Report: Unemployment Insurance System Faces Funding Crisis

http://blog.aflcio.org/2008/05/20/report-unemployment-insurance-system-faces-funding-crisis/

by James Parks, May 20, 2008

As the Senate takes up the issue of extending unemployment insurance (UI) benefits this week, a new report shows the UI funds of several states are not solvent enough to weather a recession.

With the Bush economy in freefall, more workers are being forced to apply for jobless benefits. In fact, as the number of U.S. workers filing first-time claims for benefits rose last week, the total receiving benefits climbed to the highest level in more than four years.

On top of that, some 200,000 jobless workers a month exhaust their UI benefits without finding new jobs, and about 3.5 million unemployed workers will lose jobless benefits this year.

The report, Unemployment Insurance Financing: Examining State Trust Funds Facing Recession, by the National Employment Law Project (NELP), finds that overall, state UI solvency is worse now than it was prior to the 2001 recession. Overall, current state UI reserves are only about half the levels recommended prior to a recession. Click here to download the report.

The first 26 weeks of unemployment checks are written by the state where workers reside. Any extensions are paid for by the federal government. NELP Deputy Director Andrew Stettner, one of the report’s authors, says this solvency crisis affects every worker.

If the state’s trust fund goes bankrupt, there’s pressure to cut benefits. We have to raise enough money for the trust funds to keep that from happening.

FULL story at link.