Unemployment Trust Fund Update

Dr. Bill Fox presented this morning to the Joint Select Committee on Business Taxes. His presentation indicated that Tennessee's unemployment rate is now at 7.9% which is higher than levels reached during the last recession. Also, we entered this recession with a lower balance in the Umemployment Trust Fund than during the last recession. These pressures may require an increase in premiums because projections show that the trust fund will run out of funds within the next few years.

There have been dramatic increases over the last two months in the amount of unemployment benefits being paid out. The forecast for the next quarter indicates about 20% more in benefits paid out than the 2001 recession and 8% more than during the 1980-1982 recession. The positive side of this figure is that the Tennessee work force is much larger than during the 1980s. So while the overall amount of benefits is larger, it does not indicate that we have exceeded the employment problems of the early 1980s.

To address the potential shortfall, Dr. Fox presented 4 options: Establish a larger trust fund balance in good times (too late for current circumstances), reduce benefits, increase premiums or broaden the taxable wage base.