Technically, AHCM is defined as reserve ratio (i.e., the balance of UI trust fund expressed as % of total wages paid in covered employment) divided by average cost rate of three high-cost years in the state's recent history (typically 20 years or a period covering three recessions, whichever is longer).
In this definition, cost rate for any duration of time is defined as benefit cost divided by total wages paid in covered employment for the same duration, usually expressed as a percentage.
Intuitively, the AHCM provides an estimate of the length of time (measured in number of years) current reserve in the trust fund (without taking into account future revenue income) can pay out benefits at historically high payout rate.
If the AHCM is 0.5, then the state is expected to be able to pay out six months of benefits when the a similar recession hits.
Historically, the state experienced three highest-cost years in 1991, 2002, and 2009, when the cost rates were 1.50, 1.80, and 3.00, respectively.