Earlier this month, the Nevada Department of Employment, Training and Rehabilitation issued a press release with a jubilant headline: “Nevada’s Unemployment Rate Hits an All-Time Low.”

Just two weeks later, as a wide swath of businesses are ordered shut for a month to slow the spread of a virus that has no treatment or vaccine and threatens to overwhelm the health care system, the department is doing an about-face — advertising extended hours and bracing for a flood of unemployment claims.

On Saturday, state officials announced that the second week of March brought nearly three times the number of initial unemployment claims as the first week — the largest week-over-week jump in claims since current recordkeeping began in 1987. The nearly 6,400 claims in the week ending March 14 doesn’t yet capture the tumultuous past week, during which Gov. Steve Sisolak ordered “non-essential” businesses to close their doors.

“We are seeing an uptick. While we haven’t finalized the numbers, we know there has been a significant increase,” said Tiffany Tyler-Garner, head of the employment department.

In a relative sense, Nevada is prepared for a downturn. The state’s unemployment insurance trust fund is larger than it has ever been after being deeply in the red following the recession, but it’s still anyone’s guess whether it can pull Nevada through a crisis of this magnitude — the analytics firm Applied Analysis predicts more than 300,000 workers in the tourism industry are at risk and unemployment could shoot above 30 percent, more than twice the peak of the Great Recession.

“It really depends upon the flattening of the curve,” said Meredith Levine, director of economic policy at the Guinn Center for Policy Priorities. “It really depends on how much mitigation there is of the crisis. If this continues for the long run then ultimately the money will run out. Right now, I do think it is a sustainable amount.”

Here are some questions and answers about the program.

What is unemployment insurance?

A national unemployment insurance system became law in 1935 as part of the Social Security Act. Geared toward able-bodied people who are involuntarily unemployed, it serves as a complement to the Social Security system for the elderly and helps sustain consumer demand during downturns.

The Legislature enshrined a state-level program in 1937, declaring that “economic insecurity due to unemployment is a serious menace to the health, welfare, and morals of the people of this state.”

The program functions as an insurance system, with employers paying in on behalf of working people to help them if they get laid off. It was designed so that employers have “skin in the game,” rewarding them with lower rates if they demonstrate they have kept their workers on the job over time.

The program is funded by state and federal payroll taxes. The Department of Labor oversees the system and uses federal revenue for administrative costs, while states pay most of the benefits from money collected by employers in the state.

How much money does Nevada have to administer benefits?

Nevada’s unemployment insurance trust fund balance stands at $1.98 billion. A few months ago, when the figure was $1.84 billion, state economist Jeremey Hays testified that the account had enough to pay out more than 17 months of benefits in a “normal recession.”

“Even under the worst case scenario, we have enough money to last just over a year,” Hays said at an October workshop for businesses, according to The Nevada Appeal.

At that time, benefits payouts were averaging only $23 million a month — about a third of the $90 million a month average during the recession, when Nevada’s unemployment rate nearly hit 14 percent.

While Tyler-Garner said the trust fund “is the healthiest and most solvent it’s ever been,” she didn’t want to predict how long the fund might last because of the extraordinary and evolving circumstances of the pandemic.

Not long ago, the fund was in dire straits. Nevada’s unemployment trust fund was depleted by the Great Recession, forcing it to borrow some $773 million from the federal government (34 other states had to borrow as well).

But in the last decade, the state added 328,000 jobs and its unemployment rate dropped 10 percentage points. As a result, tax payments flowing into the fund have in recent quarters been about four times the amount flowing out as benefits.

In late 2017, then-Gov. Brian Sandoval announced the debt to the federal government had been repaid and taxes would be lowered. The state’s Employment Security Division has also made subsequent decreases in the tax rates as the trust fund grew.

The standard tax rate for a business just starting out is 2.95 percent, but that can go higher or lower after a few years of operation once an employer establishes an “experience record” — a track record on how much a business is paying into and drawing out of the unemployment fund.

Generally, employers who have paid more taxes into the fund and have fewer former employees who are drawing benefits from the fund will be assigned a lower tax rate.

How does the fund work?

Because unemployment is administered by states, states can set their own rules on who is eligible, how much tax is levied and how much is paid out. As a result, each state’s trust fund is at a different level of solvency.

Currently, Nevadans can obtain benefits for up to 26 weeks. Most other states provide benefits for up to 26 weeks, but some states — including many in the South — max out at something lower, such as 12 weeks.

A permanent extended benefits program in federal law kicks in another 13 or 20 weeks of unemployment compensation to workers who have exhausted their benefits and are in a state where the unemployment picture is particularly bad. Typically, states and the federal government split the costs of those extended benefits 50-50, but legislation passed this week temporarily moves the full cost to the federal government.

There are also times when Congress enacts special extensions of benefits, including one in 2008 that brought additional weeks of benefits that were fully financed by the federal government.

“The trigger has been the politics of whatever situation we’re in,” UNLV labor law professor Ruben Garcia said. “After the Great Recession, there was a lot of attempt to extend the upper limit to 99 weeks.”

In Congress, lawmakers are discussing plans to expand benefits as part of a coronavirus aid package. 

They’ve already taken some action to shore up the unemployment insurance program. A bill the president signed into law last week will provide Nevada’s employment division $5 million to add staff and upgrade its technology to, for example, allow people to digitally sign documents and submit employment verifications online while offices are closed.

Who is eligible?

In general, someone is eligible if they are out of a job through no fault of their own and meet the state’s requirements for wages earned or time worked during a “base period.” That period includes the first four of the last five quarters before the claim is filed.

Employers pay into the system through both state and federal payroll taxes; there are not deductions from a worker’s wages to pay into the fund.

During the time employees are collecting benefits, they must certify they are “able, available and willing to accept suitable work.” That includes having transportation and child care options available, and the state’s handbook states “you cannot have conditions or barriers that prevent you from accepting work immediately.”

Applicants are required to be actively searching for work and report their weekly job search activities to get their check, although Sisolak waived the requirement in the past week amid widespread business closures and a directive that people stay at home.

“The reality is there is no employment to look for,” said Rep. Steven Horsford.

People classified as employees are eligible for benefits, but Nevada law lays out a number of exceptions to who is considered an employee. That includes agricultural laborers, certain salespeople, clergy and people performing services for their family.

There is also the large exempt category of independent contractors. A true independent contractor is someone who is free from control over the performance of services, is performing a service that is outside the course of business for the company for which it is performed and is doing work as part of their independently established business.

But it’s not uncommon for people to be wrongly classified as independent contractors when they aren’t — sometimes intentionally by an employer to avoid paying benefits or overtime, sometimes unintentionally. Garcia said sometimes a person starts out as an independent contractor but the nature of the work evolves into something resembling that of a bona fide employee, and he or she becomes eligible for benefits.

“The only way you can really determine that is apply, and see what the employer and the state says,” Garcia said.

If the state determines the person is actually an employee, the employer would be liable to pay back taxes into the unemployment insurance fund.

Horsford said addressing lack of coverage for contractors is a focus in Congress.

“We’re still trying to work on the gig economy —  those that may be working for example as contractors that may not have contributed to unemployment insurance themselves and therefore there is no match for them to now receive the benefit,” he said.

Others who may be left out of the benefits are undocumented workers who do not have authorization to work in the U.S. and domestic workers such as nannies who may suffer from a double whammy of ineligibility for benefits and a lack of demand for their services. 

“A share of them are paid under the table in which case they’re not paying into the system and under those conditions they wouldn’t qualify for unemployment benefits,” Levine said. Plus, “in a lot of households it may be a time when domestic work is not prioritized.”

What is the typical aid package?

The amount of the payout varies but, unlike welfare, is not based on financial need. People who made more at the time of their layoff will receive more in their unemployment benefits check.

For those who qualify, the weekly check is 4 percent of the earnings in the worker’s highest eligible quarter. For example, if a person made $40,000 a year, their weekly benefit check would be $400.

The weekly payout cannot be more than the maximum amount set by law July 1 of each year — a number that reflects 50 percent of the average weekly wage of all Nevadans. For Nevada, that weekly maximum is $469.

The average payment is generally less than that. Prior to the coronavirus outbreak, the average weekly payment in Nevada was $380 per week over six months, according to Horsford’s office.

“That may not offset any lost wages,” Levine said.

In December, the average length of time a Nevadan was unemployed was 13.3 weeks. About one-third of claimants ultimately exhausted their unemployment benefits without finding a job.

Calls for changing the system

Critics say the system is not covering as many people as it should, and that the many exclusions offer too many “outs” that preclude people from benefits. The problem is especially pronounced with the rise of companies such as Uber and Lyft, whose drivers are independent contractors.

Some say flat payouts, such as Rep. Maxine Waters’ proposal that the Federal Reserve send out $2,000 to every adult and $1,000 to every child each month until the crisis passes, would do more to accomplish the goal of giving people a safety net and keeping the economy going in a steep and sudden downturn.

“In a time like this there may be other alternatives that are more efficient,” Garcia said.

The system is also a patchwork from state to state, leaving people in neighboring states in vastly different circumstances.

Tyler-Garner said her office is in communication with the governor to offer feedback on how to improve the program. Recently, the office has been grappling with the question of what it means to meet the requirement of being “able and available” to work if the person is in isolation or has tested positive for coronavirus.

Others want to see changes in the requirement that people must not have left their job voluntarily to tap into benefits. Sometimes, people leave for a compelling reason, such as caring for a sick family member.

While Sisolak has already waived some rules such as one requiring seven days before benefit payments flow, Garcia said it’s an open legal question how much authority the governor has to expand the eligibility rules for the benefits. 

“It’s a meta question that comes up a lot,” Garcia said. “Certainly in these situations, we may be in a different place because it’s a state of emergency.” 

And Horsford, while he supports a rapid, multi-pronged federal government response that would include direct payments and an expansion of unemployment benefits, noted that he doesn’t think unemployment insurance should be “viewed as the end all be all solution.” Ensuring businesses don’t have to shed employees in the first place is one of his goals because “it will minimize disruption in every regard.”

“The federal government has a real opportunity in this crisis to help our large employers in Nevada get access to federally guaranteed loans so we can keep people on payroll, keep paying their benefits, so that they don’t have to seek unemployment,” he said. “If they close it’ll be very hard for them to reopen, and to keep their employees on their payroll — that is the ultimate goal."