subject: 33 United States States Short On Funding Unemployment Benefits [print this page] With jobless claims at an all time high of 9% majority of United States federal states have virtually bled their jobless workers benefit funds dry, giving them no choice but to ask the US Federal government for more funds.
Currently, about 33 federal states and the US Virgin Islands dried their funds to borrow to the tune of a whopping total of $38.7 billion to provide a temporary relief to millions of jobless claimants.
As a result of this, federal states are cost cutting non-necessary services to save money. From entertainment like fireworks to catching stray chickens, these cash-strapped cities are getting rid of all kinds of extraneous services.
Debt-ridden California state has borrowed the most, totaling more than $8.4 billion, followed by Michigan and New York, which have loans worth more than $3 billion. Nine other states have borrowed at least $1 billion from the federal government.
"The nation's financing system for jobless benefits is under unprecedented stress," said Andrew Stettner, deputy director of the New York-based advocacy group for the unemployed. "While the recession has certainly made things worse, this funding crisis has been developing for years."
At the start of the crisis, only 19 federal states met the recommended funding level, amounting to 1 year of reserves equal to the highest amount of unemployment insurance paid out during prior recessions.
Economic experts speculate that states build up their jobless benefit warchest only during strong economic times so that they can draw from these fund during lean times like these.
However, in practice, to fill their warchest, local state governments gather money for unemployment benefits by setting a fixed tax on employers on a small portion of their employee wages. While wages and the requirements for unemployment benefit levels have been climbing, governments haven't been increasing the taxable base wages at the same pace.
Wrongly, they stuck to a "pay as you go" method, taxing low during abundant times and ironically raising taxes only when hard times come.
Only 13 states were able to fund jobless benefits without borrowing from the Federal government. Out of that about 10 of them followed the recommended path to finance their warchest.
Here's how much they've borrowed from the federal government.
