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 2005 President's Budget are detailed below. The total unemployment rate (TUR) is projected to average 5.8% in FY 2004, then to decline to 5.5% in FY 2005.

Under these assumptions:

• The insured unemployment rate (IUR) is projected to be 2.7% in FY 2004 and 2.5% in FY 2005.
• State UI regular benefit outlays are estimated at $39.9 billion in FY 2004 and $39.1 billion in FY 2005, compared to Midsession estimates of $40.8 billion and $38.4 billion, respectively.
• Outlays from state trust fund accounts are projected to exceed revenues and interest earnings by $6.2 billion in FY 2004. Outlays and income are projected to be equal in FY 2005.
• Aggregate state reserves, net of loans, are projected to fall from $27.4 billion at the end of FY 2003 to $20.5 billion at the end of FY 2005, before starting to grow again. The projected low point for the state fund is $3.2 billion higher than the Midsession estimate.
• Borrowing from the Federal Unemployment Account (FUA) is projected to continue over the next few years, with lian activity declining after FY 2005. The outstanding balance at the end of FY 2005 is projected to bw $1.7 billion, down from the $3.1 billion Midsession estimate.
• No Reed Act distributions are projected through FY 2009.
• The balance in EUCA is projected to drop to $5.8 billion at the end of FY 2004 before starting to grow again.

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