$1B trust fund has Kansas labor officials prepared for Boeing 737 Max layoffs in Wichita

Kansas Department of Labor officials said Thursday that the near $1 billion in the unemployment insurance trust fund has the state prepared for layoffs from the Boeing 737 Max production halt.

“It is considered solvent and more than capable of handling any of the demands from this situation,” Deputy Labor Secretary Brett Flachsbarth said of the approximate $990 million in the fund.

Money from the unemployment insurance trust fund is expected to go to many aviation workers in the Wichita area as companies in the Boeing 737 Max supply chain lay off employees.

Spirit AeroSystems announced last week that it would lay off more than 20% of its Wichita workforce after Boeing suspended production of the troubled 737 Max. More than 40 aerospace companies in the Wichita area provide parts and services for the plane. Economic multipliers show the 2,800 layoffs at Spirit will impact about 5,800 jobs in the region.

The U.S. Chamber of Commerce advised last week that Kansas has the fourth-greatest workforce shortage in the country. But Kansas Department of Labor Secretary Delia Garcia, a former statehouse representative from Wichita, said she is unsure whether the local economy can absorb the loss of 2,800 jobs.

“What I do know, being from Wichita, and what happened during the recession time, we took a hit,” she said. “We’ve been through this before and we are resilient and we got out of it. Right now we’re talking one industry, and then (during the Great Recession) it was much larger. I think we’re more prepared than we were then.”

While the January layoffs represent about a fifth of Spirit’s Wichita workforce, the Max is more than half of the company’s annual revenue. Company officials said in the layoff announcement that “Spirit may have to take additional workforce actions in the future.”

Garcia said she doesn’t have a number of expected layoffs from the aerospace supply chain as “all the details are fluid and coming in.” Additionally, the Labor Department is not aware of any plans for more layoffs at Spirit.

“We are staying in contact with them in case it does happen and to have our resources available,” she said.

The secretary said her message to all effected companies — including those outside the aviation industry — is that KDOL has programs available to help. She emphasized the 26-week shared work program, which she said is intended to help companies avoid layoffs, and the 16 weeks of unemployment insurance. About 10 companies have already inquired about the shared work program in connection to the Boeing 737 Max suspension, said Flachsbarth, the deputy secretary.

Garcia said the unemployment trust fund, which finances the programs, is better prepared now with nearly $1 billion than when it had $660 million at the start of the recession a decade ago.

It is unknown whether the economic impact of the layoffs will be resolved before benefits run out for employers and employees using the 26-week shared work program and the 16 weeks of unemployment insurance. Garcia said the state is prepared to help workers if that does happen.

The state will have more information in the coming weeks, she said. State officials also are working closely with the United Way in case aviation workers need additional help.

“Our hope is that we won’t be needing that,” she said, “but if in case we do, we will be ready.”

Moody’s Investors Service advised on Monday that while the situation is “largely out of the company’s control,” Spirit’s earnings and cash generating capability will likely be weakened for at least two years. Moody’s also downgraded the debt rating for Spirit to junk-bond status.

Editor’s note: An earlier version of this story incorrectly noted what percentage of Spirit workers were included in the layoffs.

This story was originally published January 16, 2020 at 4:28 PM.