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By the numbers: Minnesota’s unemployment insurance fund is running dangerously low (updated)

Steve Perry//June 11, 2009//

By the numbers: Minnesota’s unemployment insurance fund is running dangerously low (updated)

Steve Perry//June 11, 2009//

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The wretched economy is laying waste not only to the state’s general fund budget, but its unemployment insurance (UI) trust fund as well. 

At the end of 2008, the fund that pays Minnesota unemployment claims stood at $508 million. According to U.S. Department of Labor calculations, that represented reserves equal to about four months (0.34 years) of average payouts in a normal recession. In more adverse conditions–like those we’re experiencing now–it’s closer to three months (0.28 years). These metrics are the Department of Labor’s main solvency measures for state UI trust funds, and a year’s worth of reserves is generally deemed healthy. The Minnesota figures placed the state’s unemployment trust fund at 35th and 31st in the nation, respectively, by the DoL standards.

Since then, the UI reserve has been drawn down by a little more than half. At the end of May, according to U.S. Treasury data, its balance stood at just under $246 million.

Robert Pavosevich, an economist with the federal Department of Labor’s Employment and Training Administration, tells PIM that based on April payout levels of $172 million–the most recent figures available–that’s enough to fund 1.43 months’ worth of benefits. (But Pavosevich further cautions that this number–and the ones cited above–don’t take into account the continuing inflows to the UI trust fund during the specified period, which means the window of solvency is actually a little longer.)

As the nonprofit news site ProPublica reported earlier this week [part 1] [part 2], the problem is pandemic across the U.S. Many states are currently in the process of raising taxes or cutting benefits to deal with the crisis; Indiana has already borrowed $700 million from the federal government and enacted a 35 percent UI tax increase on employers, and the CFO of that state’s unemployment system says even that hike won’t spare the state from paying loan penalties to the U.S. government eventually. 

Reporter Olga Pierce elaborates: “Fourteen states have simply run out of money to pay benefits and been
forced to borrow from Washington a total of more than $8 billion. That
number is almost certain to grow as more states reach the brink. If
they are not able to pay that amount back before 2011, which most will
not be able to do, they face paying hundreds of millions of dollars in

The ProPublica report classifies Minnesota as one of nearly 20 states that “may have to borrow soon.”


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