States Unemployment Progams Underfunded : Debt Rising

Add this nightmare to the under funded retirement programs that the states are obligated to fund will result in an economic crash of in debt states if nothing is done to reign in out of control budgets.

I wonder why this is so hard to understand and why so many politicians refuse to act?

State Unemployment Trust Funds in Trouble
Source: Jake Grovum, "Why State Unemployment Trust Fund Debt Matters," Stateline, April 29, 2014.

May 8, 2014

States have unemployment insurance trust funds, intended to generate money to finance unemployment benefits for out-of-work Americans. But the funds took a hit during the recession, and many states are still facing large amounts of debt, reports Stateline.

• In early 2011, when debt levels were at their worst, the states collectively owed $47 billion to the federal government.
• During the Great Recession, 36 states asked the federal government for loans. Today, 16 states owe more than $21 billion to the federal government. This does not mean that the other states are not in debt -- many simply borrowed from the private bond market, making the debt difficult to track.
• California held the highest amount of debt -- at more than $10 billion. As of March 31, its unemployment trust fund was $9.8 billion in debt.
• Indiana, New York, North Carolina and Ohio each have more than $1 billion in debt.
• Some states have been able to recover, however. Minnesota had a positive trust fund balance of $237.8 million, which dropped to more than $700 billion in debt in early 2011. As of March, the fund had a positive balance of more than $1 billion.

Some states raise taxes when their unemployment funds drop to low levels. Colorado, for example, taxed employers who laid off workers in 2010. But other states have reduced benefits instead.

• North Carolina completely overhauled its unemployment system last year, becoming the first state to opt out of the federally funded long-term unemployment benefits system.
• It also made the number of available weeks of unemployment benefits dependent upon the unemployment rate. When the unemployment rate is above 9 percent, 20 weeks of unemployment benefits are available. When the rate is at 5.5 percent, the state grants 12 weeks of benefits.
• North Carolina's debt has fallen from $2.6 billion in early 2012 to $1.45 billion in March 2014.

These unemployment funds are not prepared for another round of widespread unemployment. Prior to the recession, the states together had less than $40 billion in their unemployment trust funds, the lowest level since World War II. In the early 2000s, the state funds had more than $50 billion.