Management Capacity and the Solvency of Social Insurance Trust Funds

• In Event: Considering the Constraints of Government Agencies

Abstract

The solvency of social insurance trust funds has long been a concern for policymakers and beneficiaries. During times of economic recessions social safety net programs, such as Unemployment Insurance (UI), act as an automatic stabilizer and are a critically important policy tool. However, the solvency of these trust funds and their overall fiscal health vary widely across US states. Relatively few studies shed light on the black box of social insurance trust funds by examining both managerial capacity factors as well as program performance factors. In this paper, we join data on state unemployment insurance trust funds with state-level managerial and organizational capacity indicators, including staff resources, investment in fixed capital, and administrative budgets to examine the factors that contribute to solvency. We also consider the relationship between these capacity measures and other performance outcomes, such as payment accuracy. As a complex joint federal-state program, UI is funded through state-levied employer taxes, but state UI trust funds also receive loans from the federal government. These features mean that trust fund solvency is important not only for state program performance, but also because trust fund solvency has implications for state tax policy, state debt obligations, and federal-state fiscal interactions. Lessons may have implications for the management and solvency of other high-profile trust funds, such as the Social Security Trust Fund and Medicare Hospital Insurance Trust Fund. 

Authors

• Robert Greer, Texas A&M University
  Presenting Author

• Mallory E. Compton, The Ohio State University
  Non-Presenting Co-Author

• Matthew Young, Leiden University
  Non-Presenting Co-Author