Twice each year, when the Office of Management and Budget issues economic assumptions for the federal budget, the Division of Fiscal and Actuarial Services (DFAS) of the Office of Unemployment Insurance (OUI) uses those assumptions to develop financial projections for the Unemployment Insurance system.
Using the economic assumptions, the paths of key program variables are projected for the following five years. It should be noted that the economic assumptions beyond the first two years are not intended to be forecasts but rather are based on long-term trends. Deviations from the assumed economic path could have a significant effect on the accuracy of the estimates shown here.
Highlights of the analysis for the FY 2014 President's Budget are detailed below. The total unemployment rate (TUR) is assumed to average 7.8% in FY 2013 and 7.3% in FY 2014, about the same as for the FY 2013 Midsession Review.
Under these assumptions:
- The insured unemployment rate (IUR) is projected to average 2.6% in FY 2013 and 2.5% in FY 2014.
- State UI regular benefit outlays are estimated at $43.6 billion in FY 2013 and $44.0 billion in FY 2014, down a bit from Midsession Review.
- Revenues and interest income for state trust fund accounts are projected to exceed outlays by $9.4 billion in FY 2013 and by $8.1 billion in FY 2014.
- State trust fund account balances, net of loans, are projected to increase by $11.3 billion in FY 2013 and $10.9 billion in FY 2014. Net balances are projected to become positive by the end of FY 2013 for the first time since FY 2009.
- State borrowing from the Federal Unemployment Account (FUA) is expected to continue over the next few years, but the aggregate loan balance is projected to decline from $26.3 at the end of FY 2012 to $5.4 million at the end of FY 2018.
- State loan repayments via FUTA credit reductions are expected to continue increasing, peaking at $3.6 billion in FY 2016.
- FUA is projected to finish repaying its general fund advance balance in FY 2015, but EUCA is projected to have a balance of $8.5 billion at the end of FY 2018.
The tables in this publication are based on current law. The FY 2014 President's Budget includes a solvency proposal which would return the net FUTA tax rate to 0.8% in 2014, then reduce it to 0.37% in 2016. The FUTA taxable wage base (which effectively provides a floor for state taxable wage bases) would be increased to $15,000 in 2016, then indexed to wage growth. The proposal would also provide near-term tax relief by allowing for a two-year moratorium on state loan interest and by delaying FUTA credit reductions for borrowing states for two years. These changes would first reduce, then increase, state loan repayments and repayment of FUA general fund advances as well as increasing repayments of EUCA general fund advances.
Questions and/or comments regarding this document are welcomed. Please contact Mike Miller at firstname.lastname@example.org or (202) 693-2930 or Kevin Stapleton at email@example.com or (202) 693-3009 or write to:
Office of Unemployment Insurance
U.S. Department of Labor, Room S-4524
200 Constitution Ave., NW
Washington, DC 20210