hot topic | UNEMPLOYMENT INSURANCE
High Unemployment Puts State Jobless Funds In the Red by Jennifer Burnett
JOB SEEKERS SEARCH FOR EMPLOYMENT DENVER, COLO.—Hundreds of job seekers line up to enter a career fair in December in Denver, Colo. In an effort to boost jobs nationally, President Barack Obama proposed small business tax cuts, new infrastructure spending and energy efficiency. Photo: John Moore/Getty Images
CAPITOL IDEAS
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MARCH/APRIL 2010
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In the past year alone, Colorado’s jobless fund dropped by more than $530 million, from $562 million in January 2009 to $30 million in January 2010. That’s according to Donald J. Mares, executive director of the Colorado Department of Labor and Employment, who also said the state processed more than 22,000 new applications in November from people who lost their jobs and were applying for unemployment benefits. Just two years earlier, the monthly average for new applications was about 11,000, he said. “Like all states, Colorado has been hit hard. More people are tapping into the benefits,” Mares said in a statement following a presentation before the state’s Joint Budget Committee.
Borrowing to Pay the Bills
The nation’s unemployment rate was at 9.7 percent in January, according to the U.S. Bureau of Labor Statistics. Americans are spending more time unemployed during the economic downturn—up from 18 weeks in No-
vember 2008 to 28 weeks in November 2009. That puts a significant strain on state resources. The primary reason state trust funds—the pots of money states use to pay workers who have lost their jobs—are running out of money is simple: The amount of money coming into the funds has stayed the same or even decreased at a time when the number of jobless workers needing the benefits has skyrocketed. “The base wage that employers pay in to the (unemployment) trust fund hasn’t changed in 25 years,” Jane Oates, assistant secretary for U.S. Department of Labor’s Employment and Training Administration, told C-SPAN in January. “So when you have more people using benefits and you haven’t increased the amount of revenue that you are putting in, you are going to come up with a situation where you are short on funds.” And short on funds is exactly where a lot of states are in their unemployment insurance trust fund balances. Some state trust funds have already run out of money—some are deeply in the red—and have been forced to borrow from the U.S. Treasury, which lends
money to states to help stabilize the funds during volatile times. As of February, the average amount borrowed from the feds per state was just more than $1.1 billion, according to the U.S. Department of Labor. California borrowed the most of any state—$6.9 billion; it’s been borrowing federal funds since January 2009. Colorado, the first state forced to seek help this year, borrowed $27 million by the end of January. Michigan, which faced unemployment rates as high as 15.3 percent over the past few years, was the first state to begin borrowing money, starting in September 2006. Its loan balance was $3.37 billion in January. By the end of January 2010, states had borrowed more than $30 billion from the federal government to pay unemployment benefits.
Making Cuts, Raising Taxes
Although the Recovery Act includes a provision that delays interest from accruing on the loans until the end of 2010, the bill eventually will come due. Oates said some
