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High Unemployment Saps Virginia’s Trust Fund

Take Out Only sign on restaurant door during pandemic
A restaurant in Richmond's Carytown last month (Crixell Matthews/VPM News)

Virginia’s unemployment rate surged to nearly 11% last month, according to new data from the Department of Labor, up from around 3% in March.

The Virginia Employment Commission has processed over 700,000 claims from workers so far this year, with payouts totaling over $2 billion since March 15.

Those claims are taxing Virginia’s unemployment system, according to VEC Commissioner Ellen Marie Hess.

In a presentation to lawmakers on Tuesday, she said the state’s unemployment trust fund will run out of money in the third quarter of this year.

“The VEC anticipates that we will need to borrow to pay benefits in the third quarter,” Hess told members of the Senate finance committee. “And unless Congress acts, these funds will have to be repaid back by employers starting in the first quarter of 2021.”

When asked by Sen. Tommy Norment (R-James City) just how much employers would have to pay, Hess said the VEC was still running calculations.

“I can tell you it is going to be a significant impact if Congress does not act,” she said.

The state trust pays the base layer of unemployment insurance through the trust fund; the federal government covers the supplemental $600 weekly benefit added by Congress and signed by President Trump in March.

Employers pay into Virginia’s trust fund at a variable tax rate; those rates automatically go up through a so-called “ fund building charge ” when the funds are depleted.

The state’s chief workforce development advisor, Megan Healy, said on Friday that Gov. Ralph Northam’s administration had pressed Virginia’s Congressional delegation for more funding but may end up borrowing from the federal government. 

But she said it wasn’t a sure thing that employers would end up shouldering all of the costs and said that the state was looking at several options to plug the gap.

Other states are grappling with similar shortfalls as historic unemployment levels sweep the country. 

VEC’s phone lines have been slammed since the crisis hit in mid-March and its website has suffered from outages. Some workers have turned to Facebook groups to help navigate the process.

Gov. Ralph Northam announced on Friday that VEC would add a new call center with 315 employees to help keep up with the demand.

Even lawmakers said they have struggled to get help for constituents, with several pressing Hess for suggestions on how they could better access support agents at VEC. Hess said they would create an email address specifically for lawmakers to contact the agency.