91°F
weather icon Clear

Fund for jobless Nevadans expected to run dry in 7 weeks

Nevada’s pot of money for paying jobless benefits runs out in less than seven weeks.

The unemployment trust fund has already plummeted by about 86 percent since March, when Gov. Steve Sisolak mandated the closure of casinos, restaurants, bars and other nonessential businesses.

It took the state nearly seven years to rebuild its trust fund after the last recession, and, at this rate, it will take only around six months to empty it.

“There has been historic levels of claims, so what you’re finding is, even faster than any normal recession, states are burning through their state trust funds,” said Matt Weidinger of think tank American Enterprise Institute.

Filers will still be able to receive their benefits when the trust fund runs dry, but experts say the long-term impact will be felt by employers, who will likely face higher payroll taxes, and even new filers, who may see stricter eligibility requirements in coming years.

When depleted, Nevada can borrow as much as it needs from the federal government to continue paying benefits like it did during the Great Recession.

Rising rates

During 2010, Nevada’s unemployment rate hovered around a high of 13.5 percent.

This year, Nevada’s unemployment rate ballooned to the highest in the country at 25.3 percent in May, according to the most recent data from the U.S. Department of Labor. Hawaii follows at 22.6 percent, while Michigan comes in third at 21.2 percent.

A significant spike can also be seen when comparing the number of new claims during the Great Recession to the current pandemic- fueled economic downturn.

The Department of Employment, Training and Rehabilitation reported that 562,486 initial claims have been filed this year through the week ending July 4 — 96 percent of those new claims were filed since the week ending March 14.

During the Great Recession, the state saw a high of 36,414 new claims in December 2008 accounting for roughly a sixth of the claims Nevada Department of Employment, Training and Rehabilitation saw this March.

Weidinger said the high number of unemployment claims across the country means many states will exhaust their trust funds and look to borrow from the federal government.

But, he cautioned, the extra money is a loan, not a grant.

Nevada will likely have to raise payroll taxes to pay the loan back and help rebuild its trust fund, which is fully supported by employer payroll taxes.

“States having to resort to loans because their trusts are exhausted is going to even more immediately result in state’s having to automatically raise state payroll tax levels,” Weidinger said. “You can either raise the taxes to support the level of benefits you want to provide or you can cut (a filer’s) benefits somehow—you can cut the number of weeks, you can cut the dollar amount—there’s all sorts of ways on the benefits side you can adjust but there’s a balance.”

Seeing red

Nevada’s trust fund was $1.93 billion in January, the balance fell to $873.14 million at the end of June, according to data from the U.S. Department of the Treasury.

As of Wednesday, the fund’s balance was about $768.97 million.

DETR said at the beginning of this month it could pay 7.5 weeks of benefits at the current benefit payment rate.

“Should benefit payments remain high and the trust fund be exhausted, Nevada would likely first turn to federal borrowing,” DETR said.

The interest rate states will incur is about 2.4 percent as of July 9, but thanks to the passage of the Families First Coronavirus Response Act in March, states will be able to borrow interest-free through the end of this year.

DETR said it also expects the trust to see a boost next month.

“In August, employer contributions for wages from April (to) June will be due, and DETR is working with the U.S. Department of Labor to get federal reimbursement for the first week of benefits in each claim, under a provision from the CARES Act,” according to DETR.

Money for the three unemployment provisions under the CARES Act, such as paying an additional $600 to filers each week, is federally funded and not drawn from the state trust fund.

‘Nevada resisted…’

National Employment Law Project Senior Researcher and Policy Analyst Michele Evermore said she’s “not at all surprised” Nevada is looking to the federal government for help, noting at least eight other states have taken out a federal loan such as California, New York and Texas.

“Nevada did not enter this recession in a bad position and it running out of money is more a factor of the high, high, high unemployment rate than it is not being good stewards of their trust fund,” she said.

Evermore said before the economic impact of the coronavirus, Nevada’s trust was funded enough to manage benefits for a year and a half during a normal recession.

During the Great Recession, the state’s trust fund was emptied out and it reached out to the feds for additional funds.

At the time, the state’s unemployment rate was nearly 14 percent and it borrowed an estimated $773 million to cover unemployment benefits. Nevada paid back the loan in 2017, nearly seven years after taking it out.

Evermore said Nevada, unlike other states, refrained from trimming unemployment benefits as a way to rebuild its trust fund coming out of the economic slump.

“Nevada resisted the urge to do that after the last recession, admirably,” she said. “I don’t anticipate that would be the case after this recession, but you never know.”

Nevada and other states are facing an unprecedented economic situation and steps taken to rebuild the trust this time around will likely be different, according to the Century Foundation Senior Fellow Andrew Stettner.

“Unemployment taxes are going to go up probably significantly (for employers) back to the levels they were at in 2011 (and) 2012,” he said. “There is a risk (states will) cut benefits to pay back the trust fund loan. In the short term, it’s not a huge deal but in the long term, it’s a big deal.”

Contact Subrina Hudson at shudson@reviewjournal.com or 702-383-0340. Follow @SubrinaH on Twitter.

Don't miss the big stories. Like us on Facebook.
Business Videos
Sahara Las Vegas sues blogger over closure rumor - VIDEO
Sahara Las Vegas has filed a defamation lawsuit against Scott Roeben, the man behind vitalvegas.com, for reporting a rumor that the Las Vegas Strip property would close in September.
MGM Resorts announces “Viva Las Office” program - VIDEO
MGM Resorts International announced its new “Viva Las Office” program that encourages business travelers to work remotely from the Bellagio or Aria.
Las Vegas housing market sees record prices despite pandemic
Las Vegas’ housing market is “on fire” despite the coronavirus pandemic’s devastating effect on the economy, as sales totals surged and prices hit another all-time high last month. (Michael Quine/Las Vegas Review-Journal)
Sahara Las Vegas gets COVID-19 regulatory complaint - VIDEO
Sahara Las Vegas is the first property on the Las Vegas Strip — and the first in Southern Nevada — to receive a regulatory complaint related to coronavirus safety protocols. (Las Vegas Review-Journal)
CEO unsure if Palms will reopen - VIDEO
Frank Fertitta III, chairman and CEO of Red Rock Resorts, said the company doesn't know if or when the Palms or three other Station Casinos properties will reopen. (Las Vegas Review-Journal)
Two Las Vegas visitors win mega progressive jackpots - VIDEO
Two visitors to the Las Vegas Strip won mega progressive jackpots on table games Friday - one at Caesars Palace and another at the Flamingo. (Las Vegas Review-Journal)
D Las Vegas pulls back on dress code policy - Video
The policy barred people with face and neck tattoos from entering the downtown Las Vegas hotel-casino. (Las Vegas Review-Journal)
Amazon warehouse safety measures
Safety measures have been set up at the Amazon warehouse in North Las Vegas. (Las Vegas Review-Journal)
Allegiant Stadium hits substantial completion milestone
Nine-hundred-and-ninety-three days after the groundbreaking ceremony on Nov. 13 2017 on what was then a 62-acre lot of dirt, the $2 billion Allegiant Stadium, home of the Raiders, now holds its own in the Las Vegas skyline.
Tropicana hotel-casino on the Las Vegas Strip up for sale - VIDEO
Gaming and Leisure Properties, landlord of the 35-acre Tropicana, is looking to sell the Las Vegas property and rent it back or sell it outright.
Circa Sports bets big on NFL handicapping contests - Video
A little more than six weeks before the NFL’s scheduled season opener, the Circa sportsbook is staring at a potential multimillion-dollar loss. (Michael Quine/Las Vegas Review-Journal)
Sisolak: Bars in four counties to stay closed - VIDEO
Gov. Steve Sisolak said bars in four counties, including Clark County, will remain closed to help fight COVID-19. (James Schaeffer / Las Vegas Review-Journal)
Circa CEO comments on minor construction flaw
Circa CEO Derek Stevens, who also owns D Las Vegas and Golden Gate, said he had originally planned to fix a misplaced glass panel, but it may be here to stay.
Circa Las Vegas casino gets 1st six-ton exterior sign - Video
The under-construction Circa hotel-casino in downtown Las Vegas gets its first exterior sign bearing its name Thursday morning. (Michael Quine/Las Vegas Review-Journal)
Wynn Resorts Ltd. to place workers on furlough - VIDEO
Wynn Resorts Ltd. will put workers at Wynn Las Vegas and Encore on furlough, effective this week. This comes after paying its Las Vegas employees throughout the 78-day Nevada casino shutdown. (Las Vegas Review-Journal)
Switch, Capital Dynamics break ground on developments - Video
The project, Gigawatt 1®, includes the largest behind-the-meter solar plus battery project in the world. (Las Vegas Review-Journal)
Small crew removes scaffolding, shoring from MSG Sphere project - Video
The MSG Sphere at The Venetian has a skeleton crew on the job site to keep watch on the project, but workers recently removed scaffolding and shoring from the site. (Michael Quine/Las Vegas Review-Journal)
Amid the pandemic, Southern Nevadans are falling behind on mortgages - Video
As Nevada’s foreclosure moratorium ends, homeowners must figure out how to pay off any missed mortgage payments. (Las Vegas Review-Journal)
Casino foot traffic slows as COVID-19 cases rise - VIDEO
As COVID-19 cases continue to rise, Las Vegas casino foot traffic is starting to slow, according to a J.P. Morgan analyst.
Las Vegas entrepreneur Andrew Fonfa dies at 68 - VIDEO
Andrew Fonfa, a developer of the Lucky Dragon hotel-casino just off the Las Vegas Strip, died at age 68.
Las Vegas casinos modify smoking policies - VIDEO
On June 18, Las Vegas Sands Corp. updated its health and safety plan to ask table game players and spectators to refrain from smoking or vaping.
Tourists compare pre-pandemic Vegas to today's restrictions - VIDEO
We spoke with tourists walking up and down Las Vegas Boulevard about their experience so far amid pandemic restrictions, and how it compares to their last time in pre-pandemic Vegas. (James Schaeffer / Las Vegas Review-Journal)
Boyd Gaming Corp. has laid off at least 2,500 Nevada employees - Video
On May 22, the casino operator issued letters warning of possible impending layoffs . affecting anywhere between 25 and 60 percent of employees. The company had approximately 10,000 employees in Nevada.
Cosmopolitan of Las Vegas gives notice of potential layoffs - VIDEO
The Cosmopolitan of Las Vegas sent the state notice of potential layoffs at the 3,000-room property on the Las Vegas Strip.
Is Nevada the ‘gold standard’ for casino coronavirus response? - Video
Whenever experts begin comparing gaming jurisdictions, you’re bound to hear the phrase “gold standard” dropped in the conversation. (Las Vegas Review-Journal)
Resorts World Las Vegas activates 100,000-square-foot LED screen - VIDEO
Resorts World Las Vegas activated its 100,000-square-foot LED screen on its west tower on Independence Day, showing a digital fireworks display. (Las Vegas Review-Journal)
Station Casinos president dies in watercraft accident - VIDEO
Richard Haskins, president of Red Rock Resorts Inc. and Station Casinos, died Saturday in a watercraft accident in Michigan, according to a statement released by the company. (Las Vegas Review-Journal)
Hockey arena opponents erred in ballot initiative - Video
Opponents of a minor league hockey arena in Henderson collected enough verified signatures to put the disputed project on the November ballot, but then a problem emerged: A procedural error on the petition.
Layoffs at 'The Drew' force staff to sue owner
Rj Business reporter Eli Segall talks about the lawsuit and the future of the unfinished hotel and casino.
Vegas tourists react to mask mandate - VIDEO
Governor Steve Sisolak announced on Wednesday a mandate to wear face masks starting Friday. Down on the Las Vegas Strip tourists reacted on camera to the news. (James Schaeffer / Las Vegas Review-Journal)
THE LATEST
US jobless claims fall below 1M for first time since pandemic began

The Labor Department said applications fell to 963,000, the second straight drop, from 1.2 million the previous week. The decline suggests that layoffs are slowing, though last week’s figure still exceeds the pre-pandemic record of just under 700,000.