Unemployment claims still very high, but Wis employers won't have to chip in to get those benefits paid

I wanted to tie a couple of thoughts together relating to unemployment claims and where things might be heading. First of all, new unemployment claims remain at levels that would have exploded past previous records, with 14 straight weeks of new claims above 1.4 million.

And despite the talk of businesses reopening over the last month, the total number of people getting unemployment has remained high. Particularly when you realize that the drop in "regular" claims over the last month has been counteracted by individuals applying through other benefit programs. When you put those numbers together, we've had more than 31 million people filing for unemployment in each week since early May.

And we're seeing more businesses get restricted and/or close as COVID-19 makes a resurgence in parts of the country. Where are the jobs being added that will make up for these closings?

We also are seeing the structural decline of retail get sped up as fewer people want to go to stores during a pandemic. Look at this graphic that Yahoo News put out in this week.

Those stores and many others will keep closing in the coming months, and so you can add those workers to the unemployment lines (and the decline of commercial real estate that'll result from a bunch of empty storefronts).

In Wisconsin, we have not been immune from the unprecedented amount of job losses and unemployment claims. And the Wisconsin Policy Forum had a report out this week to see what effect those losses may have on the state's unemployment fund, which is used to pay claims.

From January 1 through June 8, U.S. Treasury Department and state Department of Workforce Development figures show Wisconsin’s unemployment trust fund took in $352.8 million from taxes and other revenues such as interest but saw $665.1 million flow out in state benefit claims and other payments (not counting federally funded amounts) – more payments already than in any year since 2013. The state has already collected the majority of payroll taxes it will take in during 2020 while the pandemic-induced surge in claims payments has only recently begun.

Fortunately, Wisconsin’s UI fund headed into the COVID-19 crisis in a stronger position compared to the last major economic collapse though it still lagged most other states (see Figure 1). After borrowing nearly $1.7 billion from the federal government during the Great Recession, the fund gradually repaid that debt and built up a balance of $1.97 billion as of December 2019. That allowed the state to lower the tax rates on employers that had risen to pay off the debt and rebuild the sagging balance.

And the Policy Forum says that Wisconsin employers are likely to continue to get that tax break for 2021, partially because of a provision that Republicans added to the state's legislation that spelled out some of the ways it will implement the CARES Act.

The basic rates for employers such as restaurants and bars, hotels, and entertainment venues typically would be about to rise at a time when they could ill afford it. Under the state’s normal policy, employers who have paid more in unemployment taxes than claims could see a rate increase of up to 1 percentage point on taxable wages; those whose claims exceed taxes paid could see an increase of up to 2 points, though in both cases the next highest rate in the schedule is used if there is no rate exactly 1 or 2 points higher.

To prevent that, Act 185 provides that benefits resulting from the public health crisis and paid for the weeks between March 12 and Dec. 31 of 2020 will not count against an employer’s claim history or reserve percentage, with the payments charged instead to the balancing account. In addition to federal loans, states may use funds from the Coronavirus Relief Fund within the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act to avoid insolvency in their unemployment funds, according to the U.S. Treasury Department.

In a way, this is kind of funny. Because as WisGOPs cry crocodile tears about how many Wisconsinites are still not able to get their unemployment benefits (largely due to barriers and understaffing that WisGOPs put in place over the last 10 years), the delays in getting benefits along with the GOP amendments to Act 185 are likely to have the effect of keeping taxes lower on employers for a year longer than they should have.

In the interim, we could use a little smaller government this time, and use efficiencies across agencies to get information about applicants and eliminate red tape. Republicans in Congress and the White House didn't seem to have any such problems with that when they were sending out $1,200 or $2,400 checks to Americans earlier this year. Even if some of those people weren't, ahem, eligible.

Wow: Treasury sent $1.4 BILLION in coronavirus stimulus payments to a million dead people, congressional watchdog finds. By ⁦@ericawerner⁩ https://t.co/hQIgNnP4Fk

— Aaron C. Davis (@byaaroncdavis) June 25, 2020

But you know what? $300 billion was sent out, which means an error rate of less than 0.5%. That seems to be a small price to pay compared to the 15% of Wisconsin unemployment claims that haven't been decided. I'll take a minor amount of errors that have to be clawed back over legitimate applicants getting screwed over and facing even harder financial situations because of delays in getting unemployment.

However, making Wisconsin unemployment applicants automatically eligible with the review coming later would require an actual act of the WisGOP Legislature, and those guys don't seem too keen on giving up their 10 1/2 month paid vacation at this point. So what could be done in the short-term to pay for the staffing and computer upgrades we need?

OH I KNOW! Given that Wisconsin employers are skipping out on higher unemployment taxes for the next year, why don't we dial back the tax cuts WisGOPs have given to manufacturers and Big Ag, which costs the State of Wisconsin hundreds of millions of dollars a year?

Then we can use some of that money to improve technology and staffing at the Wisconsin Department of Workforce Development. Seems like it'll be needed as unemployment is likely to stay high through 2021, If there's one thing we've learned recently, it's that Wisconsinites don't deserve to wait weeks while someone figures out whether they're a legitimate candidate for unemployment benefits while we have the most people out of work in 80+ years.