MEMPHIS, Tenn. (WMC) - Tennessee state officials are closely watching the amount of money in the state’s unemployment fund because it could run out in a matter of weeks.
So what would happen to the 358,890 Tennesseans currently unemployment?
Tennesseans like Jennifer Willtrout, who lost her job selling vacuums door-to-door when the COVID-19 pandemic shut down her business.
“There were days every little thing, I’d start crying. Worrying, you know?” Willtrout said.
Willtrout applied for unemployment through the Tennessee Department of Labor and Workforce Development in March. She was recently approved.
Soon, she will receive up to $275 per week in state unemployment benefits.
State unemployment insurance is funded through taxes, primarily paid by employers. It’s held in an account, where the unemployed can draw from when needed.
According to the United States Department of Labor’s report on State Unemployment Insurance, at the beginning of 2020 Arkansas had $846,046,865 in its fund; Mississippi had $710,211,252 and Tennessee had $1,273,986,041.
While that sounds like a lot of money, a data model provided by The Tax Foundation, a non-profit based in D.C., shows Tennessee will only be able to dole out unemployment money for another 12 weeks.
“This, although bad, is surprisingly not that bad compared to many other states,” said Jared Walczak, the Foundation’s State Tax Policy Director. "Tennessee was about average and it was nowhere near good enough. "
The same model shows Mississippi has about another 15 weeks left of unemployment benefits while Arkansas has about 22.
“The good news for those who are laid off is that the claims will be paid out,” said Walczak. “The federal government serves as a backstop to make sure there’s money to provide the claims.”
However, there is a catch.
When a state borrows from the federal government to pay its unemployment claims, the loan may come with interest, which is determined by a state’s solvency rating.
A 1.0 rating or higher qualifies the state for an interest-free advance.
Arkansas and Mississippi qualify for such a loan but Tennessee does not.
Since December 2007, the start of the Great Recession, Arkansas borrowed $359,989,602 in order to pay its unemployed workers.
The loan and $28,280,000 in interest wasn’t paid back until 2014.
Walczak says the same scenario could play out in Tennessee, and then the state would have to raise unemployment taxes to replenish the funds.
“The last thing that anyone wants it the economy slowly start to reopen and businesses be in a position to potentially rehire and taxes be the difference between whether they can bring people back into the workforce or not,” said Walczak.
In a statement, the Tennessee Department of Labor said, in part, "In March, the trust fund was at record highs in terms of dollar amount...We are of course concerned with the impact that this unprecedented event is having and are monitoring the situation closely.”