(The Center Square) – Unemployment claims in Virginia have been decreasing steadily since the state began reopening its economy, but they are still higher than last year and the state's unemployment trust fund is practically out of money.
Continued unemployment claims dropped to 160,764 for the week ending Oct. 3 – a 7.5% decrease from the previous week and a big drop from mid-May, when claims reached about 400,000.
Unemployment claims for the past week are about 10 times higher than they were at the same time last year. Although the unemployment numbers are improving, the Unemployment Insurance Trust Fund is set to run out of money at some point next week.
To ensure claimants continue to receive benefits, the fund will be replenished through a loan from the U.S. Department of Labor, which has been the solution for many other states facing the same problem.
The commonwealth has asked the federal government to forgive these loans, but if it does not, the state likely will have to raise business taxes to take in enough money to pay it back.
“Every recession I can remember, the state’s [unemployment insurance] trust fund has been depleted and has needed to borrow from the federal government to continue paying benefits,” Stephen Haner, a senior fellow for state and local tax policy at the free-market, Virginia-based Thomas Jefferson Institute for Public Policy, told The Center Square.
“As the situation improves, the state will have to repay the loan,” he said. “That happens by increasing the taxes that employers have to pay. This year’s hole will be the deepest it has ever been, and the new tax rates in 2021 will probably be incredible, but the basic mechanism is sound. A federal stimulus package could include provisions to reduce the burden on the states, by forgiving those debts, but at this point nobody can count [on] any such federal action.”
The largest number of unemployment claimants are in northern Virginia, Hampton Roads and in the Richmond area.
New unemployment claims, which represent people who were not previously on unemployment, saw a slight increase last week, but still are lower than April’s peak and in the subsequent months. New unemployment claims were at 10,843, which was a 1,466 increase.
The Virginia Employment Commission did not respond to a request for comment.