I’m shocked..shocked I tell you..to find out that state governments have been..ahem, rather lax about dealing with their unemployment insurance situation. Frankly, I was shocked to find out that I didn’t know how the whole damn system actually works(or doesn’t).

Do you know where the money for unemployment benefits comes from?

Unemployment Info

“The unemployment system is a financial partnership between the federal and state governments. It was intended to be counter-cyclical, i.e. to accumulate and hold significant funds during good economic times, pay out benefits during bad economic times and simultaneously stimulate a stagnant economy.
The federal government levies an unemployment tax, under the Federal Unemployment Tax Act (FUTA), primarily to finance administrative costs of the system, fund loans to states and cover extended benefits.
State governments levy payroll taxes on employers to pay for unemployment insurance benefits. These taxes are deposited into the federal Unemployment Trust Fund. Each state has its own account within the Trust Fund.”

Sounds great, except that sometimes it doesn’t work the way it should. For example, New York’s situation at this point is pretty dire:

unemployment claims stress states

"New York’s unemployment insurance fund went insolvent about two hours into 2009," says Patricia Smith, commissioner of the New York labor department

Since Jan. 1, that flood of jobless claims has forced New York and four other states-South Carolina, Indiana, Ohio and Michigan – to borrow money from the federal government to pay benefits. Fourteen more states are at major risk of breaking the unemployment bank in the next year.”
And, this is the situation as of Feb. 3, 2009 in terms of the outstanding loans to states in order for them to just pay unemployment benefits:

California: $227,762,364.74
Indiana: $334,389,806.12
Kentucky: $13,900,000.00
Michigan: $1,083,400,000.00
New York: $346,954,398.42
Ohio: $186,437,799.00
South Carolina: $117,774,869.70

State UIT Trust Fund Loans

And, lest we forget, the latest figures in terms of the unemployment rate are an average. The states with unemployment percentages over the national average are:

CA: 9.3%……..DC: 8.8%…………..FL: 8.1%…………GA: 8.1%…………IN: 8.2%………..KY: 7.8%
MI: 10%………MS: 8%…………….NV: 9.1%…………NC: 8.7%…………OH: 7.8%……….OR: 9%
PR: 13.5%…….RI: 10%……………SC: 9.5%………….TN: 7.9%

State Unemployment Rates

It is evident from matching up the states that have had to borrow to pay their benefits and the states with the highest unemployment rates that some states out there with bad employment situations have not had to borrow and some, like New York have had to. In New York’s case, the state has not changed the laws in 8 years in terms of what percentage gets collected, so they have had several ‘must borrow’ situations in the past, particularly during the Pataki administration. But considering that this economic situation will probably get a lot worse before it gets better, one wonders: Where will the benefits money come from?



Snarky housewife from Upstate New York. Into gardening, fiber arts, smallholder farming.