OKPOLICY.ORG
Across the nation, the deep, prolonged economic recession is putting great strains on state Unemployment Insurance (UI) programs. Oklahoma is hardly immune from these challenges, but our problems are less severe than elsewhere. The combination of having entered the recession with our UI program in good fiscal health, the relative mildness of the downturn in Oklahoma, and the Legislature’s willingness to do what needed to be done to get the boost of available federal stimulus dollars should help allow the state’s UI program to continue to provide a temporary source of income until employment prospects improve.
As everyone knows, the June jobs report was brutal – the nation lost an additional 467,000 jobs, the unemployment rate reached 9.5 percent, and the total number of unemployed Americans hit 14.7 million, an all-time high. State-level figures for June have not yet been released, but May did bring relatively good news for Oklahoma, as the state’s 0.1 percent increase in the unemployment rate (from 6.2 percent to 6.3 percent) was far less severe than in prior months or in the nation as a whole. Still, the state saw its number of unemployed hit 111,700 for the month, an increase of nearly 50,000 compared to a year prior. The unemployment rate has now topped 7.5 percent in 19 counties, led by Hughes County, whose jobless rate reached 10.9 percent in May. The number of Oklahomans claiming Unemployment Insurance (UI) benefits rose to just under 50,000 in May, a 208 percent increase compared to May 2008. Almost 10,000 long-term unemployed workers in the state who have already exhausted their initial period of UI eligibility have now become eligible for an additional 13 weeks of benefits.
Such developments are putting enormous stress on state unemployment insurance systems. Every state has an Unemployment Insurance Trust Fund which collects revenues and pays out benefits. When fewer workers are employed, states pay out more in benefits while taking in less in UI tax collections. Yet while Oklahoma’s Trust Fund balance has declined over the past year, we are in a much stronger situation than most states.
According to a study by the National Employment Law Project, the UI Trust Funds in eight states had already reached insolvency by the end of 2008, while another 16 states faced certain or serious risks of insolvency over the course of 2009-10, leaving them dependent on federal loans to continue operating their UI programs. By contrast, Oklahoma entered the downturn with our UI Trust Fund in excellent shape. At the end of 2008, our Trust Fund had reserves equivalent to 51.5 months of average monthly benefits, the third strongest situation in the nation.
At its peak in August 2008, before the first onset of the economic downturn, the balance in Oklahoma’s UI Trust Fund was $863.3 million. At the end of June, it had fallen to $717.0 million, a decline of $145.6 million. The drop in the Trust Fund’s balance would have been much more precipitous but for the injection in June of $75.8 million as part of the federal stimulus package. Oklahoma became eligible for these new federal dollars as a result of the Legislature having approved some minor reforms to the state’s UI program that make more formerly part-time and low-income workers eligible for benefits (see our Issue Brief on the subject and one from the National Employment Law Project on what other states have done).
The expansion of unemployed benefits to additional laid-off workers during the downturn is not the only advantage of having adopted these reforms. More significantly, perhaps, by propping up the Trust Fund balance, the $76 million in new federal dollars are expected to avert an automatic trigger, known as conditional factors, that would have increased UI taxes on businesses and reduced UI benefits for the unemployed beginning in 2010. Such a situation would have impacted businesses and laid-off workers at precisely the time when they are already facing economic hardships.
There remain chronic weaknesses with the UI program: its benefits levels fall far short of replacing lost income, many people risk exhausting eligibility before finding work, and for various reasons, a majority of the unemployed, including some 60 percent of unemployed Oklahomans, do not qualify for UI in the first place. However, for Oklahomans who do qualify, the health of the state’s UI Trust Fund will be one less thing to worry about.
