Financing and Benefits Dr. Wayne Vroman The Urban Institute - PowerPoint PPT Presentation

Overview of UI Program Financing and Benefits Dr. Wayne Vroman The Urban Institute October 24, 2018 1

Outline • Trust funds and financing • UI Benefits • UI Modernization from the ARRA • Disasters and Disaster Unemployment Assistance (DUA) 2

Chart 1. Aggregate Reserve Ratio, 1960 to 2018 4.0 Percent of Payroll 2.0 0.0 -2.0 1965 1975 1985 1995 2005 2014 1960 1970 1980 1990 2000 2010 2018 Reserve Ratio - Net Reserves as Percent of Payroll - Dec. 31 3

Taxable Wage Bases in 51 Programs - 2018 Tax Base Not Indexed Indexed 7,000 4 0 7,001 – 10,999 14 0 11,000 – 13,999 5 1 14,000 – 16,999 9 0 17,000 – 19,999 0 2 20,000 – 24,999 0 4 25,000 – 34,999 0 6 35,000 – 47,300 0 6 Total 32 19 4

Ratio of 2018 Tax Base to 2008 Tax Base 2018/2008 Total Indexed Not Indexed Ratio >= 1.50 11 4 7 1.4 – 1.499 0 0 0 1.3 1.399 8 5 3 1.2 – 1.299 11 9 2 1.1 – 1.199 3 1 2 1.01 – 1.099 4 0 4 1.00 14 0 14 Total 51 19 32 5

Simple Averages of State Reserve Ratios, December 2007 and December 2017 16 Indexed 32 Non-indexed 48 Programs Programs Programs December 2007 1.31 2.11 0.91 December 2017 1.29 2.13 0.87 Reserve ratio - net reserves as a percent of total payroll 6

Indexation and Borrowing, The Great Recession Non-indexed 51 States Indexed States States All States 51 35 16 States with 35 29 6 Loans Borrowing 0.69 0.83 0.38 Probability 7

Municipal bonds • First issuances 1987 - Louisiana and West Virginia • 1991 Recession – Connecticut • 2002 Recession – Texas, Illinois and North Carolina • North Carolina issued short term notes in 2003, 2004 and 2005 • After the Great Recession of 2007-2009 • 2010 Texas • 2011 Idaho, Michigan • 2012 Colorado, Illinois, Pennsylvania • 2013 Arizona, Nevada 8

Recent Municipal Bond Issuances State Texas Idaho Mich- Colo- Illinois Pennsyl Arizona Nevada igan rado -vania Issue Year 2010 2011 2011 2012 2012 2012 2013 2013 Loan 1,960 188 3,278 625 1,470 2,829 200 549 Amount a Loan/Pay- 0.5 1.1 2.4 0.7 0.7 1.5 0.2 1.3 roll - % Max 2020 2015 2023 2017 2020 2024 2014 2018 Maturity Callable Yes No Yes No Yes Yes No b Bonds? Year Fully 2017 2015 2020? 2017 2017 2019? 2014 2017 9 Repaid a- Loan amount in $millions b – 9 month tax anticipation notes

Illustrative Repayment Calculations: Illinois Annual Cumu- FUTA FUTA Cumu- Year Muni lative Credit Credit lative Repay Muni Offset Offsets FUTA ($mill.) Repay Rate % ($mill.) Offsets 247 247 0.3 153 153 2013 287 534 0.6 320 473 2014 368 901 0.9 494 967 2015 409 1,311 1.2 665 1,632 2016 2017 159 1,470 1.5 844 1,470 Total 10

Mean unemployment duration has increased • Duration – Mean unemployment duration, in weeks, CPS • Regression with annual data 1970 to 2008, • Duration = 0.066 + 0.656*TUR + 1.001*TURLag + 0.232*Trend 1970 • t Ratio (0.1) (2.7) (4.6) (12.1) • TUR – Total unemployment rate (CPS, labor force survey) • Adjusted R 2 = 0.83 Std. Error = 1.22 Weeks • Mean duration 1970 to 2008 = 14.8 weeks • Maximum duration 1970 to 2008 = 20.0 weeks in 1983 11

Chart 2. Average Unemployment Duration 1970 to 2018 40.0 Duration in Weeks 30.0 20.0 10.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014 2018 Average Duration Projection 2009-2018 Regression 1970-2008 12

Chart 3. UI Recipiency Rates 1989 to 2017 0.45 0.4 0.35 0.3 0.25 0.2 0.15 1989 1992 1995 1998 2001 2004 2007 2010 2013 2015 2017 IUTU WKTU IUTU - Ratio of weekly claimants to weekly unemployment 13 WKTU – Ratio of weekly beneficiaries to weekly unemployment

Chart 4. Average Benefit Duration, Three Groups of States, 1989 to 2017 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 1998 2001 2004 2007 2010 2013 2015 2017 43 States with 26 Weeks FL,GA,NC MI,MO,SC 14

Chart 5. UI Modernization - State Counts 2000 to 2018 50 40 30 20 10 0 2000 2003 2006 2009 2012 2015 2018 ABP Dep Allowances Exhaustee Training Quits Part-Time 15

Chart 6. U.S. Disaster Data Five Year Averages 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 1953-57 1963-67 1973-77 1983-87 1993-97 2003-07 2013-17 Major Disasters Fire Management Emergency Mgmt. 16

Disaster Payments • FEMA Individual assistance • Housing Assistance • Other Individual Assistance • FEMA Public assistance • Trash and debris removal • Infrastructure restoration • Hazard Mitigation • Disaster Unemployment Assistance 17

Chart 7. Proportion of Disasters with Benefits Five Year Averages, 1965 to 2017 1.000 0.750 0.500 0.250 0.000 1965-9 1975-9 1985-9 1995-9 2005-9 2015-7 P Individual Assistance P DUA Authorized P DUA Paid P Public Assistance 18