlled Joint Finance Committee rejected his proposals. 

Earlier this week, Evers issued an executive order waiving work search requirements for claimants and categorizing workers who are otherwise eligible but unemployed due to COVID-19 as available for work and eligible for benefits. And Evers is asking lawmakers to suspend the one-week waiting period for UI benefits, so that workers impacted by coronavirus response measures won’t have to wait as long to get paid. 

“We’d hope the Legislature would approve that item as soon as possible,” Reihl said. 

Delie is also backing the guv’s request to lift the waiting period and calling on lawmakers to do the same. He noted many people in the state are living paycheck-to-paycheck, and low-wage jobs are likely to be hit harder than others. 

“It’s really important that we get money into the hands of workers that are affected by this,” he said. “To penalize them for that first week or cause a delay in benefits is kind of throwing salt in the wound at this point.”

–By Alex Moe