Massachusetts (MA) began 2020 with roughly $1.7 billion on deposit with the U.S. Treasury (UST) for Unemployment Insurance (UI). As of June 20th, that balance turned negative, ($766) million. Although initial claims continue at around 35,000 a week, or 10-times the average of last year, payable claimants remain just shy of 600,000.
The MA government is not making it easy to get a clear picture of how the pandemic is affecting its finances.
From a MA bond offering, an attached May 22, 2020 Information Statement discloses, “On April 6, 2020, the Commonwealth applied to the U.S. Department of Labor for an amount not to exceed $1.20 billion in repayable advances to the Commonwealth’s Unemployment Trust Fund account from the federal unemployment account for the period April 2020 through June 2020
A statement added on June 8th reads, “On June 16, 2020, the Commonwealth applied to the U.S. Department of Labor for an amount not to exceed $2.17 billion in repayable advances to the Commonwealth’s Unemployment Trust Fund account from the federal unemployment account for the period July 2020 through September 2020“
On June 8th, when the last Statement was published, my calculations show that MA had a negative balance at the UST of around $335 million. I don’t know why MA didn’t disclose its UST balance.
Although Mass requested $1.2 billion for the April through June period, as of June 23rd, the UST displays a total of $2.37 billion worth of withdrawals. Again, having begun 2020 with roughly $1.7 billion, Mass. will probably end June just shy of the requested $1.2 billion. From April through June, MA has been paying out an average of $183 million per week to UI recipients.
The $2.7 billion request for July through September ties out to my calculation of needing $730 million x 3 month for $2.19 billion.
Assuming we don’t have a second wave of UI applications, MA should end 2020 with $3.2 billion in UI liabilities.
These figures also allow us to calculate MA workers’ average monthly UI payments as $1,333.
I hope MA will be clearer about these numbers in their next bond offering Information Statement. Further, if they’re going to disclose statistics in this way, “From March 15, 2020 to June 6, 2020, a total of 968,899 initial claims have been filed for unemployment insurance”, I believe they should also disclose the actual claims, which, financially speaking, are the ones they pay out.
That said, the “initial claims” number is very important, suggesting MA is under more financial stress than the actual claims indicate. That is, based on initial claims, MA’s unemployment rate may be closer to 30%!
So far, it looks like MA’s current 3 million workers will need to pay an additional $80 month in 2021 to work off this UI liability. Hopefully the UST, as it during the Great Financial Recession, will forgo interest. Otherwise, I believe MA is currently looking at interest payments of 2.41%, or $75 million in 2021.
Any questions, please feel free to contact me at max at maxdatabook.