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States Struggle to Support Their Unemployed

December 17, 2008 by Alexis
As unemployment rates rise nationally, individual states are now facing the challenge of generating enough funds to pay for jobless benefits. The National Association of State Workforce Agency reported this week there are thirty states across the country turning to the federal government for federal aid to solve a crisis that’s seemingly feeding upon itself – less people in the workforce means less state-generated money, which in turn means less funding for the unemployed.

When the economy is going well, states generally build up trust funds to offset times when the state budget tightens. The federal government suggests that each state hold at least one year worth of peak level benefits in their trust. Most states haven’t been doing that, and those that did hadn’t predicted or prepared for the actual impact the recession would have.

To put it in perspective, The Labor Department saw 573,000 initial applications for jobless benefits come in the first week of December, a figure that’s the highest since November of 1982 and 50,000 more than economists expected.

Funds in two states, Indiana and Michigan, appear to be running on empty. With an unemployment rate of 6.4%, Indiana is expected to ask for over $330 million at the beginning of the year to support their jobless benefits program – a program that’s been guaranteed available to each Indiana citizen.

Michigan’s unemployment rate currently stands at an astounding 9.3%, and that number could actually climb higher depending on the outcome of the auto industry. Michigan plans to offset part of the deficit through a “solvency tax” the state’s government intends to implement in January on certain prospering employers, but the plan in no way intends to solve the problem. The state has been borrowing money from the federal government for the past few years now and is currently $508.8 million in debt to Washington DC.

The key word in that last sentence is “borrowing.” With unemployment expected to rise in the immediate future, states will have to find ways to balance the jobless benefits they distribute with the reimbursement packages they’ll be forced to pay.

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