Emergency unemployment benefits sanctioned by Congress last spring start to run out this week, threatening the financial stability of about 2 million Americans who have been out of work for a very long time.
But for jobless Minnesotans receiving those benefits – and there are more than 63,000 of them – there is a safety net.
“No one in Minnesota is going to be immediately cut off,” says Lee B. Nelson, chief attorney for the state Department of Employment and Economic Development.
Once their benefits from that federal program run out, they’ll receive money from the state’s Extended Benefits Program for an additional 13 weeks.
At least for now.
The problem is, Minnesota’s access to those benefits will likely expire at the end of March and nobody is talking about extending them.
“Minnesota may trigger-off on that EB [extended benefits] extension,” said Nelson, which means that come April extended benefits for the long term unemployed in Minnesota would cease – unless Congress or the Legislature do something.
Here’s why. (This gets complicated, but hang in there.)
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Program tied to state unemployment rate
Under the law, the program continues only if the state’s unemployment rate is higher than it was in each of the last two years. That means unemployment rates have to rise for the program to continue in Minnesota. However, the state’s unemployment rate, which stands at 7.1 percent, is not expected to rise significantly.
Moreover, Minnesota has to start picking up a portion of the cost of the program.
The program is currently 100 percent federally funded under the emergency benefits law. In the past, the state paid 50 percent and the federal government paid 50 percent. (Minnesota started its extended benefits program in 1970.)
As of this week, Minnesota has to pick up 50 percent of the cost of the extended benefit program until it expires at the end of March, to the tune of an estimated $100 million, Nelson said. (Note that “we pay out $41 million a week” in benefits, Nelson said.)
Where are we going to get that money?
“Borrow it,” Nelson said.
“One, you’re at the mercy of Congress; and the other you’re at the mercy of the unemployment rate in the state. Will it go up or will it go down?” Nelson said.
Down the road, benefits payouts are uncertain, but, Nelson said: “If you’re unemployed today, you will have up to 26 weeks available of unemployment benefits. That one you can count on.”
Here’s how the state’s unemployment benefit system works. The state pays out 26 weeks of regular benefits to persons who qualify for them. The size of that unemployment payout figures at 50 percent of a person’s average weekly wage up to the state’s maximum of $578 per week, which could be allocated to a person who had been making about $58,000 a year.
States pay at different rates, with Wisconsin, for instance, paying out a maximum of only $363 a week, Nelson added.
When regular state benefits ran out, a person would apply to the federal emergency unemployment benefit program set up by Congress. There are three tiers to that program in Minnesota, tied to the state’s unemployment rate. “It’s very complicated,” Nelson said.
Minnesotans receiving money through the temporary federal program will continue to receive benefits in their current category until they exhaust them, but after Nov. 30, the program will accept no new applicants. In this current, more fiscally conservative political climate, Congress has not renewed the emergency payout program.
Even if lawmakers do not extend the current program now, they could in future, since twice before this year Congress missed a deadline to extend the plan but eventually funded it, thus allowing people on unemployment to receive retroactive and current benefits.
Before Thanksgiving the House fell short on a vote to extend benefits and the Senate did not address the issue.
Some key numbers
How many Minnesotans are currently receiving benefits? Nelson shared these numbers from the week ending Nov. 20:
- People receiving benefits: 152,238.
- New applicants that week for unemployment benefits: 6,197.
- Those receiving benefits under the regular state program of 26 weeks: 73,610.
- Those receiving federal extension benefits: 63,711.
- Those receiving state extended benefits: 13,049.
- About 2,000 additional persons receive benefits under some other programs.
What was the cost of such benefits the week ending Nov. 20? Total payout that week was $41,548,916 with an additional $2,172,000 of that in supplemental stimulus payments that are now being phased out.
Unemployment benefits do not come from the state budget, Nelson stressed, but rather from an Unemployment Insurance Trust Fund. Funds come from an unemployment insurance tax employers pay.
“There is a minimum tax that [employers] pay, but if benefits are paid out, the employers tax increases. Employers have to repay the fund what the benefits cost,” he said.
When unemployment rises, employers have to pay higher taxes, which explains why the employer-paid tax started going up in 2010 and will continue going up through 2015, Nelson said.
For the last year and one-half the fund has been in deficit, until taxes can replenish it. As of Nov. 20, Minnesota was $428,556,088 in deficit.
“This is not new. It is not unique. There are currently 33 states in deficit and borrowing from the federal government,” Nelson said. Minnesota was in deficit for periods in the ’70s, the ’80s and in 2002, he said.