DALLAS (CBSDFW.COM) – The Texas unemployment fund could run out of money as soon as next week.
So then what happens?
Rest assured, if you are on unemployment you will still receive benefits even when the state’s fund runs out of money.
However, in order for Texas to continue to pay out millions every week in benefits, the state is prepared to borrow billions from the federal government.
The Texas Workforce Commission has requested to borrow $1.8 billion in May, $2.6 billion in June, and $2 billion in July to cover unemployment benefits.
Texas must repay these federal loans, called Title XII advances, with interest starting in 2021.
If not repaid in two years, in-state businesses will face higher federal unemployment insurance taxes to compensate for the state still owing the federal government money.
Jared Walczak, the director of state tax policy for the Tax Foundation, said, “The good news is everyone will be receiving their unemployment benefits. The bad news for everyone in Texas is this has to be paid off.”
Walczak said for Texas this will likely mean unemployment benefits will likely be less generous in the future and taxes, especially for businesses, will go up.
“Businesses will probably see some increased taxes, eventually, but timing does matter,” Walczak said. “The last thing states want to do is hit their businesses really hard right now when they are trying to rehire.”
Walczak said this could mean it could take Texas years, even decades, to pay off the debt.
According to the Treasury Department, Texas is one of nine states (California, Connecticut, Hawaii, Illinois, Massachusetts, New York, Ohio and West Virginia) to have been approved for federal loans in anticipation of the states’ unemployment funds running dry.