WKYT Investigates | Ky. unemployment dollars dry up as pandemic shutdown drags on

Kentucky's unemployment insurance trust fund, which the state uses to pay UI benefits, is quickly dwindling as a result of an historic number of claims stemming from the coronavirus pandemic shutdown.

“We’re probably looking at a matter of days left in the UI trust fund than weeks,” said Jordan Harris of the

www.pegasuskentucky.org/?fbclid=IwAR12gz__3e_x4QiRIK9oDoJgyF7JzVPreheaG7Z5avTVjK4NbomZ3qy4HWI”>Pegasus Institute

, a non-partisan and non-profit Louisville-based think tank.

Asked during his news conference on Friday about the status of the trust fund, Gov. Andy Beshear, D-Ky., did not say how much money remained in the account but said he believed the state had enough to get through the end of spring or into the early summer.

Gov. Beshear again indicated he will ask the federal government for a loan to be able to keep paying benefits to Kentuckians in need.

But if or when the state does that, it will have to pay back the loan with interest - which will cost the commonwealth even more as it tries to recover from the economic devastation caused by the disease and the extended economic shutdown in response.

Kentucky has seen its unemployment rate skyrocket in the weeks since public health leaders confirmed the state's first COVID-19 case on

.

“We’ve never really seen anything quite like this,” said Dr. Michael Clark,

gatton.uky.edu/faculty-research/faculty/clark-michael”>associate director

of the Center for Business and Economic Research at the University of Kentucky. "It's likely that it's going to take a little bit of time to slowly work our way out of this."

By the end of April, approximately a quarter of Kentucky's workforce was out of a job, according to the state's third-quarter revenue

.

That percentage is now closer to a

of the state's civilian workforce as the number of initial unemployment claims over the duration of the pandemic approaches 700,000, according to numbers provided by the

.

Gov. Beshear said Friday that the state has paid out $1.2 billion in unemployment benefits for those claims.

Roughly 33.5 million Americans have filed for

in that seven-week period. That has led to a 14.7% unemployment rate nationwide, the highest since the

www.wkyt.com/content/news/A-devastating-jobs-report-for-April-will-show-viruss-impact-570299991.html”>Great Depression

.

"Today's report reflects the massive impact that measures to contain the coronavirus have had on the American workforce," U.S. Secretary of Labor Eugene Scalia said in a statement Friday following the release of the April jobs numbers.

The money to pay unemployment benefits comes from a tax that businesses pay, which is then deposited into the state's unemployment insurance trust fund with the

. About 94,000 employers paid into Kentucky's UI system in 2018, according to numbers from the state's latest trust fund

In theory, the fund grows in good economic times (with more employers paying into it, and fewer claims needing to be paid by withdrawals from it) so that it can be used in poorer times - like now - as the number of claims rises.

Kentucky has had to take out loans before to pay for the unemployment benefits it owed. At the height of the Great Recession in January 2009, employer taxes and trust fund reserves could no longer cover the costs of unemployment claims filed in Kentucky, according to the state's latest report.

That year the state borrowed from the federal government more than $500 million to meet benefit payment obligations. In total, the state borrowed $972 million, which was paid back by the end of 2015 - two years ahead of schedule, saving Kentucky businesses $165 million in federal unemployment taxes (or $105/worker), the

reported in August 2015.

The state paid off the debt early as a result of fewer unemployment insurance claims and changes lawmakers made to reduce benefit payments. then-Gov. Steve Beshear, D-Ky., said at a news conference at the time.

By January 2020, the state's fund had swelled to nearly $619 million, according to account statements filed with the

.

Since then, it has dwindled, and dwindled quickly.

The state went through roughly a quarter of its total available funds from March through April 16, Jordan Harris of the Pegasus Institute pointed out, even as the number of claims continued to increase.

The

and others have projected that Kentucky’s trust fund likely would not last through May.

“That eight years of surpluses is going to be completely wiped out in about a two-month period,” Harris said. “There's no real foreseeable scenario where the state wouldn't have to borrow from the federal government at some point this month.”

Asked during his

about the status of the state's UI trust fund in the face of an unprecedented number of claims, Gov. Andy Beshear said he expected the state would take a federal loan "just like we have in the past."

He added:

"I'm not going to stop paying benefits simply because we need to get a loan. My commitment isn't just to help everybody that's had to wait too long, but to make sure that we can continue to get the help. And then we'll be able to pay it off over time, we'll be able to dig out - but this is the time where people need us the most, right? The most. And we've got to do whatever it takes to be there for them."

That could include paying millions of dollars in interest to the federal government.

Thirty-one states/jurisdictions can borrow money interest-free in 2020, according to the U.S. Department of Labor's

. Kentucky is not one of them.

Kentucky is one of 22 states/jurisdictions below the federal government's recommended solvency standard. That means, according to the government's definition, that their unemployment insurance trust funds would not be able to survive an economic downturn without help.

States need a solvency level of 1.00 to qualify for interest-free borrowing. Kentucky's solvency level is 0.57, which puts it 11th worst out of 53 jurisdictions (50 states, plus District of Columbia, Puerto Rico and Virgin Islands). The last time Kentucky met the recommended solvency level was 1974.

Kentucky's solvency level is better than its neighbors Illinois (0.42), Ohio (0.42), Indiana (0.51) and West Virginia (0.52) but trails neighbors Missouri (0.86), Tennessee (0.96) and Virginia (1.10).

And even while experts believe the worst of the layoffs is likely over, there is no quick and easy road to recovery.

Elevated unemployment rates are expected to continue even well into 2021, and businesses and employers could face higher unemployment insurance tax rates as the state tries to pay back the loan and interest.

That combination could have further ripple effects on the economy as a whole and could lead to prolonged economic problems for the state and region even long after the pandemic ends.

"It is likely to be a slow process, partially because it's a phased-in approach, but there is also still a lot of uncertainty about how the virus will progress in the future,” Dr. Clark said. “I think a lot of households are maybe going to be hesitant to increase their spending back to where it was before.”

Kentucky state budget officials announced in their third-quarter revenue

an expected revenue drop amid a projected recession that could lead to a General Fund shortfall of $318.7 to $495.7 million.

WKYT’s

reached out to Gov. Beshear’s office on Friday morning about the status of the state’s UI fund.

"At the current rate, end of spring or into the summer we're going to have to look at options," Gov. Beshear said during his news conference that afternoon. "We feel pretty good about the dollars that are in it about making it to those points.

"We'll see exactly how much Healthy at Work picks up our economy, how many people go back to work," he said, "but knowing that we've just got to get through the period of time to defeat this virus, we're going to do whatever it takes to ensure there are dollars in that, including borrowing - which was done during the Great Recession; surely we would do the same during COVID-19, a worldwide health pandemic."

Gov. Beshear did not say how much money he thought the state would need to borrow.

This week the state of Ohio asked the federal government for $3.1 billion to fill an impending shortfall in its unemployment trust fund,

. Like Kentucky, Ohio is not eligible to borrow without interest.