As the economic recession continues to deepen, eight states have already run out of unemployment funds for its citizens and have begun borrowing funds from the federal government to cover the short fall. The states that are borrowing from the federal government to meet unemployment needs include Michigan, New York, North Carolina, South Carolina, Kentucky, Ohio, California, and Indiana. Many other states are tottering dangerously close to insolvency for their unemployment coverage if things don’t improve soon.
How did this happen? According to statements from National Employment Law Project’s Andrew Stettner statements to the Greenville News, the unemployment shortfalls in these states are the result of “bad policy choices and neglect.” In times of economic plenty, states failed to increase the amount of cash allotted to shore up unemployment funds despite the rising incomes of its citizens.
The federal funds being loaned to these states should not be confused with a federal bail out. These states are accepting loans from the government that they will be expected to repay in the future, thus passing on the burden to the state taxpayers due to the mistakes of the state governments.
According to CNN’s article from the Bureau of Labor Statistics, there were 7 states that had an unemployment rate of eight percent or higher as of late December, and the economic situation has far from improved since that time. Given the current trends, it is time for citizens to realize that they might not be able to rely upon unemployment funds should they find themselves out of work.