DOVER, Del. (AP) - Delaware officials plan to borrow hundreds of millions of dollars from the federal government to pay benefits on an avalanche of coronavirus-related unemployment claims and replenish the state’s depleted unemployment insurance trust fund.
Department of Labor officials said Thursday that the trust fund, which had a balance of $165 million before Gov. John Carney shut down businesses in March in an effort to stem the spread of the virus, will be depleted by mid-July.
Officials have submitted an initial request for $196 million to cover payments through August, and are expecting to borrow another $150 million in the fourth quarter.
“As soon as we get that money it goes out the door,” said state Labor Secretary Cerron Cade.
State officials currently estimate that roughly $530 million will be needed to pay benefits through the end of the year and restore the trust fund to its pre-emergency level.
The federal government’s coronavirus response package includes a provision allowing states to borrow money at zero interest for the rest of the year to cover unemployment benefit costs, as long as the loans are paid back by the end of the year. Remaining balances and any future loans would be subject to interest payments, although states are hoping that federal officials extend the interest-free provisions - or forgive the loans entirely.
Meanwhile, states also are allowed to use money they receive under the federal Coronavirus Relief Fund to help cover state-funded unemployment claims.
The current plan is to keep the CRF money in reserve to pay back the loans later this year, rather than immediately committing CRF funds to pay for unemployment benefits. That would give officials more flexibility in using CRF funds for other virus-relate costs, such as testing, contract tracing and housing assistance, while buying time to see if the feds ease up on the loan requirements before the end of the year.
“We’re playing chicken,” Cade said.
Delaware was approved for a total of $1.25 billion in CRF assistance, but New Castle County is slated to receive $322.8 million of that total directly. Under the CRF program, any local government with a population exceeding 500,000 was allowed to apply directly for a portion of its state’s allocation.
State officials are asking New Castle County to share a portion of its CRF allocation to help cover unemployment insurance costs for jobless Delawareans, currently pegging the county’s fair share at about $138 million.
“New Castle County needs to be part of the solution,” said state Finance Secretary Rick Geisenberger.
Geisenberger warned that if officials can’t pay off the loans in a timely fashion with state and county CRF funds, the state would likely have to raise unemployment insurance taxes on employers “at the exact wrong time.”
Meanwhile, officials are eyeing legislation aimed at keeping employers from having to shoulder the financial burden of skyrocketing unemployment benefit payments for people who lost their jobs because of the coronavirus.
“Given the fact that we’re the ones who shuttered the economy, it’s the only fair way to treat employers,” Geisenberger said during a meeting of the state Unemployment Insurance Advisory Board.
Typically, an automatic increase in the unemployment insurance tax on employers is triggered if the balance in the state’s Unemployment Insurance Trust Fund falls below a certain level. On an individual basis, a business can also face higher unemployment insurance taxes based on its “experience factor,” based on total benefits paid from the trust fund for its employees.
Lawmakers are drafting bills to put the automatic trigger and experience factor components on hold until January.
Without the legislation, employers would be facing an estimated $140 million to $150 million in unemployment insurance taxes next year, compared to roughly $61 million this year, officials said.
Officials also are considering expanding the size of the state Unemployment Insurance Appeals Board, in anticipation of the panel having to handle a larger number of cases.
Meanwhile, officials reported Thursday that 3,037 initial unemployment claims were filed in the week ending June 6. Benefit payments for the week totaled more than $45 million, compared to $67 million paid in all of 2019. The number of continuing claims at the end of the week totaled more than 59,000, more than 10 times the amount in mid-March, when a state of emergency was declared.
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