Recent layoffs and increased benefits have dwindled funds in Minnesota's unemployment trust fund.
This year, the state is expected to spend between $500 million and $600 million on unemployment claims, despite a recession or dramatic unemployment rates. Last year, the state spent about $409 million, state officials say.
The balance in Minnesota's fluctuating unemployment trust fund was $528.3 million by the end of July -- $142.5 million less than it was at the same time last year.
"If we were to have a recession like the 1991 recession, the Minnesota trust fund right now would go broke because we don't have enough reserves to pay the increased costs that we see right now in that scenario," said Jack Weidenbach, unemployment insurance director in the Minnesota Department of Economic Security.
However, Weidenbach said Minnesota's unemployment rate has remained at comfortable levels. For the funds to dry, it would take July's unemployment rate of 3.3 percent to jump into the 5 percent to 6 percent range, he said.
But there also are factors that show a bleaker forecast.
Minnesota is one of 23 states the U.S. Department of Labor has earmarked for not having enough in their unemployment trust funds at the end of last year to endure a yearlong economic downturn. The target for the state's reserve fund is at more than $1 billion, according to the Labor Department.
Reserve funds build in a strong economy, but states often are reluctant to let them grow too large. With July's initial claims 33 percent higher than a year ago nationwide, reserves are dropping quickly.
"It's difficult to have a system that responds quickly," Weidenbach said. "You never know what your increased costs are going to be."
Minnesota also has broadened eligibility in recent years, and maximum benefits increased Aug. 1.
Part-time, minimum-wage workers can typically qualify under Minnesota's new minimum requirement of $1,000 for the worker's peak earnings quarter plus another $250 from the remaining three quarters. It previously required $1,000 in the peak quarter and $250 in one other quarter.
"Our eligibility requirements are relatively low compared to other states," Weidenbach said.
And, last year, Minnesota workers leaving a job because of domestic violence were able to qualify for unemployment benefits.
Claims are set in proportion to earnings and generally equal half the wage amount. The maximum weekly benefit is $339 if based on the peak-earnings quarter method of calculation, a method usually used for seasonal workers. Top benefits are $452 a week if based on an all-quarters calculation method used for year-round workers.
Story contributed on-cycle by St. Cloud Times.
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