Unemployment and Unemployment Insurance

On August 22, 1996, President Bill Clinton signed into law an historic overhaul of the country’s welfare programs. Fifteen years later, during one of the most prolonged economic downturns in U.S. history, some states are actually seeing declines in the number of their citizens accessing TANF - Temporary Assistance for Needy Families - which is the nation’s cash assistance program for poor families with children.

As the national unemployment rate hovers around 9.1% and with state unemployment rates as high as 12.9 percent, states are still struggling to pay out unemployment benefits. In September 2006, Michigan became the first state in recent history to borrow money from the federal government so that it could continue to send out unemployment checks. Now, 28 states plus the Virgin Islands are currently borrowing money and next month, many will have to start paying interest on those loans.  For most, the bill will be in the millions of dollars.  

While the unemployment rate improved slightly in July, state government employment is still falling, continuing a three-year trend.

Shortly after the Great Recession began, states started struggling to keep their unemployment insurance (UI) trust funds afloat. UI trust funds are used to pay out unemployment benefits to citizens. Primarily because of sustained high unemployment rates, long-term unemployment and unsustainable funding models, those UI trust funds have been exhausted, leaving states with a negative balance no choice but to borrow from the federal government.

Unemployment rates remain high and many people have been without work for extremely long periods of time, exhausting state unemployment trust funds quickly. More than half the states are borrowing from the federal government to cover costs, which could have an impact on future fiscal stability.

Unemployment rates remain high and many people have been without work for extremely long periods of time, exhausting state unemployment trust funds quickly. More than half the states are borrowing from the federal government to cover costs, which could affect future fiscal stability.

As state leaders came together to hammer out their 2012 fiscal year budgets, they faced a challenging task: Find a way to close huge budget gaps while facing an increased demand for services like unemployment benefits. Sustained high unemployment rates, long-term unemployment and unsustainable funding models have exhausted state unemployment trust funds, requiring states to borrow large sums from the federal government. As of March 2011, 31 states had borrowed more than $42.5 billion from the federal government to continue paying unemployment benefits, and sizable interest payments on those loans come due in the fall of 2011. Paying back those loans with interest will be a struggle and could have an impact on both economic recovery and future fiscal stability.

States owe a whopping $40 billion in loans to the feds so they can continue to pay unemployment benefits to unemployed residents. Now, states are faced with bringing their unemployment programs back in the black, and several states are considering or are implementing cuts to unemployment benefits alongside tax increases.

Approximately 40 million Americans received monthly food stamp benefits in 2010, up from about 26 million in 2007. Increased unemployment during the recession was a major contributing factor to the growth in the number of Americans depending upon SNAP. 
 

Unemployment rates remain high and many people have been without work for extremely long periods of time, exhausting state unemployment trust funds quickly. More states are borrowing from the federal government to cover costs, which could have an impact on future fiscal stability.

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