Governor commits to dedicating CARES Act funding to Unemployment Insurance Trust Fund as businesses face increased taxes

The current balance of Kentucky’s Unemployment Insurance (UI) Trust Fund is negative $460,207,409 according to Kentucky Labor Cabinet Secretary Larry Roberts, who presented on the topic to the Interim Joint Committee on Economic Development and Workforce Investment Thursday in Frankfort.

Roberts said the fund is projected to reach the negative $600 million mark by year’s end, due to the unprecedented number of unemployment insurance claims from Kentuckians in the midst of the COVID-19 pandemic, but that “Governor Beshear has committed to dedicating a significant amount of CARES Act dollars to that trust fund balance by the end of the year,” according to Roberts.

“We are pleased to hear the Governor will provide CARES Act monies to support the UI Trust Fund,” said Kentucky Chamber President and CEO Ashli Watts. “We have advocated for this and welcome the help it will provide employers as they work to recover and get our economy back on track.”

Roberts’ presentation outlined the current status of the UI Trust Fund, saying that interest on the fund will be accruing on January 1, 2021, “However, the U.S. Treasury will not take action to collect the loan until January 1, 2023,” Roberts said.

Despite the significant debt accrued by the fund, Roberts said most employers would see a “modest tax rate increase” in 2021. The current average UI Tax Rate for Kentucky employers in 2020 is 1.76 percent. The Labor Cabinet projects the average to rise to 2.52 percent in 2021 and 3.23 percent in 2022.

The impact on Kentucky businesses, many of whom are already struggling to make payroll payments and pay utility bills in the face of the pandemic, remains to be seen.

In addition to the UI Tax Rate increase for Kentucky employers, Roberts also mentioned the surcharge upon all subject contributing employers for any year there are insufficient funds in the Unemployment Compensation Administration Fund for the payment of interest on advances to the UI Trust Fund, pursuant to state law. According to the presentation:

• The formula contained in the statute will be calculated at nineteen-hundredths of one percent (.19%) of the first $11,100 in wages paid to each worker by a subject contributing employer.
• The surcharge shall be due and payable at the same time and in the same manner as employer contributions.  This surcharge will increase the cost for contributing employers by $21.09, and it will generate approximately $38 – $40 million each year.

Roberts also went over details of the Pandemic Unemployment Assistance (PUA) program that was passed by Congress in March, which allowed citizens to draw benefits based on fear of exposure to COVID-19. The Beshear Administration was scrutinized earlier this month by a story from the Kentucky Center for Investigative Reporting for ‘Backtracking and Billing’ Kentuckians who filed for unemployment insurance benefits based on the PUA program.

In response to the story, Senate Republicans last week held a press conference to announce legislation in the upcoming 2021 Session to address ‘mistakes’ in handling of these overpayments.

Roberts told committee members Thursday that the state is not pursuing collection of these overpayments and that Kentucky Labor Cabinet submitted a letter to the U.S. Department of Labor earlier this week requesting a waiver of collection for these overpayments.