The Unemployment Trust Fund (UTF):
State Insolvency and Federal Loans to States
Updated December 1, 2020
Congressional Research Service
https://crsreports.congress.gov
RS22954

The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

Summary
Although states have a great deal of autonomy in how they establish and run their unemployment
insurance programs, federal law requires states to pay Unemployment Compensation (UC)
benefits promptly as provided under state law. During some recessions, current taxes and reserve
balances may be insufficient to cover state obligations for UC benefits. States may borrow funds
from the federal loan account within the Unemployment Trust Fund (UTF) to meet UC benefit
obligations. Currently, 21 jurisdictions are borrowing funds from the UTF.
This report summarizes how insolvent states may borrow funds from the UTF loan account to
meet their UC benefit obligations. It includes the manner in which states must repay federal UTF
loans. It also provides details on how the UTF loans may trigger potential interest accrual and
explains the timetable for increased net Federal Unemployment Taxes Act (FUTA) taxes if the
funds are not repaid promptly. For 2020, the Virgin Islands has an increased net FUTA tax of
3.0% because of outstanding loans.
The Unemployment Insurance (UI) provisions in the Families First Coronavirus Response Act
(FFCRA, P.L. 116-127) provide various types of assistance to states, including a temporary
suspension on the accrual of interest on federal advances (loans) to states to pay UC benefits and
a waiver of interest payments through December 2020. FFCRA does not reduce the underlying
loan amount that must be repaid.
Outstanding loans listed by state may be found at the Department of Labor’s (DOL’s) website,
https://oui.doleta.gov/unemploy/budget.asp.
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The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

Unemployment Compensation, Unemployment
Taxes, and a State’s Obligation to Pay Benefits
Unemployment Compensation (UC) is a joint federal-state program financed by federal payroll
taxes under the Federal Unemployment Tax Act1 (FUTA) and by state payroll taxes under State
Unemployment Tax Acts (SUTA).2 These revenues are deposited into the appropriate account
within the federal Unemployment Trust Fund (UTF).
Original y, the intent of the UC program, among other goals, was to help counter economic
fluctuations such as recessions.3 This intent is reflected in the current UC program’s funding and
benefit structure. When the economy grows, UC program revenue rises through increased tax
revenues. At the same time, UC program spending fal s because fewer workers are unemployed.
The effect of collecting more taxes while decreasing spending on benefits dampens demand in the
economy. It also creates a surplus of funds, or a reserve fund, for the UC program to draw upon
during a recession. These reserve balances are credited in the state’s account within the UTF.
During an economic slowdown or recession, UC tax revenue fal s and UC program spending rises
as more workers lose their jobs and receive UC benefits. The increased amount of UC payments
to unemployed workers dampens the economic effect of lost earnings by injecting additional
funds into the economy.
State and Federal Unemployment Taxes
State Unemployment Taxes
States levy their own payroll taxes (SUTA) on employers to fund regular UC benefits and the
state share (50%) of the Extended Benefit (EB) program.4 Federal laws and regulations provide
broad guidelines for these state taxes. Each state deposits its SUTA revenue into its account
within the UTF.
SUTA revenue finances UC benefits. General y, when economic activity is robust and increasing,
SUTA revenue is greater than a state’s UC expenditures. As a result, the state’s reserves within
the UTF grow. This trend is reversed during economic recessions and during the early economic
recovery period, when the state’s reserves are drawn down and new SUTA revenue does not
always make up the shortfal .

1 §§3301-3311 of the Internal Revenue Code of 1986 (26 U.S.C. §§3301 -33011). For a complete description of FUT A,
see CRS Report R44527, Unem ployment Com pensation: The Fundam entals of the Fed eral Unem ploym ent Tax
(FUTA).
2 T he underlying framework of the Unemployment Compensation (UC) program is contained in the Social Security Act
(SSA). T itle III of the SSA authorizes grants to states for the administration of state UC laws, T itle IX autho rizes the
various components of the federal Unemployment T rust Fund (UT F), and T itle XII authorizes advances or loans to
insolvent state UC programs.
3 See, for example, President Franklin Roosevelt’s remarks at the signing of the SSA at http://www.ssa.gov/history/
fdrstmts.html#signing.
4 T he Extended Benefit (EB) program was established by the Federal-State Extended Unemployment Compensation
Act of 1970 (EUCA), P.L. 91-373 (26 U.S.C. 3304, note). EUCA may extend receipt of unemployment benefits by 13
weeks or 20 weeks at the state level if certain economic situations exist within the state. For details, see CRS Report
RL33362, Unem ployment Insurance: Programs and Benefits.
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The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

If the recession is deep enough and if SUTA revenue is inadequate for long periods of time, states
may have insufficient funds to pay for UC benefits. Federal law, which requires states to pay
these benefits, provides a loan mechanism within the UTF framework that an insolvent state may
opt to use to meet its UC benefit payment obligations.5 States must pay back these loans. If the
loans are not paid back quickly (depending on the timing of the beginning of the loan period),
states may face interest charges and the states’ employers may face increased net FUTA rates until
the loans are repaid.
In the years immediately following the 2007-2009 recession, many states had insufficient SUTA
revenue and UTF account balances to pay UC benefits.
Federal Unemployment Taxes
Al FUTA revenue is deposited into the Employment Security Administration Account (ESAA)
within the UTF. Federal unemployment taxes pay for the federal share of EB (50%) and for
administrative grants to the states. Additional y, through the federal loan account within the UTF,
FUTA funds may be loaned to insolvent states to assist the payment of the states’ UC obligations.
Net FUTA Rate Is 0.6%
FUTA imposes a 6.0% gross federal unemployment tax rate on the first $7,000 paid annual y by
employers to each employee. Employers in states with programs approved by the U.S. Labor
Secretary and with no outstanding federal loans may credit up to 5.4 percentage points of state
unemployment taxes paid against the 6.0% tax rate, making the minimum net federal
unemployment tax rate 0.6%.6
Because most employees earn more than the $7,000 taxable wage ceiling in a calendar year, the
FUTA tax typical y is $42 per worker per year ($7,000 × 0.6%), or just over 2 cents per hour for a
full-time, year-round worker.7
States Required to Pay UC Benefits
States have a great deal of autonomy in how they establish and run their unemployment insurance
programs. However, the framework established by federal laws is clear and requires states to
promptly pay the UC benefits as provided under state law.8

5 Federal unemployment compensation law does not restrict the states from using loan resources outside of the UT F.
Depending on state law, states may have other funding measures available and may be able to use funds from outside
of the UT F to pay the benefits (such as issuing bonds). Although the interest rate on munic ipal bonds may be lower, the
total cost of such loans may be higher than borrowing from the UT F. For details, see Wayne Vroman et al., A
Com parison of Unem ploym ent Insurance Financing Methods, Urban Institute, prepared for the U.S. Department of
Labor by t he Urban Institute, 2017, p. 210, https://www.dol.gov/sites/dolgov/files/OASP/legacy/files/A-Comparative-
Analysis-of-Unemployment-Insurance-Financing-Methods-Final-Report.pdf.
6 Section 3304 of FUT A (26 U.S.C. §3304) allows up to 5.4% credit for actual state unemployment taxes paid.
Additionally, under Section 3303 of FUT A (26 U.S.C. §3303), employers that paid less than a 5.4% rate in state
unemployment taxes are eligible for an additional state tax credit of up to 5.4%. T he total state tax credit (actual and
additional) on federal unemployment tax calculation is restricted to be no more than 5.4 %. T hus, all employers in states
with approved UC programs receive a 5.4% credit in the calculation of FUT A, even if the employer paid less than a
5.4% rate in state unemployment taxes.
7 Assuming a full-time, year-round worker works 52 weeks per year and 40 hours per week (for 2,080 hours per year),
$42 ÷ 2080 = $0.0202 and the state has no state tax credit reduction because of outstanding loans.
8 §3304 of FUT A (26 U.S.C. §3304). If the state does not pay the UC benefits, federal law is explicit. T he stat e will not
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In budgetary terms, UC benefits are an entitlement (although the program is financed by a
dedicated tax imposed on employers and not by general revenue). Thus, even if a recession hits a
given state and, as a result, that state’s trust fund account is depleted, the state remains legal y
required to continue paying benefits. To do so, the state might borrow money either from the
dedicated loan account9 within the UTF or from outside sources.
If the state chooses to borrow funds from the UTF, not only wil the state be required to continue
paying benefits, it also wil be required to repay the funds (plus any interest due) it has borrowed
from the federal loan account. Such states may need to raise taxes on their employers or reduce
UC benefit levels, actions that dampen economic growth, job creation, and consumer demand. In
short, states have strong incentives to keep adequate funds in their trust fund accounts.
If the state borrows from sources outside the UTF, the state would not be subject to the loan
restrictions described below. Instead, the state would be subject to the terms within that outside
loan agreement, which might offer a different (more favorable) interest rate or repayment
schedule but may include fees to establish the loan.10
Funds Available for Loans to States Within the UTF
The Federal Unemployment Account (FUA) is the federal loan account within the UTF. The FUA
is primarily funded from the statutory transfer of excess revenue from the Extended
Unemployment Compensation Account (EUCA) being deposited into the FUA.11
If needed, the FUA may borrow funds from other federal accounts within the UTF or from the
general fund of the U.S. Treasury. From FY2009 to FY2015, the FUA had to borrow funds from
the U.S. Treasury to finance loans to the state accounts.12
1. Revenue from additional FUTA taxes paid by employers when a reduced credit
against federal unemployment taxes exists because the state has an outstanding
unpaid loan from FUA is deposited into the FUA. (See the discussion below on
“Federal Tax Increases on Outstanding Loans Through Credit Reductions” for a
more detailed explanation of these additional taxes.)

have a UC program meeting federal requirements, and thus the federal unemployment tax paid by employers on each
employee’s annual earnings would be a net tax of 6.0% (that is, up to $420 per worker with no allowable state tax
credit) rather than 0.6% if the state UC program paid benefits and had no outstanding loans.
9 T he Federal Unemployment Account (FUA).
10 For details on such loans, see Wayne Vroman et al., A Comparison of Unemployment Insurance Financing Methods,
Urban Institute, prepared for the U.S. Department of Labor by the Urban Institute, 2017, https://www.dol.gov/sites/
dolgov/files/OASP/legacy/files/A-Comparative-Analysis-of-Unemployment -Insurance-Financing-Methods-Final-
Report.pdf.
11 42 U.S.C. 1105(b)(1) requires that at the end of every month, 20% of all newly collected FUT A revenue be deposited
into the EUCA, which is authorized to pay for the federal share of EB. T he EUCA balance is limited to the maximum
of 0.5% of covered wages ($34.91 billion in FY2020). If the EUCA balance exceeds the limitation, 42 U.S.C.
1105(b)(2) requires that the excess be distributed to the FUA. In FY2020, the EUCA net balance is an estimated
shortfall of (negative) $4.88 billion. T hus, no EUCA funds are p rojected to be distributed to the FUA in FY2020.
12 T he FUA completed repaying its general fund advance balance in June 2015, and FUA funds have since been used to
assist in repaying the remaining general fund advances to the EUCA. T he EUCA finished repayin g its general fund
advance loans in FY2018 but continued to owe funds to the FUA while slowly repaying those non -interest bearing
loans from the FUA. On May 1, 2020, the FUA again began to borrow directly from the general fund because of
increased lending to the states.
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2. Federal law al ows the FUA to borrow available funds from the other federal
(EUCA and ESAA) accounts within the UTF.13
3. Federal law also authorizes appropriations as loans from the general fund of the
U.S. Treasury if balances in the federal accounts are insufficient to cover their
expenditures.14 (For example, if the states’ borrowing needs exceed the available
FUA balance.) Such appropriations require discretionary action by Congress and
the President.
Mechanism for Receiving a Loan from the UTF
Once a state recognizes that it does not have sufficient funds to pay UC benefits, the mechanism
for receiving a loan from the UTF is straightforward. The state’s governor (or the governor’s
designee) must submit a letter requesting that the U.S. Labor Secretary advance funds to the state
account within the UTF. Once the loan is approved by the U.S. Labor Secretary, the funds are
placed into the state account in monthly increments.
Loan Repayment
States with outstanding loans from the UTF must repay them fully by the November 10 following
the second consecutive January 1 on which the state has an outstanding loan. If the outstanding
loan is not repaid by that time, the state wil face an effective federal tax increase. Thus, a state
may have approximately 22 months (if borrowing began on January 1) to 34 months (if
borrowing began on January 2) to repay the loan without a federal tax increase, depending on
when it obtained the outstanding loan.
Division D of the Families First Coronavirus Response Act (FFCRA, P.L. 116-127) temporarily
waives interest payments and the accrual of interest on federal advances (loans) to states to pay
UC benefits through December 2020.15 But it does not reduce any underlying loan principal.16
As of November 27, 2020, just under $42.0 bil ion in UTF loans to states were outstanding. (See
Table 2 for the list of states borrowing funds.) The current list of states with outstanding loans
may be found at the Department of Labor’s (DOL’s) website, https://oui.doleta.gov/unemploy/
budget.asp.
Federal Tax Increases on Outstanding Loans Through
Credit Reductions
If the state does not repay a loan by November 10 of the second year,17 the state becomes subject
to a reduction in the amount of state unemployment tax credit applied against the federal

13 42 U.S.C. 1110.
14 42 U.S.C. 1323.
15 For background on these federal loans to states, see CRS Report RS22954, The Unemployment Trust Fund (UTF):
State Insolvency and Federal Loans to States.
16 T his provision is similar to what was enacted for 2009 and 2010 under Section 2004 of the American Recovery and
Reinvestment Act (ARRA; P.L. 111-5). See CRS Report R40368, Unem ployment Insurance Provisions in
the Am erican Recovery and Reinvestm ent Act of 2009 .
17 T he “second year” is the year when the state has outstanding UT F loans on January 1 for the second January 1 in a
row. Depending on the timing when the first loan began, it may actually be the third year of the loan.
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unemployment tax beginning with the preceding January 1 until the state repays the loan fully.
Depending on the duration of the loan and certain other measures, one or more of three different
credit reductions may be required. These reductions are fully catalogued in Table 1. At the height
of the period following the most recent recession (2011), 20 states and the Virgin Islands faced
increased FUTA rates because of outstanding UTF loans.18 For 2020, only the Virgin Islands has
an increased net FUTA rate, as shown in Table 2.
Basic Credit Reduction
The credit reduction is initial y a 0.3 percentage point reduction for the year beginning with the
calendar year in which the second consecutive January 1 passes during which the loan is
outstanding and increases by a 0.3 percentage point reduction for each year there is an
outstanding loan. For example, in the first year, the credit reduction results in the net federal tax
rate increasing from 0.6% to 0.9%—an additional $21 for each employee; in the second year, it
would increase to 1.2%—a cumulative additional $42 for each employee.
Additional Credit Reductions: 2.7 Add-on and Benefit-Cost Ratio Add-on
Two potential other credit reductions exist (in addition to the cumulative 0.3 percentage point
increases) during the ensuing calendar years in which a state has an outstanding loan:
1. Beginning in the third year, the 2.7 add-on uses a statutory formula that takes into
consideration the average annual wages and average employment contribution
rate.19
2. Beginning in the fifth year, the Benefit-Cost Ratio (BCR) add-on replaces the 2.7
add-on and uses the five-year benefit-cost rate as wel as average wages in its
calculation.20
Table 1 presents these reductions and the subsequent net FUTA tax faced by state employers as a
result of these unpaid loans. If any January 1 passes without an outstanding balance, the year
count starts over with the next loan. DOL maintains a list of potential reduced credit states at
https://oui.doleta.gov/unemploy/docs/potential_credit_states_2020.xlsx.
Table 1. Schedule of State Tax Credit Reduction and Net Federal Unemployment
Tax Act (FUTA) Tax
Net FUTA Tax
(0.6% + credit
Loan Year
Credit Reduction
Additional Reductions
reductions)
Year 1 of outstanding loan
0.0%
None
0.6%
Year 2 (applied retroactively
0.3%
None
0.9%
at end of calendar year)
Year 3
0.6%
2.7 Add-on
1.2% or morea
Year 4
0.9%
2.7 Add-on
1.5% or morea
Year 5
1.2%
BCR Add-on
1.8% or moreb

18 See https://oui.doleta.gov/unemploy/docs/reduced_credit_states_2009-2020.xlsx.
19 T he 2.7 add-on formula is [(2.7% × 7000 ÷ U.S. Annual Average Wage) - Average Annual State T ax Rate on T otal
Wages] × State Annual Average Wage ÷ 7000.
20 T he Benefit-Cost Ratio (BCR) add-on formula is: Max [Five-year Average State Unemployment UC Outlays ÷
T axable Wages, 2.7] - Average Annual State Unemployment Tax Rate on T otal Wages.
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Net FUTA Tax
(0.6% + credit
Loan Year
Credit Reduction
Additional Reductions
reductions)
Year 6
1.5%
BCR Add-on
2.1% or moreb
Year 7
1.8%
BCR Add-on
2.4% or moreb
Year 8
2.1%
BCR Add-on
2.7% or moreb
Year 9
2.4%
BCR Add-on
3.0% or moreb
Year 10
2.7%
BCR Add-on
3.3% or moreb
Year 11
3.0%
BCR Add-on
3.6% or moreb
Year 12
3.3%
BCR Add-on
3.9% or moreb
Year 13
3.6%
BCR Add-on
4.2% or moreb
Year 14
3.9%
BCR Add-on
4.5% or moreb
Year 15
4.2%
BCR Add-on
4.8% or moreb
Year 16
4.5%
BCR Add-on
5.1% or moreb
Year 17
4.8%
BCR Add-on
5.4% or moreb
Year 18
5.1%
BCR Add-on
5.7% or moreb
Year 19
5.4%
BCR Add-on
6.0%
Source: U.S. Department of Labor, Employment and Training Administration.
Notes: 2.7 Add-on = [(2.7% × 7000 ÷ U.S. Annual Average Wage) - Average Annual State Tax Rate on Total
Wages] × State Annual Average Wage ÷ 7000.
Benefit Cost Ratio (BCR) Add-on = Max [Five-year Average State Unemployment Compensation Outlays ÷
Taxable Wages, 2.7] - Average Annual State Unemployment Tax Rate on Total Wages.
a. Exact net FUTA tax depends upon 2.7 Add-on calculation and whether state qualified for avoidance.
b. Exact net FUTA tax depends upon BCR Add-on calculation (or the 2.7 Add-on calculation, if the BCR Add-
on is waived).
Avoiding Some or All of the Credit Reduction
Section 272 of P.L. 97-248 al ows a delinquent state the option of repaying—on or before
November 9—a portion of its outstanding loans each year through transfer of a specified amount
from its account in the UTF to the FUA.
If the state complies with al the requirements listed below, the potential credit reduction is
avoided (there is no reduction):
 The state must repay al loans for the most recent one-year period ending on
November 9, plus the potential additional taxes that would have been imposed
for the tax year based upon a state tax credit reduction.
 The state must have sufficient amounts in the state account of the UTF to pay al
compensation for the last quarter of that calendar year without receiving a loan.
 The state also must have altered its state law to increase the net solvency of its
account with the UTF.
From 2011 through 2014, South Carolina met these requirements. As a result, employers in South
Carolina were not subject to a state tax credit reduction in the calculation of their FUTA taxes.
(General y, employers in South Carolina would have paid more in state unemployment taxes to
meet these requirements.)
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The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

Avoiding Credit Reduction: Cap
Once a state begins to have a credit reduction, the state may apply to have the reductions capped
if the state meets four criteria:
 No legislative or other action in 12 months ending September 30 has been taken
to decrease the state’s unemployment tax effort. (A state cannot actively decrease
its expected state unemployment tax revenue from current law.)
 No legislative or other action has been taken to decrease the net solvency of the
state’s trust fund account. (For example, the state would not be al owed to
actively increase the average UC benefit amount from current law requirements.)
 Average state unemployment tax rate on total wages must exceed the five-year
average benefit-cost rate on total wages.
 Balance of outstanding loans as of September 30 must not be greater than the
balance three years before.
Waiving the BCR Add-on
The BCR add-on may be waived if the Secretary of Labor determines the state did not take
legislative or other actions to decrease the net solvency of the state’s trust fund account. The 2.7
add-on would then replace the BCR add-on.21
Revenue from Credit Reductions Reduces State UTF Loans
The additional federal taxes attributable to the credit reduction are applied against the state’s
outstanding UTF loan. Thus, although technical y employers are paying additional FUTA taxes,
the additional tax pays off a state’s debt. The state’s employers wil pay the additional federal
taxes resulting from the credit reduction no later than January 31 of the next calendar year.
Interest Charges on Loans
Since April 1, 1982 (P.L. 97-35 as amended), states have been charged interest on new loans that
are not repaid by the end of the fiscal year in which they were obtained.22 (Before April 1, 1982,
states could receive these loans interest free.23)

21 T he U.S. Virgin Islands applied for and received the BCR waiver for 2020. See https://oui.doleta.gov/unemploy/
docs/potential_credit_states_2020.xlsx for details.
22 Interest payments can be delayed up to 9 months (and no interest on the unpaid interest would accrue) if the most
recent 12-month average unemployment rate (from September of the previous year to August of that year) is 13.5% or
higher (42 U.S.C. §1322(b)(9)). If the state’s January through June average insured unemployment rate (IUR) in the
previous year is 6.5% or higher, the state would be required to pay 25% of that current year’s interest that is due (42
U.S.C. §1322(b)(3)(C)). (T he IUR is the ratio of UC claimants divided by individuals in UC-covered jobs. It excludes
unemployed workers who have exhausted their UC benefits and the self -employed.) T he state then would pay the
remaining 75% over the next three years (25% in each year). T he remainder of the interest payment would be not be
subject to additional interest.
23 Section 2004 of P.L. 111-5 temporarily waived interest payments and the accrual of interest on loans. T he interest
payments that were due from the time of enactment (February 17, 2009) until December 31, 2010, were deemed to
have been made. No interest on advances accrued during the period. Although interest did not accrue during this
period, this did not absolve states from repaying the underlying loans. If a state did not pay back funds within the
prescribed amount of time or make good progress as determined by the Labor Secretary, the state tax credit was
reduced. On January 1, 2011, the calculation of interest reverted to permanent law on interest charges. P.L. 115-123
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The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

The interest is the same rate as that paid by the federal government on state reserves in the UTF
for the quarter ending December 31 of the preceding year but not higher than 10% per annum.
The interest rate for calendar year loans is determined by Section 1202(b)(4) of the Social
Security Act. The interest rate for a calendar year is the earnings yield on the UTF for the quarter
ending December 31 of the previous calendar year. The U.S. Treasury Department calculated the
fourth-quarter earnings yield in 2019 to be 2.4087%. However, FFCRA temporarily suspends
interest charges from the date of enactment through December 31, 2020, and requires interest
accrued on loans made in calendar year 2020 to be deemed as having been made by the state
(without the state transferring funds), effectively making the interest rate 0% for 2020.24
States may not pay the interest directly or indirectly from SUTA revenue or funds in their state
account within the UTF. If a state does not repay the interest, or if it pays the interest with funds
from SUTA taxes, DOL is required by federal law to refuse to certify that state’s program as
being in compliance with federal law.25 Not being in compliance with federal unemployment law
would mean that the state would not be eligible to receive administrative grants and employers in
that state would not receive any state unemployment tax credit in the calculation of their federal
unemployment taxes.
States may borrow funds without interest from the UTF during the year. To receive these interest-
free loans, the states must meet four conditions:26
1. The states must repay the loans by September 30.
2. For those repaid (by September 30) loans to maintain their interest -free status, there
cannot be any loans made to that state in October, November, or December of the calendar
year of such an interest-free loan. If loans are made in the last quarter of the calendar year,
the “interest-free” loans made in the previous fiscal year will retroactively accrue interest
charges.
3. States must have had at least one year in the past five calendar years before the year in
which advances are taken in which the Average High Cost Multiple27 (AHCM) was greater
than or equal to 1.0.
4. Additionally, states must meet two criteria for maintenance-of-tax effort in every year
from the most recent year the AHCM was at least 1.0 and the year in which loans are taken.
a. The average state unemployment tax rate (total state unemployment tax amount
collected over total taxable wages) was at least 80% of the prior year’s rate.
b. The average state unemployment tax rate was at least 75% of the average benefit-
cost ratio over the preceding five calendar years, where the benefit-cost ratio for a year
is defined as the amount of benefits and interest paid in the year divided by the total
covered wages paid in the year.

temporarily forgave the Virgin Islands for interest payments due in 2017 until September 28, 2018, and exempted that
interest from accruing additional interest during the period.
24 UT F Quarterly Yields are published at https://www.treasurydirect.gov/govt/rates/rates_tfr.htm.
25 26 U.S.C. §3304(a)(17) and 42 C.F.R. §503(c)(3).
26 20 C.F.R. §606.32.
27 T he average high-cost multiple (AHCM) is the ratio of actual UT F account balances (divided by covered wages in
that year) to the average of the 3 highest years of benefit payments (each divided by that year’s covered wages)
experienced by the state over the past 20 years. Presumably, the average of the 3 highest years’ outlays would be a
good indicator of potential expected UC payments if another recession were to occur. Under these assumptions, if a
state had saved enough funds to pay for an average high year of UC benefit activity, its AHCM would be at least 1.0.
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Temporary Interest Waiver for 2020
Section 4103 of FFCRA (P.L. 116-127) temporarily waives interest payments and the accrual of
interest on federal advances (loans) to states to pay UC benefits through December 2020. The
temporary measure does not reduce any underlying loan principal.28
Status of Outstanding Loans, Accrued Interest
Owed, and State Tax Credit Reductions
The second column in Table 2 lists current outstanding state loan balances, which total just under
$42.0 bil ion.29 The table also includes information on accrued interest payments for FY2020. The
fourth column provides information on whether the state was subject to a credit reduction for tax
year 2020. The last column provides the net FUTA tax faced by employers in each state that had
an outstanding loan. At this time, while 21 jurisdictions had an outstanding loan balance, only the
U.S. Virgin Islands has an increased net FUTA tax of 3.0% rather than 0.6%.
Table 2. Outstanding Loan Balances, Interest Owed, and 2020 State Tax
Credit Reduction
(November 27, 2020)
Outstanding Loan
Interest Paid
2020 Tax Credit
2020 Net FUTA Tax
Balance
FY2020
Reduction
(0.6% + credit
Statea
($)
($)
(%)
reductions)
California
$16,155,202,422
$0b
N.A.
0.6%
Colorado
$574,921,903
$0b
N.A.
0.6%
Connecticut
$405,957,646
$0b
N.A.
0.6%
Delaware
$32,907,572
$0b
N.A.
0.6%
Georgia
$814,999,880
$0b
N.A.
0.6%
Hawai
$703,025,453
$0b
N.A.
0.6%
Il inois
$2,852,871,344
$0b
N.A.
0.6%
Indiana
$89,908,153
$0b
N.A.
0.6%
Kentucky
$486,984,893
$0b
N.A.
0.6%
Louisiana
$133,460,334
$0b
N.A.
0.6%
Massachusetts
$2,012,018,817
$0b
N.A.
0.6%
Minnesota
$742,522,016
$0b
N.A.
0.6%

28 T his provision is similar to the provision under Section 2004 of the American Recovery and Reinvestment Act
(ARRA; P.L. 111-5) for suspending interest payments and accrual of interest for 20 09 and 2010. See CRS Report
R40368, Unem ploym ent Insurance Provisions in the Am erican Recovery and Reinvestm ent Act of 2009 .
29 If a state is not listed on this table, (1) the state did not have any outstanding loans on November 27, 2020; (2) did not
have interest accruals in FY2020 as of November 27, 2020; and (3) was not subject to a state tax credit reduction on the
calculation of the net FUT A tax in 2020.
Congressional Research Service

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link to page 13 The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

Outstanding Loan
Interest Paid
2020 Tax Credit
2020 Net FUTA Tax
Balance
FY2020
Reduction
(0.6% + credit
Statea
($)
($)
(%)
reductions)
New Jersey
$504,808,747
$0b
N.A.
0.6%
New Mexico
$162,339,529
$0b
N.A.
0.6%
New York
$8,708,582,020
$0b
N.A.
0.6%
Ohio
$1,169,375,997
$0b
N.A.
0.6%
Pennsylvania
$617,572,170
$0b
N.A.
0.6%
Texas
$5,557,228,988
$0b
N.A.
0.6%
Virginia
$69,554,746
$0b
N.A.
0.6%
Virgin Islands
$81,175,161
$0b
3.0c
3.0%
West Virginia
$114,190,720
$0b
N.A.
0.6%
Total
$41,989,608,510

Source: Prepared by the Congressional Research Service (CRS), using data from the U.S. Bureau of Public Debt,
http://www.treasurydirect.gov/govt/reports/tfmp/tfmp_advactivitiessched.htm, and the U.S. Department of Labor,
https://oui.doleta.gov/unemploy/futa_credit.asp.
Notes: States not listed on this table had no outstanding loans on November 27, 2020, had no outstanding
interest accruals, and were not subject to a state tax credit reduction on the calculation of the net FUTA tax in
2020.
N.A. = Not applicable, state did not have consecutive outstanding loan balances on both January 1, 2020, and
January 1, 2019.
a. Under UC law, the District of Columbia, Puerto Rico, and the Virgin Islands are considered to be states.
b. Section 4103 of the Families First Coronavirus Response Act (FFCRA, P.L. 116-127) temporarily waives
interest payments and the accrual of interest on federal advances (loans) to states to pay UC benefits
through December 2020.
c. For this year, the state received credit reduction add-on relief.

Author Information

Julie M. Whittaker

Specialist in Income Security

Congressional Research Service

10

The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
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Congressional Research Service
RS22954 · VERSION 52 · UPDATED
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