Baker is seeking a $1.2 billion loan to pay for unemployment benefits
Amid five straight weeks of soaring jobless claims, Gov. Charlie Baker asked the federal government for a $1.2 billion loan to help Massachusetts meet unprecedented needs and ensure people don’t suffer unpaid paydays.
Baker wrote to US Secretary of Labor Eugene Scalia on April 6 asking for funding, a government spokesman confirmed. In his letter, available to the news service, Baker estimates that Massachusetts will need to top up its coffers with a $900 million advance from Washington to pay unemployment benefits in May and another $300 million in June.
With a cash injection needed soon, the state’s Unemployment Insurance Trust fund balance has fallen by more than half to about $750 million since early March, amid a record high in applications.
Another wave of claims reported Thursday brought the five-week total in Massachusetts to more than 650,000, and that number doesn’t include the more than 200,000 formerly ineligible workers who are now under an expanded program that started Monday , seek help to support the self-employed and independent contractors.
Between April 12 and April 18, about 4.4 million other Americans and 80,000 other Massachusetts residents filed initial jobless claims, according to weekly data from the US Department of Labor.
Both new numbers were the lowest increases since late March — the state’s claims peaked at 181,423 between March 22 and 28 — but were still many times higher than any pre-pandemic record.
The most recent weekly high in the United States was 665,000 initial claims, reported in late March 2009 at the height of the Great Recession.
Between March 15 and April 18, nearly 26.5 million workers statewide and about 653,000 in Massachusetts filed for unemployment benefits, an unprecedented onslaught that has seen businesses across the country shut down to avoid the spread of the highly contagious coronavirus, which is found in killed nearly 45,000 people in the United States.
Baker told reporters Thursday that the department receives “10 to 15 times” as many applications per week as all previous records.
As massive as these numbers are, they do not reflect the full extent of the economic impact of COVID-19 on Massachusetts: In just three days, the state received nearly a third as many claims from newly eligible unemployed as it did from workers in the past five weeks, who were already entitled to unemployment benefits.
The pandemic unemployment assistance program, outlined by Congress in what is known as the CARES Act, extends eligibility to those who were previously ineligible for unemployment benefits, such as B. Self-employed, contract workers and gig workers.
After launching the program on Monday to accept those applications, the Executive Office for Labor and Human Resources announced Thursday that more than 200,000 people, none of whom are counted in federal figures on standard unemployment claims through April 18, have already submitted applications.
“These people, in a lot of cases, are probably going to get their checks next week, which is a great thing,” Baker said during a news conference Thursday.
Rolling claims, which reflect how many workers claim benefits beyond their initial claims and are reported with a one-week lag compared to new claims, are also at high levels. In the week ended April 11, nearly 16 million people in the United States and 464,000 in Massachusetts applied for ongoing assistance, the Labor Department reported.
If no worker filed initial claims more than once, the total of 653,000 claims for Standard Jobless Assistance filed between March 15 and April 18 would account for about 17.5 percent of the Massachusetts labor force.
The state unemployment rate was 2.9% in March.
In a report following Thursday’s release of the numbers, Greg Sullivan, director of research at the Pioneer Institute, estimated that Massachusetts’ unemployment rate is now “at least 20.4 percent.”
Job cuts have been particularly severe in hospitality, retail and hospitality, where business has evaporated on stay-at-home advice.
The Massachusetts Department of Asployment Assistance pays benefits to nearly 400,000 workers, and a customer service staff that once numbered about 50 has now grown to nearly 1,000 to handle the influx, according to the department’s news release Thursday.
The flood of damage has placed a considerable burden on the states. In Massachusetts, unemployment insurance trust fund balances fell 54% amid the state of emergency, from about $1.63 billion on March 1 to $748 million on April 16, according to Treasury Department data.
Baker’s request, if granted, would raise $1.2 billion in federal dollars to help the state meet its unemployment benefit obligation.
Massachusetts isn’t the first state to make such a request: New York requested a $4 billion interest-free loan to replenish its own dwindling unemployment insurance reserves, according to a Wall Street Journal report, which featured Massachusetts as a country with The biggest drop in the trust fund balance was between February and mid-April.
Two recent reports, one by The Tax Foundation and one by the Pioneer Institute, estimate Massachusetts could exhaust its fund sometime between May and July.
In addition to requests for state aid, any significant shortage could also prompt Massachusetts to charge companies higher unemployment insurance rates, Pioneer Institute authors Gregory Sullivan and Charles Chieppo wrote.
The cost of paying PUA benefits, which is a maximum of $823 per week like the standard program, is reimbursed by the federal government, as is the additional $600 per week that all unemployment insurance recipients receive through the CARES Act.
States cover the cost of unemployment benefits for all other recipients through the premiums paid by employers.