Maryland labor officials brief Economic Matters Committee on $1.9 billion unemployment trust fund, modeling and proposals

Maryland Department of Labor Secretary Portia Wu told the Economic Matters Committee on Jan. 16 that the state's Unemployment Insurance trust fund had a balance of about $1.9 billion and that department staff used a U.S. Department of Labor model to forecast how long that balance could sustain benefit payments under different unemployment scenarios.

"The current balance of the trust fund is $1,900,000,000 so it is in good shape," Secretary Portia Wu said, and she later added, "We have a situation where we have a gap. We have a structural funding deficit in unemployment insurance." Secretary Wu and the department's chief labor economist, Mike Sires, briefed the committee on the average high cost multiple, the department's key solvency metric.

The nut graff: The briefing combined a solvency snapshot with modeling of policy options. Officials said the trust fund's current strength is supported by historically low unemployment and one-time federal assistance, but long-term pressures ' including a capped taxable wage base, rising average benefit payments and federal limits on administrative reimbursement ' could reduce the fund's capacity during future recessions. The department presented proposals for addressing administrative funding and modeled changes to benefits and the taxable wage base.

Sires, introduced as the department's chief labor economist, described the average high cost multiple as a measure of how many years of high-cost recession claims the trust fund could cover. "What we're thinking about is not just how large our trust fund is, but how much room we have to pay claimants when they make claims," Sires said. He explained the model's scenarios: a continued tight labor market (lower unemployment), a return to long-term historic averages (about 5.0 percent unemployment) and variants that assume no program changes.

Sires said the department used a U.S. Department of Labor (USDOL) model customized for Maryland. The model projects the average high cost multiple would remain above the policy target of 1.0 through about 2028–29 under the modeled scenarios, then decline as inflation increases average weekly benefit costs and revenues grow only slowly because the taxable wage base remains fixed at $8,500.

Officials walked the committee through a set of modeled policy adjustments and their effects on solvency: dropping tax table A (which would increase revenues in the model), setting the maximum weekly benefit equal to 50 percent of average weekly wages, increasing the dependent allowance to $25 and indexing it to inflation, and increasing the taxable wage base (the department described this as moving the base to 20 percent of average weekly wages in the model).

The department also presented a proposal to address administrative funding. Secretary Wu said federal reimbursements for UI administration have fallen and trust fund monies cannot be used for administration. The department proposes a separate administrative fee assessed as a small portion of the annual UI tax contribution; the department described the proposal as "point 15% of the annual UI tax contribution" which the briefing said would equal about $12.75 per employee on a maximum taxable wage base of $8,500. Wu said the approach would be structured so employers' net contributions would be reduced correspondingly in the first year so the change is largely revenue-neutral for employers in that year.

Committee members asked for details and follow up. One delegate asked whether county-level projections were available; Sires said the department had not produced a county-by-county forecast and that the statewide scenarios are "very rough." Committee members also asked where the trust fund is held and whether it earns interest; Secretary Wu said the fund is held in an account managed under state rules (working with the comptroller and treasurer) and the department would provide a follow-up on how the account is managed and whether it earns interest.

No formal committee votes were taken during the briefing. Officials said legislative action would be required to establish a separate administrative fee and that the administration has submitted draft legislation to do so. Committee members and department staff discussed strategy, trade-offs and the operational difficulty of sudden emergency benefit increases, with Secretary Wu advising that benefit increases are easier to administer when phased or planned ahead rather than added suddenly in an emergency.

Ending: The department said it is available to provide more detailed modeling and follow-up information requested by committee members, and the briefing closed with no committee action recorded.