States Are Running Out of Unemployment Funds

Two Dozen States’ Unemployment Funds in the Red, Nine More Within Six Months

by Olga Pierce, ProPublica – January 20, 2010 12:42 am EST

The record 20 million Americans who collected unemployment insurance benefits last year landed on a safety net that was already deeply frayed.

New Interactive: ProPublica Predicts if Your State’s Unemployment Insurance Fund Is About to Hit the Skids

A historical compromise has left responsibility for unemployment benefits largely in the hands of states, and they have fulfilled this charge with varying degrees of effectiveness.

In a series last summer with public radio’s Marketplace, we reported that only a handful of states had built up reserves sufficient to weather the Great Recession [1] – and forecast a spate of borrowing by states where reserves ran out.

Half a year later, the direst predictions seem to be coming true: So far 25 states have borrowed more than $25 billion to keep benefits flowing after their trust funds ran dry. In many other states the situation is deteriorating fast.

Our new unemployment insurance tracker [2] monitors states’ trust funds using the most up-to-date data available on the Web – and projects the health of funds six months into the future. To help readers understand the roots of each state’s fiscal fiasco or success it also pulls together other helpful information and historical data that can be downloaded. According to our projections, Arizona, Colorado, Hawaii, Kansas, Maryland, Massachussetts, New Hampshire, Tennessee and Vermont will find themselves in the red within six months.

And while states’ poor fiscal planning is a serious topic on its own, our tracker [2] also follows the increasing human toll: so far businesses in 36 states face tax increases this year, ranging from a few dollars per worker to more than a thousand. Six states have moved to cut, freeze or otherwise restrict benefits, a number that is likely to increase. (See our breakdown of states’ projected increase in taxes [3]—and cuts in benefits.)

Some states have focused the pain, like Virginia, where unemployed seniors who also receive Social Security face steep benefit cuts. Other states, like Pennsylvania, have taken a broader approach: all unemployment beneficiaries will receive 2.4 percent smaller checks starting this month.

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