The state of Indiana has requested to borrow $300 million from the federal government to cover unemployment benefits for jobless Hoosiers through November.
Indiana Department of Workforce Development Chief of Staff Josh Richardson said the state’s unemployment insurance trust fund has about $40 million remaining in it—after entering the pandemic with a balance of nearly $1 billion. The fund is expected to run dry by the end of September.
The state has not borrowed any money from the federal government yet, but it has requested $60 million to cover shortfalls for September, plus $120 million for both October and November.
“We know that we’re going to borrow,” Richardson said. “There was no reason to wait any longer.”
Indiana is now one of 20 states that has requested a loan to cover unemployment benefits.
Since the beginning of March, the state has paid out nearly $5 billion in unemployment benefits to more than 680,000 unique individuals, with about $1.17 billion of that amount being state benefits. The rest has been federal benefits.
Richardson said the state has typically been paying $30 million per week in state unemployment benefits. At that pace, the fund will likely be depleted by the last week of September.
He said the fund, which is supported by taxes paid by businesses, will likely see some revenue in October, which could help offset how much the state ends up borrowing.
Interest has been waived on the Federal loans, known as advances, through the end of the year. But after that, without further action from Congress, interest could start building on Indiana’s outstanding balance. The interest rate has not been set, but it could be around 2.4%, Richardson said.
It’s unknown how long the state will have to borrow from the federal government or how much the loan will end up totaling.
“There are so many balls up in the air,” Richardson said.
During the Great Recession, the state had to borrow roughly $2 billion from the federal government to pay unemployment claims. The state paid back that loan in 2015.
Richardson said this situation is slightly different from the last time because the fund is now set up to not only be sustainable, but to dig the state out of a hole, if necessary.
“It’s similar to then, but there are some key differences,” Richardson said.
State lawmakers overhauled the unemployment trust fund in 2011, requiring businesses to pay about 80 percent more into the system and trimming benefits to out-of-work Hoosiers by about 20 percent.
Earlier this year, lawmakers passed legislation that locked businesses in at the same contribution rate for another five years. The rate had been expected to drop but the state was trying to comply with federal guidelines that suggested the fund have a balance of $1.8 billion.