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UI Data Summary FY 2007 Budget Mid-session Review

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OVERVIEW

Twice each year, when the Office of Management and Budget issues economic assumptions for the federal budget, the Division of Fiscal and Actuarial Services (DFAS) of the Office of Workforce Security (OWS) uses those assumptions to develop financial projections for the Unemployment Insurance system.

Using the economic assumptions, the paths of key program variables are projected for the following five years. It is important to keep in mind that the economic assumptions beyond the first two years are not intended to be forecasts but rather are based on long-term trends. Deviations from the assumed economic path could have a significant effect on the accuracy of the estimates shown in the UI Outlook.

Highlights of the analysis for the FY 2007 Budget Midsession Review are detailed below. The total unemployment rate (TUR) is projected to average 4.8% in FY 2006 as well as in FY 2007.

Under these assumptions:

  • The insured unemployment rate (IUR) is projected to be 2.0% in both FY 2006 and FY 2007.


  • State UI regular benefit outlays are estimated at $30.86 billion in FY 2006 and $33.02 billion in FY 2007, compared to President's Budget estimates of $34.69 billion and $36.74 billion, respectively. Outlay estimates are significantly lower throughout the projection period, based on lower expected unemployment and lower projected growth in the average weekly benefit amount.


  • Revenues and interest earnings for state trust fund accounts are projected to exceed outlays by $6.51 billion in FY 2006 and $5.15 billion in FY 2007.


  • Aggregate state reserves, net of loans, are projected to increase from $29.26 billion at the end of FY 2005 to $47.18 billion at the end of FY 2010, before starting to decline slightly as benefit outlays continue to increase.


  • Borrowing from the Federal Unemployment Account (FUA) is projected to decrease over the next few years, with no new loans projected in FY 2008. Borrowing is projected to resume in FY 2009 as benefit outlays continue to increase. There are expected to be no outstanding loans at the end of FY 2007 through FY 2009, with increasing balances after that.


  • The interest rate on FUA loans for CY 2006 is 4.6256%.


  • No Reed Act distributions, which occur when all three of the Federal accounts reach their ceilings, are projected through FY 2011.

Proposed Legislation

The tables in this publication are based on current law, under which the effective FUTA tax rate drops from 0.8% to 0.6% in CY 2008. The FY 2007 President's Budget includes a proposal to extend the 0.8% rate for five years, through CY 2012. This change would increase FUTA collections by $7.1 billion for FY 2008-11. Federal account balances would grow faster than under current law, but no Reed Act distributions are projected through 2011.

Questions and/or comments regarding this document are welcomed. Please contact Mike Miller at miller.michael@dol.gov or (202) 693-2930, or write to:

Office of Workforce Security
Division of Fiscal and Actuarial Services
Room S-4231
U.S. Department of Labor
200 Constitution Ave., NW
Washington, DC 20210