Risk Funding of Unemployment Insurance: An Econometric Approach

The unemployment insurance econometric forecasting model (UIEFM) provides legislative policy simulations to the Virginia Employment Commission. One mode of the UIEFM, the economic projection program, generates alternative economic and policy forecasts. These forecasts are used by mode 2, the financial forecast program, to project trust fund balances, receipts, and benefits over a 10-year horizon. Three major unemployment insurance legislative policy problems are examined: (1) excess solvency, (2) the impact of benefit increases on solvency, and (3) pool tax volatility. The fiscal impact of each policy problem is estimated by means of UIEFM policy simulations.