Copyright © 2020 Albuquerque Journal
New Mexico has borrowed more than $50 million from the federal government to continue funding unemployment programs since its state trust fund ran out of money earlier this month.
With that total likely to increase in coming months, the state is looking at its options for paying that money back before costs start accumulating.
Workforce Solutions Secretary Bill McCamley said the state is considering a variety of options if the federal government doesn’t provide a bailout for states, including raising the wage cap on payroll taxes.
“These are just ideas, and nothing concrete has been floated yet,” McCamley said.
In the short term, the administration emphasized, nothing would change for New Mexicans receiving unemployment.
“I think New Mexicans need to understand that we’re paying attention; we’re going to preserve these benefits for individuals on unemployment,” Gov. Michelle Lujan Grisham said during a press conference Thursday.
Before the COVID-19 pandemic reached New Mexico, the state’s unemployment trust fund had a balance of $465 million. But the spread of the virus and associated business shutdowns caused unemployment to skyrocket.
McCamley told the Journal that DWS has paid out more than $2.32 billion through various unemployment programs since March 15. By comparison, the department paid out just under $138 million for the entirety of 2019.
The fund ran dry Sept. 8. Earlier in the summer, the state requested up to $285 million from the U.S. Department of Labor to fund unemployment programs for August, September and October.
As of Friday morning, New Mexico had borrowed $51.4 million of that possible $285 million. McCamley said he believed the state wouldn’t need to borrow the full amount, saying that would be a worst-case scenario. McCamley did not estimate how much the state might need to borrow in the future, but he said the amount will depend on how effective the state is at preventing the spread of the virus and how many claimants transfer from state to federal unemployment in the coming weeks.
McCamley said the state program provides unemployed New Mexicans with up to 26 weeks of benefits before they’re asked to switch over to a separate federal program that provides 13 weeks of benefits.
That timing means many New Mexicans who lost their jobs at the start of the pandemic will begin to transfer over to the federal system in the next several weeks. At that point, the state will no longer have to borrow to pay their benefits.
“We expect a fairly high volume of standard claimants over the next four to five weeks to switch over to that program,” McCamley said.
The state also has some time to figure out its approach to repaying its loans. These loans will be interest-free through the end of the year under federal law, and McCamley said the state has until fall 2022 before federal unemployment insurance taxes begin to increase.
“We would obviously want to have something figured out by then,” he said.
Lujan Grisham said she is hopeful the federal government will be open to providing financial support for states in this situation.
If not, McCamley said, the administration, legislators and business leaders would work together on a solution. In the meantime, he said, the focus should be on preventing the spread of the virus.
“The more the virus increases, the less we can get people off unemployment,” McCamley said.
