Although initial unemployment insurance (UI) claims for the week of April 12–18 dropped in last week’s report from the Employment Security Department (ESD), they were still the fifth-highest in state history. Continuing claims increased to 523,126. Since March 1, arts, entertainment and recreation; construction; and accommodation and food services are still the sectors with the most initial claims relative to February employment.

Further, the claims report last week did not include claims by independent contractors, who are newly eligible for UI under the CARES Act (the third federal aid bill). Such claims were first accepted late Saturday, April 18, and that day ESD “received more applications (including expanded, extended and traditional benefits) in a single day than the biggest week on record, which was 182,000 applications in the week ending 3/28. For comparison, the 182,000 applications in a week was already seven times the peak week for the 2008/2009 recession.” With these claims, ESD expects total claims in this week’s report to increase to 900,000 to 1 million.

Meanwhile, Congress passed a new federal aid bill that increases funding for the paycheck protection program (forgivable loans for small businesses) and adds funding for health care providers and testing. The bill does not add funding for state and local governments, but Treasury has provided new guidance that allows some flexibility in the use of previously appropriated relief funds. That flexibility does not include the ability to use the funds to address revenue shortfalls.

The Wall Street Journal writes, “States across the country face an increasingly grim financial outlook due to the coronavirus pandemic shutdown—with no near-term sign the federal government will come riding to the rescue.” The story adds,

Though Washington state has roughly $3.5 billion in reserves, budget officials say projected revenue shortfalls over the next three years would wipe that out. Even with federal aid, the state would face major budget cuts, said David Schumacher, director of the state’s Office of Financial Management.

“That’s going to be a huge driver of whether we have bad budgets and significant cuts, or catastrophe,” he said of the federal aid.

(As passed by the Legislature, the 2020 supplemental budget left $3.558 billion in total reserves at the end of 2021–23.) According to Moody’s, the downturn could mean a fiscal shock of $3.5 billion to $4.4 billion for Washington. To access the constitutionally-protected rainy day fund during this time, the Legislature will likely need only a simple majority vote.

Happily, on Friday, Gov. Inslee announced that some private, existing construction work will be allowed to continue at this point.

Finally, last week we continued looking at how the state responded to the Great Recession:

• Looking back at state budgeting in the Great Recession, part 1: Revenue losses
• Looking back at state budgeting in the Great Recession, part 2: How the governor and Legislature responded
• Looking back at state budgeting in the Great Recession, part 3: New resources
• Looking back at state budgeting in the Great Recession, part 4: Overview of spending cuts

Previous recap: Recapping last week