Bullock directs $200 million in coronavirus relief funds to boost unemployment insurance trust fund

Wednesday, October 14, 2020

HELENA – Coronavirus relief funds will bolster Montana's unemployment insurance trust fund, Gov. Steve Bullock announced Oct. 7.

Bullock directed $200 million in relief dollars to the trust fund, to prevent thousands of state businesses who pay unemployment insurance from getting an 85 percent spike in thir tax rate.

"Montana businesses have already been hit hard once due to COVID-19 and its economic impacts. The last thing we want is to see them hit hard twice by significantly increasing unemployment insurance rates," Bullock said. "Boosting the trust fund will have a real impact on the ground for tens of thousands of Montana businesses next year and for years to come and will play a key role in the state’s economic recovery."

"Business owners in Montana are doing all they can to navigate the economic challenges presented by COVID-19," Todd O’Hair, president and CEO of the Montana Chamber of Commerce, said. "Every bit of assistance helps, and this smart use of Coronavirus Relief Funds will bring some needed predictability to unemployment insurance rates as we emerge from the pandemic."

Montana's fund has been significantly tapped due to the COVID-19 pandemic. The unemployment insurance tax rate is typically set at the end of October each year and this year’s rate would have resulted in an increase in the average employer contribution rate of at least 85 percent.

Paying $200 million into the trust fund will bring the total to nearly $400 million and ensure the department can continue paying unemployment insurance to those who need it without overwhelming Montana businesses. Current estimates project this will save Montana businesses millions in tax increases over the next several years, relieving them from a required rate increase under state law to ensure funding is available for benefits.

Montana’s UI Trust Fund is financed through a tax on eligible wages from employers, using a multifaceted rate schedule. A lower balance in the UI Trust Fund results in higher UI rate schedules in adherence with state law to ensure the funds are adequate to meet demand.

Without this infusion, projections estimate the rates would need to move to from Schedule 1 to Schedule 7. There are 11 possible schedules. After the Great Recession, it took rates approximately eight years to return to Schedule 1, reaching a height of Schedule 7 in 2009 and 2010, slowly ramping down over that time.

Individual businesses may still see changes in their contribution rates based on their specific experience, such as hiring additional employees. However, these shifts are minor compared to the avoided overall rate impact that would have occurred without this transfer.

Bullock committed an additional $4 million in Coronavirus Relief Funds that will be distributed to the Montana Department of Labor & Industry to pay the employer share of reimbursable entities such as nonprofits, which do not pay unemployment taxes, but rather reimburse the state when a claim is charged against their account. Under the CARES Act, nonprofits are eligible for a 50 percent reimbursement from the federal government. The $4 million will be allocated to cover the remaining 50 percent.

By state statute, rates must be assigned by Oct. 31. The $200 million in Coronavirus Relief Funds will be paid immediately to prevent the rate increase from going into effect in 2021. Rate schedules and employer contributions paid between 2009 and 2019 are available at http://uid.dli.mt.gov/Portals/55/Documents/news/UI_Quick_Facts_10_Year.pdf.

 As of Sept. 28, 2020, 13 states had used Coronavirus Relief Funds to backfill their UI Trust Fund, 19 states are already borrowing from the U.S. Treasury to pay UI benefits, and two more have advance authorization to begin borrowing.