by Timothy McQuiston, Vermont Business Magazine Regular weekly unemployment claims continue to grow to their highest levels this year and remain at a very high level, as claimants were required to refile based on their annual eligibility. The Vermont Department of Labor has also reverted to call-in only for new claims, as the online system has been barraged by large numbers of fraudulent filings.
In addition, Commissioner Michael Harrington is urging the Legislature to change the law regarding how employers are charged to meet UI Trust Fund obligations (see his letter below).
The Vermont UI Trust Fund was well-stocked with over $500 million before the pandemic and is still flush with over $200 million. Despite the Stay Home order from a year ago and layoffs at their highest levels since the Great Depression because of the pandemic, current law would require a steep increase in employer charges because of those pandemic-related layoffs. At current law more than $1 billion would be raised.
Harrington says this puts a burden on employers who are just emerging from the recession and is simply not needed. However, the law needs to change by May 14 or Labor will be required to increase rates to all employers.
Senate President Pro Tem Becca Balint responded to the letter and Governor Scott said Friday that there is still time to get it through. It needs to be changed by May 14.
On its own as the economy recovers, the Vermont UI Trust Fund increased by a net of $21.9 million last week to $221.4 million (see table below).
The governor said his administration has been asking lawmakers to remove 2020 in the UI calculation because it not only balloons the funding requirement but it also punishes employers who were not at fault for the pandemic or the layoffs related to it.
As for the fraud, criminal enterprises in the US and internationally were taking advantage of the new benefit year (in which claimants were required to re-file) to file false claims in Vermont and across the nation.
In many cases the criminal enterprises were using personal information they had gained from data breaches at other private companies or credit agencies upwards of 15 years ago and were biding their time for the best opportunity to take advantage. The pandemic has provided that opportunity, he said.
Harrington said Vermont has likely lost millions of dollars because of this, but knowing exactly how much has been difficult to assess.
While the Labor Department was catching most of the fraudulent claims, even those that managed to get through for even a few weeks were able to steal substantial amounts of money because of the sheer volume of attempts (see Figure 2 graph below).
Harrington said that upwards of 90 percent of claims online were fraudulent.
Governor Scott said he hopes the Legislature will allocate funds to update the 30-year-old Labor Department mainframe and other IT systems to reduce the opportunity for fraud should another large-size calamity arise.
He added that there always has been fraud related to UI claims. He said such fraud should be a felony, but in the case of the pandemic, the criminals are not only outside Vermont but outside the nation.
Suspending the online registration appears to have solved the problem. The UI Trust Fund is still well funded. Harrington pointed out that much of the money lost is likely in the federal PEUC and PUA programs, as the US government extended benefits because of the pandemic.
Current UI Claims
Meanwhile, on May 1, 2021, the Labor Department reported 6,372 new weekly filings, an increase of 1,142. This week's filings, which are also 2,497 more than the same time last year.
As for ongoing jobless claims, for the week ending May 1, 2021, the Labor Department processed 18,967 regular UI claims, up 2,215 from the previous week and -45,443 fewer than the same time last year.
As for further comparison, initial Vermont claims for the week of March 21, 2020 (the first full week of the pandemic in Vermont), were 3,784, up 3,125 from the week of March 14.
Nationally, claims unexpectedly fell to 498,000, their lowest pandemic level. However, these remain historically high numbers. There were 590,000 initial claims the previous week. Productivity also exceeded expectations in the first quarter. But the April unemployment rate ticked up one-tenth to 6.1 percent.
Labor Commissioner Harrington has said at Governor Scott's media briefings that the new federal stimulus and unemployment money will help Vermonters, even though the unemployment rate is on paper at near same level as it was just before the pandemic led to historic unemployment levels.
He has also said that the new round of UI stimulus has also brought a new round of fraud. He said this is largely not due to individual Vermonters trying to game the system, but from organized entities making a nationwide effort.
Harrington said 25 percent to 35 percent of all new claims are estimated to be fraudulent.
For instance, one Vermonter not seeking benefits reported to VBM that he was notified that he had applied for benefits in both Vermont and Ohio.
Harrington said that some of these criminal enterprises might include those that swiped personal identification during the Equifax breach three years ago and have waited for the right time to use the information to defraud the UI system.
For the legitimate claims, there were 11,552 on regular UI; 10,670 on PEUC; 10,364 on PUA; and 5 on extended benefits as of April 24, 2021, according to VDOL.
Figure 2 shows the spike in suspected fraudulent claims.
VDOL table as prepared for the Legislature. Click HERE to see full report.
Labor Department Report to Legislators
During the benefit week ending April 24, there were 32,561 weekly claims filed. This is an increase of 851 over the previous benefit week. During the week ending April 24, $13,123,398 in benefits were paid out to claimants.
The Department hosted the first of a series of Virtual Town Hall events for claimants to learn more about the work search requirement that will be reinstituted beginning May 9. These events are centered around how to enter a work search in the online claimant portal, changes and exemptions to the work search to adapt to the current state of the pandemic, and other reemployment services and supports available to claimants to help them transition back to the workforce and into meaningful employment.
There was a large increase in fraudulent initial claims being submitted.
To mitigate this, the Department removed the initial unemployment insurance application from the website, requiring claimants to call the UI Claimant Assistance Center to open an initial unemployment claim. This has reduced the number of fraudulent claims being submitted. The Department continues to work with vendors to identify potential fraudulent claims and places an automatic stop-payment issue on identified claims until the claimant’s identity can be verified to reduce the number of benefits paid to a fraudster.
We continue to hear from Vermonters that wait times remain high. The Department has always advised claimants to call later in the week whenever possible. As expected, the Claimant Assistance Center experiences the highest call volume on Monday’s, especially in the morning. The Claimant Assistance Center is open Monday through Saturday from 8:00am until 5:30pm.
Weekly UI Report
Regular weekly UI claims in Vermont had been edging down since late January, but starting in late March headed steeply back up. Governor Scott declared a State of Emergency on March 13, 2020, and closed restaurants and bars after lunch on March 17, 2020. (He has extended the State of Emergency month to month since, now to May 15, 2021).
On March 24, 2020, Governor Scott issued a “Stay Home, Stay Safe” order and directed the closure of in-person operations for all non-essential businesses (effective March 25-May 15, 2020). These measures swelled the ranks of the unemployed and led to about 90,000 Vermonters filing for unemployment benefits.
As part of unwinding the emergency measures taken to combat the novel coronavirus a year ago and to jumpstart the economy now, on Tuesday April 6, 2021, Governor Scott unveiled two major actions.
First he announced his Vermont Forward Plan to get the state "back to normal by the Fourth of July" or nearly so. This is based on the rollout of vaccines. It would provide universal instead of sector-specific mitigation measures. It would also lift economic and gathering restrictions over the next few months, while maintaining general health guidance.
Scott also revealed a $1 billion economic recovery and revitalization plan. This features major infrastructure upgrades, including $250 million for broadband.
American Rescue Plan
• The American Rescue Plan (ARP) signed into law by the President on March 11 and includes provisions to extend various Unemployment Insurance programs:
o Pandemic Unemployment Assistance (PUA) was created in March 2020 as a program for individuals not typically eligible for regular unemployment insurance to file for and receive benefits (e.g. self-employed, independent contractors, etc.). This program has been extended until September 6, 2021. The benefit week ending September 4, 2021 will be the final week claimants are able to file in the PUA program.
o Pandemic Emergency Unemployment Compensation (PEUC) was also created in March 2020 as an extension program for claimants who exhausted their regular unemployment insurance benefits but remained unemployed. The ARP extends the number of weeks an individual may receive in the PEUC program from 24 to 53 weeks if they exhaust their regular UI benefits.
o Federal Pandemic Unemployment Compensation (FPUC) has also been extended through the benefit week ending September 4, 2021. Claimants will receive an additional $300 benefit which will be added directly to their state weekly benefit payment.
o Reimbursable Employers: The ARP increases the federal reimbursement rate for non-profit and municipal governments from 50% to 75% for the amounts of compensation paid for weeks of unemployment beginning after March 31, 2021, and ending on or before September 6, 2021.
o Unemployment Insurance Tax Exemption: The first $10,200 in 2020 unemployment benefits are exempt from federal income tax for households with incomes below $150,000 per year. This tax exemption is under the jurisdiction of the IRS. Claimants may find more information about the exemption on the IRS website here: https://www.irs.gov/faqs/irs-procedures/forms-publications/new-exclusion...
1099 Processing Incident
• Once a claimant has received and reviewed all of their 1099 documents, if they still feel that the information provided on the forms is incorrect, they can submit a 1099 correction request form. If a claimant needs a new 1099 or never received a 1099, they can also request to have the Department reissue their 1099. Individuals who receive a 1099 from the Department but never filed for unemployment benefits should file a fraudulent 1099 report with the Department immediate. All in formation regarding 1099 requests can be found at https://labor.vermont.gov/request-1099-correction.
• As of March 7th, the Department had recaptured 61% (approximately 57,600 returned out of 94,800) of all original 1099s that were delivered to the post office.
Identity Protection Update
• The State has contracted with Identity Theft Guard Solutions, Inc (IDX) to provide identity protection service to claimants. This protection will cover claimants for a minimum of 12-months. Notices were mailed to all 2020 claimants on Thursday, February 18. Claimants have until May 18, 2021 to register with IDX for credit monitoring services, which are retroactive to the date of the incident (January 29, 2021).
• As of March 22, 2021, 11,573 individuals (11.7% of population) had enrolled in ID protection. Claimants have until May 19, 2021 to enroll. The industry average for enrollment is 10% of the affected population.
More than $3 trillion in pandemic relief, including CARES Act with the first round of PPP, helped the US third quarter grow at a record pace of 33.4 percent.
US GDP had its worst quarter on record in the second quarter as it fell 31.4 percent in that April-June period; the next worst was in 1921, which led to the Great Depression.
Meanwhile, the state unemployment rate, which was the lowest in the nation before the pandemic, then spiked during the pandemic, has retreated and is now the third lowest in the nation and back to its pre-pandemic level, which is not really that good of a thing.
The VDOL points out that the US Census modeling has not caught up with the reality of the pandemic and Vermont's 2.9 percent unemployment rate in March portrays a rosier economic picture than what actually exists.
Harrington has previously said that the real unemployment rate is more in the 5 percent range, and if it included the PUA, the rate is likely more in the 6-8 percent range.
Harrington and Scott said that while the data the US Census collects is not erroneous, they disagree with the methodology the federal government is using given the altered behavior of people during the pandemic.
They said people have left the workforce for reasons related to the pandemic, like for personal safety or childcare, which then lowers the total Labor force, which works as the denominator in the calculations, thus lowering the unemployment rate.
PUA claims are not included in the unemployment rate calculation.
The PUA benefits in some cases are more advantageous. PUA claimants also can get partial payments even if they have some income.
Scott has also extended his Emergency Order until May 15. He has said that he will continue to extend the Order as long as necessary.
He has said in recent weeks that he expects the state to "get back to normal" by the Fourth of July, as the vaccine rollout will by then have covered every single adult.
After a spike of claims at the beginning of the pandemic, followed by a steep decline as the economy began to reopen in April 2020, initial unemployment claims fell consistently since the beginning of July before flattening over the last couple months. And now have climbed consistently the last couple of months.
Claims hit their peak in early April 2020.
At that point, Governor Scott's "Stay Home" order resulted in the closing of schools, restaurants, construction and more, while many other industries cut back operations.
The official Vermont March 2020 unemployment rate was 3.1 percent, but the April 2020 rate was 15.6 percent, which is the highest on record. The Vermont unemployment rate in May 2020 fell to 12.7 percent.
The US April 2020 rate was 14.7 percent, the highest rate since its was first calculated in 1948 and the highest unofficially since the Great Depression of about 25 percent.
Early on in the pandemic, US jobless claims reached 5.2 million and then 6.6 million claims. Just prior to the steep job loss, there were 282,000 claims on March 14, 2020.
The Pandemic Unemployment Assistance (PUA) has added to the ranks of those receiving benefits, but is not counted in the official unemployment rate. The PUA serves the self-employed who previously did not qualify to receive UI benefits and might still be working to some extent.
As for regular UI claims in Vermont, during the Great Recession for the entire year in 2009, claims spiked at 38,081 claims.
The claims back in 2009 pushed the state's Unemployment Insurance Trust Fund into deficit and required the state to borrow money from the federal government to cover claims.
Right now (see data below), Vermont has $221.4 million in its Trust Fund and saw the fund increase by a net of $21.9 million last week. Payments lag claims typically by a week. The balance as of March 1, 2020, was $506.2 million.
Vermont at the beginning of the pandemic had more than double the UI Trust Fund it did when the economy started to slide in 2007. It went into deficit and the state had to borrow money from the federal government to pay claims. Some states like California are already in UI deficit because of the COVID crisis.
Scott has said the UI fund is not expected to run out under current projections. At the this rate, Vermont has enough in the Trust for nearly 70 more weeks.
"We are in a much healthier position than many other states," Labor Commissioner Harrington has said.
Given the Trust Fund's strong performance and the burden of unemployment taxes on employers, Governor Scott reduced the UI tax on businesses. He also announced that starting the first week of July, the maximum unemployment benefit to workers will increase about $20 a week.
UI tax rates for employers fell again on July 1, 2018, as claims continue to be lower than previous projections. Individual employers' reduced taxable wage rates will vary according to their experience rating; however, the rate reduction will lower the highest UI tax rate from 7.7 percent to 6.5 percent. The lowest UI tax rate will see a reduction from 1.1 percent to 0.8 percent.
Also effective July 1, 2018, the maximum weekly unemployment benefit will be indexed upwards to 57% of the average weekly wage. The current maximum weekly benefit amount is $466, which will increase to $498. Both changes are directly tied to the change in the Tax Rate Schedule.
The Vermont Department of Labor announced Thursday, October 1, 2020 an increase to the State’s minimum wage. Beginning January 1, 2021, the State’s minimum wage will increase $0.79, from $10.96 to $11.75 per hour. The calculation for this increase is in accordance with Act 86 of the 2019 Vermont General Assembly. It tracks inflation.
This adjustment also impacts the minimum wage of “tipped employees.” The Basic Tipped Wage Rate for service or tipped employees equals 50% of the full minimum wage or $5.88 per hour starting January 1, 2021.
The Vermont Department of Labor has announced that the state is set to trigger off of the High Extended Benefits program, as of October 10, 2020. This determination by the US Department of Labor follows the recent announcement of Vermont’s unemployment rate decreasing from 8.3% in July to 4.8% in August.
NOTE: Employment (nonfarm payroll) - A count of all persons who worked full- or part-time or received pay from a nonagricultural employer for any part of the pay period which included the 12th of the month. Because this count comes from a survey of employers, persons who work for two different companies would be counted twice. Therefore, nonfarm payroll employment is really a count of the number of jobs, rather than the number of persons employed. Persons may receive pay from a job if they are temporarily absent due to illness, bad weather, vacation, or labor-management dispute. This count is based on where the jobs are located, regardless of where the workers reside, and is therefore sometimes referred to as employment "by place of work." Nonfarm payroll employment data are collected and compiled based on the Current Employment Statistics (CES) survey, conducted by the Vermont Department of Labor. This count was formerly referred to as nonagricultural wage and salary employment.
UI claims by industry last week in Vermont are similar in percentage to those from a year ago.
Commissioner Harrington Letter to Legislative Leadership