Washington state may need to borrow federal funds to cover claims for jobless benefits after a new forecast shows a likely shortfall in the state’s unemployment insurance trust fund.

The shortfall, announced Monday by the state Employment Security Department (ESD), reflects the unprecedented number of layoffs during the pandemic coupled with a new forecast for a slower economic recovery and lingering unemployment in Washington state.

The ESD, which has often struggled to process claims for benefits, was also hit by widespread fraud that siphoned off hundreds of millions of dollars in both state and federal unemployment benefits.

The state’s unemployment trust fund, which stood at $4.7 billion on March 1, is now at $2.8 billion and is expected to be depleted by late 2020 or early 2021, ESD officials said.

The agency was quick to emphasize that the availability of no- and low-interest federal loans, which 12 states or territories have already sought, ensures that benefits won’t run out.

“We wanted to be clear with folks that benefits never run out,” said ESD spokesperson Nick Demerice, adding that Washington will begin applying for its own federal loan in August or September.


Since the first big pandemic-related layoffs in early March, Washington has paid out more than $6.5 billion in benefits, though roughly two-thirds of that has been in emergency federal funds, including a $600 weekly payment.

Monday’s announcement is the first public indication from the agency that the state trust fund, which is funded through taxes on employers, might not remain solvent without additional money.

Since the start of the pandemic, ESD officials have often described the trust fund as healthy and have noted that Washington’s unemployment insurance finances are in better shape than in many other states.

“We have drawn it down, but it’s still quite strong,” said ESD Commissioner Suzi LeVine at a news conference Thursday. “And when you look across the United States, knowing that nine states have already applied for federal loans, we’re in a pretty good spot.”

Demerice said Monday’s less rosy outlook for the trust fund reflects a new economic forecast by the Economic and Revenue Forecast Council (ERFC). That forecast, issued June 17, shows a much higher unemployment rate than had been previously expected, thanks to the pandemic-fueled recession.

For the fourth quarter of 2020, the ERFC now predicts a statewide unemployment rate of 9.3%, or more than twice the rate forecasted in February.

That more-dire outlook led the ESD to downgrade its own forecast for the trust fund: the agency in November expected to have around $5 billion in the trust fund by the end of 2020, but it now expects to run out by as early as December without a federal loan, Demerice said. He added that the new outlook was shared with LeVine after the Thursday press conference. 

Although federal loans ensure that the ESD will be able to cover all claims for jobless benefits, repaying those loans could lead to some increases in employer taxes, though how much is not yet clear, Demerice said.