SIOUX FALLS, S.D. (KELO) — Before the coronavirus pandemic the state of South Dakota appeared to be able to afford to pay for historic new unemployment claims caused by an economic downturn, according to reports from the Federal Reserve in Minneapolis and the U.S. Department of Labor.
But the state has reached historic new unemployment levels that are even higher than the Great Recession. Factors used to evaluate the financial health of the state’s unemployment trust fund were based on 20-year historic unemployment rates that were far below those of the past several weeks.
The state’s trust fund is used to pay the state’s portion of unemployment claims.
Despite those historic levels, the state’s unemployment trust fund is in good shape so far, said Dawn Dovre of the South Dakota Department of Labor and Regulation.
“We are constantly monitoring the UI Trust Fund balance and make projections based on recent claims activity. Currently, we do not project the trust fund to go insolvent this year,” Dovre said.
The state has had 42,630 people file for new unemployment claims from March 21 to through May 9.
Claims passed 1,000 during periods in years 2008 to 2010 during the Great Recession. The state had 1,226 initial claims on Dec. 13, 2008, according to the federal DOL. The numbers dropped below 1,000 until Jan. 3, 2009, when 1,153 initial claims were recorded followed by 1,073 on Jan. 10, 2009.
South Dakota has paid out $28.1 million in state benefits in unemployment claims since March 16, said Dawn Dovre of the South Dakota Department of Labor and Regulation. For the week ending May 8, South Dakota paid out a total of $5.3 million in state benefits and another $13.3 million was paid out in Federal Pandemic Unemployment Compensation (FPUC) benefits.
As of May 10, the South Dakota Unemployment Trust Fund balance was $104.3 million.
The $28.1 million has been paid out in about 10 weeks. South Dakotans can be on unemployment for up to 26 weeks and another 13 weeks under a measure from the federal government. The federal government is providing money to help pay for those additional 13 weeks.
Another 10 weeks like prior weeks means the state would spend about $56 million total in unemployment claims.
But not everyone on unemployment stays on it for 26 weeks.
In the calendar year 2019, people receiving unemployment benefits received them for an average 13.7 weeks, Dovre said in a prior KELOLAND.Com original story.
Yet South Dakota appeared to be in a better position with its unemployment trust fund before COVID-19 than it was before the Great Recession. The state was one of at least 12 states that needed to borrow money to pay unemployment claims during the Great Recession, according to the Federal Reserve Bank of Minneapolis.
In the year and months before the coronavirus pandemic, South Dakota’s unemployment trust fund was in improved health, according to a May 8, 2019, analysis by the Federal Reserve Bank of Minneapolis and a 2020 report by the U.S. Department of Labor.
The Federal Reserve said South Dakota was one of four Upper Midwest States which had prepared and recovered after the Great Recession in terms of its unemployment trust.
Before the COVID-19 pandemic hit the state, South Dakota had a trust fund balance of $127.7 million in 2019, according to the Federal Reserve of Minneapolis. The federal reserve said that was 177% solvency which meant the state had more than 100% of funds it needed in case of 12 months of high unemployment.
The percent solvency and a factor called the Average High Cost Multiple (AHCM) are ways to gauge an unemployment trust fund’s financial health.
An AHCM is based on a formula that includes the state’s ability to pay its historic highest level unemployment rates.
An AHCM of 1.0 is the target level of solvency recommended by the Advisory Council on
Unemployment Compensation, according to the Government Accountability Office.
An AHCM as high as 1.0 would indicate enough reserves to pay benefits at historically high rates for 12 months, the GAO said.
A U.S. Department of Labor 2020 Unemployment Trust Fund Solvency report said South Dakota’s AHCM is 1.77.
Based on solvency rates, the state would have enough to pay for historic highs in unemployment for 12 months.
Also, the state has a built-in stop gap if the trust fund drops to $11 million or below, Dovre said. An increased employer tax rate schedule goes into effect when the fund hits that $11 million, she said.
Although South Dakota has reached historic unemployment claims, the numbers did drop for the week ending May 5.
However, they increased again for the week ending May 9.
South Dakota was the only state in a surrounding five-state area to post an increase in new, or initial, unemployment claims for the week ending May 9.
The state had 5,131 new claims, an increase of 1,202 over the prior week’s 3,929 claims, according to the U.S. Department of Labor.
The neighboring states of Iowa, Nebraska, North Dakota and Minnesota all posted decreases.
Iowa had 16,735, a decrease of 6,506 from the prior week’s 23,241 claims.
Minnesota had 40,427 claims, a decrease of 1,065 over the prior week’s 41,492 claims.
Nebraska had 6,408 claims, a decrease of 10 from the prior week.
North Dakota had 3,225 claims a decrease of 819 from the prior week’s claims of 4,044.
South Dakota has had 42,630 people file for new unemployment claims from March 21 through May 9. That is about 9.14% of the total S.D. DOLR’s March 2020 workforce of 465,939.
All five states ranked in the top 10 in workforce participation in early 2020.
In February of 2020, South Dakota had a workforce participation rate of 69.5% and about 68% in July of 2019, according to the DOL and the U.S. Census.
Iowa had a 71% rate, Minnesota, 70.1%, Nebraska, 70.5% and North Dakota, 69.3%.
The job market has changed for those looking for a new job.
The South Dakota Bureau of Finance and Management said Statewide job openings are down 30.5% from the March 19 peak.
There has been a 33.4% decline in posted job openings in the Sioux Falls Metropolitan Statistical Area since March 19. There has been a 29.7% decline in posted job openings in the Rapid City Metropolitan Statistical Area since March 19. The BFM uses data from the South Dakota Department of Labor and Regulation.
A May 8 KELOLAND.com original story examined where some job openings were in the state. Openings including those in health care and social assistance, food and accommodations and retail trade.