During COVID pandemic curtailments, the balance in the Unemployment Insurance Trust Fund (UITF), which pays unemployment insurance benefits to unemployed workers, declined to less than $2 billion (less than 8 months of benefits).
The UITF is funded entirely from unemployment insurance taxes paid by employers. Because of the low balance in the UITF and the extraordinary demands on the fund due to high rates of unemployment, employers were facing increases of 200% or more in their unemployment insurance taxes – as well as possible surcharges – to maintain UITF solvency.
Fortunately, the Legislature responded to this crisis by appropriating over the $500 million of federal relief funds to backfill the fund, eliminating the risk of a solvency surcharge. Recognizing that employers were not responsible for pandemic-related layoffs, the Legislature temporarily adjusted UI experience rates to provide relief from unemployment insurance charges due to pandemic layoffs. In addition, the Legislature provided targeted relief for those employers that were most impacted by pandemic closures.
Recent data shows the Legislature’s actions worked. As the economy has recovered, so has the balance in the UITF. By the end of the 2023 fiscal year (June 30, 2023), the UITF balance had grown to $3.8 billion. Recent economic and revenue forecasts now project the fund continuing to increase to $4.4 billion in 2024 and $4.8 billion in 2025.
Under these forecasts, employer unemployment insurance tax rates should remain stable. Individual rates may fluctuate, however, depending on an individual employer’s layoff experience.