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UI Data Summary FY 2009 Budget Mid-session Review

OVERVIEW

Twice each year, when the Office of Management and Budget issues economic assumptions for the federal budget, the Division of Fiscal and Actuarial Services (DFAS) of the Office of Workforce Security (OWS) uses those assumptions to develop financial projections for the Unemployment Insurance system.

Using the economic assumptions, the paths of key program variables are projected for the following five years. It is important to keep in mind that the economic assumptions beyond the first two years are not intended to be forecasts but rather are based on long-term trends. Deviations from the assumed economic path could have a significant effect on the accuracy of the estimates shown in the UI Outlook.

Highlights of the analysis for the FY 2009 Budget Midsession Review are detailed below. The total unemployment rate (TUR) is projected to average 5.1% in FY 2008 and 5.6% in FY 2009.

Under these assumptions:

• The insured unemployment rate (IUR) is projected to average 2.2% in FY 2008 and 2.4% in FY 2009



• State UI regular benefit outlays are estimated at $38.35 billion in FY 2008 and $44.65 billion in FY 2009, up significantly from President’s Budget estimates of $33.55 billion and $36.10 billion, respectively. Outlays are higher than prior estimates throughout the projection period.



• Outlays from state trust fund accounts are projected to exceed revenues and interest income by $2.48 billion in FY 2008 and $4.93 billion in FY 2009.



• State trust fund account balances are projected to fall from $40.84 billion at the end of FY 2007 to $31.77 billion at the end of FY 2010 before starting to grow again.



• Borrowing from the Federal Unemployment Account (FUA) is projected to increase over the next few years due to higher projected outlays. The end-of-year balance of outstanding loans is projected to peak at $2.4 billion in FY 2011.



• The interest rate on FUA loans for CY 2008 is 4.8078%.

These projections assume no funding of employment services from the Unemployment Trust Fund after FY 2008, consistent with the Administration’s budget request.

Enacted Legislation

These projections include the impact of the new Emergency Unemployment Compensation (EUC08) program. Benefit costs are projected to be $4.41 B in FY 2008 and $5.84 billion in FY 2009. The bulk of funding for this program comes from the Extended Unemployment Compensation Account, thus pushing projected Reed Act distributions beyond FY 2013.

Proposed Legislation

The tables in this publication are based on current law, under which the effective FUTA tax rate drops from 0.8% to 0.6% in CY 2009. The FY 2009 President’s Budget includes a proposal to extend the 0.8% rate for one year, through CY 2009. This change would increase FUTA collections by $1.9 billion for FY 2009-10.

Questions and/or comments regarding this document are welcomed. Please contact Mike Miller at miller.michael@dol.gov or (202) 693-2930, or write to:

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