State Unemployment Insurance Trust Funds
As unemployment rates have skyrocketed in the economic downturn, state unemployment insurance funds are being depleted at increasing rates. As funds run out, states are borrowing from the federal government, raising taxes and cutting benefits.
Unemployment rates remain high, many unemployed long-term.
- 2009 ended with an annual average national unemployment rate of 9.3 percent after hitting a 26-year high of 10.2 percent in October 2009.
- Approximately 5 million people—or one-third of all those unemployed—are considered long-term unemployed, defined by economists as those who have been without work for 27 weeks or more.
- Unemployment rates in December 2009 ranged from a low of 4.4 percent in North Dakota to a high of 14.6 percent in Michigan.
- All states reported an increase in their jobless rate from December 2008 to December 2009. Alabama, Florida, Michigan and Nevada reported the largest increases over 2008 while Nebraska and North Dakota reported the smallest increases.
Unemployment insurance benefits extended.
- Over the past year, Congress expanded federal unemployment benefits, extending the amount of time an individual can receive benefits significantly, while the American Recovery and Reinvestment Act added an extra $25 per week to all unemployment checks through June 30, 2010.
- In November 2009, Congress extended federal jobless benefits by an additional 14 weeks for those Americans who exhaust their benefits by the end of 2009, while those living in high unemployment states (rates of 8.5 percent or higher) can possibly receive another 20 weeks of benefits. In December 2009, President Obama signed a bill that extended the benefit through Feb. 28, 2010.
- According to The Wall Street Journal, individuals in some states can possibly receive benefits for up to 99 weeks—the most benefits provided in history—based on the state’s unemployment rate and benefit structure.
- Even with these extensions, however, workers are, on average, unemployed for longer periods of time and are running out of benefits. Before the most recent federal benefit extension, more than 2 million Americans had already exhausted their unemployment benefits as of September 2009.
Dire unemployment situation has state unemployment insurance trust funds on shaky ground.
- Twenty-six states plus the U.S. Virgin Islands were forced to borrow money from the Federal Unemployment Account to help pay increasing claims for unemployment insurance benefits, with outstanding loans now totaling more than $30 billion at the end of January 2010.
- The U.S. Department of Labor estimates by 2011, at least 40 states will need to borrow money to fund their unemployment programs.
- The American Recovery Act included a provision that delays interest from accruing on those loans until 2011. Interest on borrowed funds cannot be paid back using unemployment insurance revenues.
- With unemployment rates at or near record highs, states are facing difficult decisions in 2010. A recent survey by the National Association of State Workforce Agencies shows that a majority of states—35—increased taxes on employers in 2010 and seven states enacted legislation to raise the taxable wage base on employers for unemployment taxes.