NYS seeks $4B no-interest loan to cover unemployment claims

New York and other states are quickly depleting funds set aside as millions of laid-off workers apply for unemployment-insurance benefits.

WASHINGTON -- New York state has asked the federal government for a $4 billion no-interest loan to cover unemployment payments for people put out of work by the coronavirus pandemic as it and other states burn through funds set aside for jobless claims.

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New York and other states are quickly depleting funds set aside as millions of laid-off workers apply for unemployment-insurance benefits offered by state governments, according to a Wall Street Journal analysis of Treasury Department data.

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Nearly half of U.S. states have logged double-digit percentage declines in their trust-fund balances since the end of February, the month before the coronavirus pandemic triggered widespread job losses and record numbers of jobless claims. States use the money to pay regular unemployment benefits, while the extra $600 payments recently added for workers laid off during the pandemic are funded through a federal stimulus package signed into law last month.

From the end of February to mid-April, New York had used about half of the trust-fund money it had on tap, representing one of the steepest declines among states.

"All benefits, including enhanced benefits, are being paid, and to help ensure it remains that way the state has applied for an up to $4 billion, no-interest federal loan," said Deanna Cohen, spokeswoman at the New York labor department.

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Massachusetts also has used up about half of its available funds. California registered the third-largest decrease over this period: Its trust-fund balance had dropped nearly 40% since February to $1.9 billion in mid-April.

Economists say the cash drain means some states could run out of money in the coming weeks for paying regular unemployment benefits, raising the possibility they will need help by getting loans from the federal government.