Shaping Policies. Creating Opportunities.

COVID $$ to Unemployment Trust Fund?

Last week, Missouri legislators convened a Special Legislative Session to discuss allocation of the remainder of the Coronavirus Relief Fund in Missouri. While the Governor’s Supplemental Budget request and House Bill 14, the corresponding supplemental appropriations bill, both recommend funds for a wide variety of needed services, they also would allow federal COVID relief funds to be used to replenish the state’s unemployment trust fund – at the same time that the Missouri Department of Labor decreased the unemployment tax assessment for businesses.

While some funds included in the Governor’s recommendation and HB 14 would be allocated to COVID mitigation, school nutrition, and other items (further detail below), the largest appropriation by far is $752 million that would be allocated to the Department of Public Safety – State Emergency Management Agency. From there, the funding would be distributed to COVID-related costs at the discretion of the Governor.

Many of the costs outlined are to be expected – for example, the direct costs of purchasing PPE, contact tracing, etc., as well as more indirect costs, such as the reimbursement of “state employee salaries for staff working on COVID-19.” However, the “budget book” describes that remaining funding could be used to “shore up the Unemployment Insurance Trust Fund” (FY 2021 Supplemental Appropriations Recommendations House Bill 14, page 35). 

Although the Unemployment Trust Fund has been significantly depleted over the last seven months, in the normal course of operations, businesses would be assessed a slightly higher unemployment tax rate to rebuild the fund. However, the Missouri Department of Labor just announced that the unemployment tax assessment will be decreasing.

While COVID funding can be used to partially replenish unemployment trust funds, Congress never intended for COVID relief funds to be used for the purpose of lowering business assessments.

Missouri’s unemployment assessment is already quite low. The average rate of 1.24% is only applied to the first $11,500 of income per employee – which results in a business contribution of just $142.60 per year per employee to the trust fund. Beginning in 2021, the amount of income subject to the tax would be reduced, allowing businesses to decrease their contribution to the trust fund. The decrease will be very tiny for most businesses – with the new contribution of just $136.40 per employee per year – a savings of $6.

At the same time, Missourians who have been most impacted by COVID are continuing to suffer extreme hardship, including lasting unemployment. As of August, the state had 137,600 less jobs than it did a year ago (Bureau of Labor Statistics). Those who have been able to return to work are likely earning less than they did previously.  And, as of September 30th, 82,516 Missourians had exhausted their regular Unemployment Benefits (Missouri Department of Labor). Although these individuals are likely eligible for extended and special pandemic benefits in the near term, it is very likely that with the recent resurgence of COVID rates that Missouri unemployment levels could surge as well. As the crisis continues, Missourians who have already exhausted regular unemployment and others will exhaust all benefits.

Instead of using the COVID relief funds to replenish the unemployment trust fund, the funding would be better used if directed toward a stimulus payment to help Missourians who have been most directly impacted by unemployment due to COVID. That assistance would assure that funding would flow to families who are most in need and help stimulate local economies across the state.    

Missouri initially received $2.083 billion in federal relief funds through the CARES Act. $520.9 million was allocated to counties (this does not include additional funding that Jackson County and St. Louis County received directly from the U.S. Treasury. Some of the funding was allocated during the legislative session. However, the Missouri Office of Administration, Division of Budget and Planning has estimated that between $750 million – $1.5 billion remain (depending upon expenditures at the county level, some counties may need to return unspent funds to the State, which accounts for the range).

House Bill 14 is the vehicle for the supplemental budget and includes approximately $1.055 billion in spending authority for the remaining Coronavirus Relief Funding for Missouri. The most significant spending items include:

  • $140.9 million for testing, contact tracing and mitigation of COVID. These funds would be allocated to the Department of Public Health, for distribution to local public health agencies.
  • $75.6 million for school nutrition, in a special grant from the USDA.
  • $34 million for expansion of the Shared Work program through the Department of Labor.
  • $18.7 million additional authority from the federal Homeless Assistance CARES Act Grant.
About the Author

Leave a Reply