Washington’s Unemployment Trust Fund starting to bounce back in 2022
Having hit its lowest point in the pandemic last year, the state’s Unemployment Trust Fund is now on the up-and-up in 2022.
Barring any other economic recessions, it appears the fund will stay that way.
“We’re looking at forecasts from the Economic and Revenue Forecast Council — those suggest that we’re at a point where we’re stabilizing and are growing,” said Dan Zeitlin, system policy director for the state Employment Security Department, at the Unemployment Advisory Council’s meeting on Friday.
The Unemployment Trust Fund pays out unemployment benefits for people in Washington. It was nearly depleted after the record joblessness during the COVID-19 pandemic.
Now, however, with people getting back to work, Zeitlin said the fund should reach “normal” levels — that is, pre-pandemic levels — by 2025. The state should also be out of danger of needing to take out a loan from the federal government.
“We’re not seeing that we’re going to dip below three months of available benefits — at three months, we ask the feds for a credit card,” explained Scott Michael, legal services manager at ESD.
The Unemployment Trust Fund is filled by unemployment insurance taxes on business owners, which are paid based on the number of people employed. These taxes are going up in the coming years to help replenish the fund after its losses.
However, a bill in the Legislature would lower the increase of those taxes in the next two years to help businesses. Similar bills last year also helped soften the tax hike for businesses.
Senate Bill 5873 would decrease the social tax — one form of unemployment tax that businesses pay — this year and next year. In 2022, the tax would decrease by a third — from a maximum of 0.75% to 0.5%.
“What we are doing is reducing the unemployment insurance increase — there’s still an increase, but it’s not as much,” said Sen. Karen Keiser (D-Des Moines), the bill’s prime sponsor, at a bill hearing last week.
The bill would also give an extra helping hand to the state’s smallest businesses next year by capping taxes on businesses with 10 or fewer employees.
“We’re emphasizing extra relief for the small businesses that are larger bearers of the social tax part of unemployment insurance,” Keiser said.
Business groups such as the Washington Retail Association and Association of Washington Business especially applauded this part of the bill.
“Our state’s small businesses are still struggling with the impacts of pandemic-related shutdowns and slowdowns,” said Patrick Connor, Washington director of the National Federation of Independent Businesses. “In fact, 65% of them still haven’t seen their sales return to pre-crisis levels.”
Keiser said that by dampening the tax increase, the bill would slightly slow the trust fund’s growth. However, she pointed out that the trust fund’s promising and healthy recovery has enabled legislators to write the bill.
“The balance of the benefit will not be undermined and we will have sufficient funds in the trust fund to pay unemployment benefits as they are needed,” she said.
Michael said if the bill passes, at the end of 2025, the Unemployment Trust Fund would have about 0.6 fewer months of benefits — or about 18 days’ worth — than if the status quo remains in place.
“We’re still projecting that the trust fund will continue to increase, … it’s just not going to increase as fast as it would under current law,” Michael said.