DLLR Moves to Ensure Continuation of Unemployment Insurance Benefits


(BALTIMORE, 1/21/10) -- Alexander M. Sanchez, Secretary of the Department of Labor, Licensing and Regulation, announced that the Department has taken steps to ensure that Marylanders who have lost jobs through no fault of their own continue to receive unemployment benefits. The Department is seeking short-term advances from the U.S. Treasury to prevent the depletion of the Maryland Unemployment Insurance Trust Fund.

"The goal of borrowing is to ensure that unemployment benefits continue to flow uninterrupted to eligible Marylanders who are relying on them while they search for new jobs," Secretary Sanchez said.

"It will be business as usual," Secretary Sanchez continued. "This borrowing is neither long-term nor permanent, nor is it unprecedented. We fully intend to repay these cash-flow advances without interest by the end of the calendar year."

DLLR anticipates that these advances will be needed to pay unemployment benefits starting in February, until unemployment insurance tax payments from employers flow into the Trust Fund during April. The Department estimates that it will need to draw down approximately $250 million in advances. A provision of the American Reinvestment and Recovery Act (ARRA) allows states to borrow funds to supplement their trust funds on an interest-free basis through the end of 2010.

Twenty-six other states have obtained a total of about $25 billion in advances from the federal government to continue paying unemployment benefits. The U.S. Department of Labor estimates that as many as 35 states may need to borrow to pay benefits by the end of 2010.

The need for these advances is being created by unprecedented demand on the Trust Fund because of the economic downturn. The Trust Fund pays up to 26 weeks of benefits for Marylanders who lose jobs through no fault of their own. Extended benefits beyond the first 26 weeks are paid for by federal funds.

While the Trust Fund in Maryland has held up better than those in many other states, its reserves have declined to less than $100 million, from $755 million at the end of 2008. It is currently paying approximately $22 million a week in benefits.

As part of his aggressive strategy to strengthen small businesses and create jobs in Maryland, Governor O'Malley has introduced a proposal to provide $83 million in unemployment rate relief for Maryland employers and to make modernization adjustments to the unemployment insurance laws to allow the State to access $126.8 million in federal dollars to shore up the Trust Fund this year.

These funds will reduce the need to borrow again in the future and help return Maryland to lower employer contribution rates at a faster pace than would otherwise be possible. The Governor's proposal will also decrease the risk of fund insolvency and the harmful impact of long-term borrowing by instituting the relatively low-cost modernization measures necessary to access $126.8 million in federal dollars. These new funds will offset the modest, incremental cost of the modernization measures for seven years, during which time the State will climb out of the economic downturn and both employers and workers will regain surer footing.