Business & Economy

Long-term unemployed people are running out of benefits, state cautions

Michael Harrington
Michael Harrington, commissioner of the Department of Labor, discusses the state’s backlog of unemployment claims at a press briefing on April 17. Photo by Mike Dougherty/VTDigger

Despite the pandemic that has thrown a record number of people out of work in the past eight months, Vermont’s unemployment insurance trust fund, which is supported by taxes on employers, is in good shape now and could remain solvent for another year, says Labor Commissioner Michael Harrington.

The fund, which was at more than $500 million before the state started closing businesses in mid-March as a result of the Covid-19 pandemic, is now at about $260 million.

Harrington said some states have started to borrow money to replenish their unemployment insurance trust funds. Harrington doesn’t expect Vermont to need to do that unless business closures increase significantly.

“If we stay on the trajectory we are on, we are likely to end the next calendar year 2021 in the positive, and it’s even possible that we would not need to borrow at all, given ongoing contributions,” he said. “Even if we saw a complete doubling of claims, we would still end the calendar year of 2021 in the positive.”

However, things are not looking as good for the small number of people who are coming up on a full year of filing for unemployment benefits, Harrington told the Joint Fiscal Committee Monday, as it considered how to allocate about $81 million in coronavirus relief money. 

Those are the people who became unemployed before the pandemic began, and then were unable to return to work. The state unemployment system is unequipped to extend their benefit terms, Harrington said.

“We are very concerned about those individuals that are triggering off or exhausting their benefits,” said Harrington, and he doesn’t know how many people are in that position. “The No. 1 priority or concern now is those folks are coming to the end of the line for all benefits.”

Unemployment insurance benefits in the pandemic have included 26 weeks of traditional unemployment insurance, an additional 13 weeks of pandemic emergency unemployment compensation and 13 weeks of extended benefits. 

The problem is becoming more urgent now because the beginning of winter is historically a time when many people leave seasonal employment.

Pandemic assistance running out

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Compounding problems for some of the state’s unemployed is the ending of Pandemic Unemployment Assistance. The PUA, created by Congress in March, provides up to 39 weeks of unemployment benefits to people who aren’t eligible for traditional unemployment insurance. To be eligible for PUA, claimants must have lost their means of support for reasons related to Covid-19. PUA eligible beneficiaries include business owners, self-employed workers and independent contractors.

Right now about 12,000 people are filing for regular unemployment insurance and an additional 8,000 or 9,000 are filing for PUA, said Cameron Wood, director of unemployment insurance for the labor department. 

Under federal guidelines, all of the state’s $1.25 billion in federal Covid-19 emergency funding must be assigned to a program by the end of the year or it must be returned to the federal government. 

The Joint Fiscal Committee met Nov. 5 to start talking about the Scott administration’s proposal on reallocating $114 million in leftover CRF funds. On Monday, the panel spent  three hours debating how much to spend on a diverse list of proposals, including the Vermont Student Assistance Corp., the Public Service Department, and the Agency of Agriculture, Food and Markets, which is looking for $2.4 million for its Buy Local campaign and for expanded meat processing.

Business need estimated at $600 million

A priority for Joint Fiscal is the business grants program, which is administered by the Agency of Commerce and Community Development and the tax department.  

Throughout the pandemic, hospitality businesses — which include hotels, restaurants and other forms of accommodations and food service — have been hardest hit, dropping from 25,500 jobs in February to just 9,100 jobs in April. 

Employment in the sector is still at only about 40% of what it was pre-pandemic, at about 13,000 jobs, the labor department said.

Hospitality businesses likely make up the largest share of applicants to the business grants program, said Joan Goldstein, the state’s economic development commissioner. She told the committee that the Agency of Commerce and Community Development believes the unmet economic need to keep businesses of all types operating through the winter is $600 million. The committee is contemplating an allocation of only $75 million.

Tom Kavet
Legislative economist Tom Kavet, center, in April 2019. Photo by Glenn Russell/VTDigger

The Legislature’s economist, Tom Kavet, has said frequently that the billions of dollars pouring into Vermont grant programs hasn’t been well targeted. He asked the Agency of Commerce on Monday to try to do a better job of making sure the money goes to the companies that need it the most. 

For example, he said, a $300,000 cap on grant awards meant that state grants wouldn’t meet the needs of all businesses with large losses.

“Large hotels and resorts haven’t been as big a beneficiary because of caps and things like that,” he said. “If you had time to untangle and rewrite the rules, there are a lot of places you could move money to where it’s critical.”

After running out of time to make a decision Monday, committee members agreed to meet again on Saturday. That day, Nov. 14, is the panel’s deadline for sending a response to the Scott administration. 

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Anne Wallace Allen

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