Expanded Unemployment Would Cost Virginia $45M a Week, but Fund Is Almost Dry

by Tyler Arnold


If Virginia Gov. Ralph Northam opts to expand unemployment benefits by $100 a week per person, it would cost the state an additional $45 million a week, but the unemployment insurance fund already is set to run out of money in September, state officials said.

President Donald Trump signed an executive order to extend federal unemployment benefits by $300 a week, but states would have to supply an additional $100 a week, increasing the benefit to $400 a week.

The White House later said a state’s current unemployment contributions could count toward the $100, meaning states may not have to increase their payments and people would receive an additional $300 per week.

Some governors have said they will or likely will provide the additional $100 per week to the benefit, and many others, including Northam, have waited to make an announcement.

“We are continuing to review newly-released details from the U.S. Department of Labor to determine how – and if – we can proceed,” Alena Yarmosky, Northam’s press secretary, told The Center Square. “I would note that Virginia and other states are leading the fight against COVID-19, and we are doing so with increasingly limited resources. Governor Northam has repeatedly made it clear that we need more support from the federal government, not less.”

Virginia’s unemployment insurance trust fund has become financially less stable since the COVID-19 pandemic hit. Because of the pandemic and the subsequent regulations, the unemployment system became overburdened with recipients and has not yet recovered.

Before COVID-19 hit, the unemployment insurance trust fund had about $1.45 billion in reserves, but the the fund is set to run out of money at some point next month, Megan Healy, the chief workforce development adviser for Northam, told The Center Square. The system was unexpectedly burdened with another million people filing for claims.

At the current rate, Healy said Virginia will have to borrow $750 million from the federal government to supply its portion of unemployment benefits through the end of the year. She said the state has to put in its request for a federal loan for unemployment, but she hopes the federal government will provide a grant instead so the state does not need to raise business taxes to pay for it.

“We have been working with our congressional delegation around unemployment insurance and have asked if the loans can turn into grants,” Healy said. “With many businesses struggling now, this extra financial burden of an increased UI tax would be detrimental.”

Stephen Haner, a senior fellow for state and local tax policy at the free-market, Virginia-based Thomas Jefferson Institute for Public Policy, said the state should provide the additional funding until the federal government can.

“It would have been better if Congress had reached a compromise, and that’s their shame,” Haner said. “Until Congress gets its act together, yes, Virginia should find the matching $100 and draw down the federal funds to keep the supplemental benefits going. For once, we’ll be in a position to put the issue before the General Assembly next week.”

The unemployment bonus will be provided retroactively for recipients, which means claimants would get the extra funding starting Aug. 2.

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Tyler Arnold reports on Virginia and West Virginia for The Center Square. He previously worked for the Cause of Action Institute and has been published in Business Insider, USA TODAY College, National Review Online and the Washington Free Beacon.

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