More than 324,000 Louisiana residents remain unemployed; drained trust fund could lead to higher business taxes

By David Jacobs | The Center Square

Though fewer Louisiana residents made new claims for unemployment benefits last week than the week before, the total number of people receiving benefits still increased, the Louisiana Workforce Commission says.

Meanwhile, the deliberate economic slowdown meant to control the spread of COVID-19 continues to drain the state’s unemployment trust fund, which could lead to higher taxes on Louisiana businesses without federal help.

Initial unemployment insurance claims for the week ending July 25 dropped to 18,511, a significant decrease from the prior week’s total of 32,079. For a pre-pandemic comparison, during the week ending July 27, 2019, 2,022 initial claims were filed, the LWC says.

The number of continued claims for the week ending July 25 increased to 324,357 from the previous week’s total of 313,117. There were 17,740 continued claims for the week ending July 27, 2019.

The state’s unemployment trust fund contains about $305 million. Before the pandemic began, the balance was more than $1 billion.

Employers pay taxes to sustain the fund. When it falls below $750 million, the amount of employee wages that are taxed increases, effectively raising taxes on employers, and weekly benefits for recipients are reduced.

Also, benefits would decrease, and the LWC would no longer be able to pay for its Incumbent Worker Training Program. Those changes wouldn’t kick in until the Revenue Estimating Conference meets in the fall, at which point adjustments could be made.

If the trust fund balance falls below $100 million, Louisiana law mandates a surtax on businesses of up to 30 percent on taxable payroll.

“This would be a last resort but without congressional intervention, it will almost certainly be necessary to ensure the trust fund stays solvent,” Gov. John Bel Edwards said.

Bars across the state are closed, while other types of businesses are restricted to half of their normal capacity.

Business owners have sued to lift some of the restrictions and some Republican lawmakers have called for the governor’s emergency order to be overturned, citing the economic damage. Some lawmakers and business owners also argue the restrictions violate their constitutional rights.

Absent an infusion from Congress, Louisiana (and many other states) would have to borrow from the federal government to keep the unemployment trust fund solvent through the end of the year. The loan would be interest-free but would have to be repaid by November 2022, requiring additional fees and assessments on businesses to pay back the loan, Edwards says in a letter to the state’s congressional delegation.

“I know that we can all agree that now is not the time to put increased burdens on Louisiana businesses with additional taxes or assessments,” Edwards says in the letter.