Because of the high jobless rate and past fiscal irresponsibility, 30 states have collectively had to borrow more than $40 billion from the federal government just to keep unemployment insurance checks in the mail. A provision in the stimulus bill made those loans interest-free for an extended grace period.
But no more. Efforts to include an extension of the grace period in Obama's tax cut extension enacted at the end of last year failed, and the first batch of 14 states will have to start paying interest before the end of this year. Given that state budgets need to be hammered out in advance, that means state legislatures will soon face tough choices as they come back in session.
The amounts due range from California and Michigan, which each face payments of more than $300 million dollars, to Kansas, which will owe about $6 million. (Fun fact: That's $2 for every Kansan.) And because of federal rules, states can't use unemployment insurance taxes to make interest payments, which means cash-strapped states will have to take that money from their general budgets, so there will be less money for roads, schools and other priorities.
Because of a historical compromise, each state operates its own unemployment insurance fund with wide latitude to set tax rates and benefits. While some states were careful to save up and build a cushion of reserves in good years, others got themselves into this mess by maintaining dangerously low levels of reserves for years before the Great Recession hit. (How is your state doing? Check out our Unemployment Insurance Tracker [1].)
The bill is coming due at a particularly bad time for state legislatures, which already face an $82 billion shortfall for 2012, said Arturo Perez, a fiscal analyst for the National Conference of State Legislatures.
That budget crunch is the largest and deepest fiscal crisis states have faced since the end of the great depression, Perez said.
GO HERE to read more.
The amounts due range from California and Michigan, which each face payments of more than $300 million dollars, to Kansas, which will owe about $6 million. (Fun fact: That's $2 for every Kansan.) And because of federal rules, states can't use unemployment insurance taxes to make interest payments, which means cash-strapped states will have to take that money from their general budgets, so there will be less money for roads, schools and other priorities.
Because of a historical compromise, each state operates its own unemployment insurance fund with wide latitude to set tax rates and benefits. While some states were careful to save up and build a cushion of reserves in good years, others got themselves into this mess by maintaining dangerously low levels of reserves for years before the Great Recession hit. (How is your state doing? Check out our Unemployment Insurance Tracker [1].)
The bill is coming due at a particularly bad time for state legislatures, which already face an $82 billion shortfall for 2012, said Arturo Perez, a fiscal analyst for the National Conference of State Legislatures.
That budget crunch is the largest and deepest fiscal crisis states have faced since the end of the great depression, Perez said.
GO HERE to read more.
6 comments:
Our Central Bank is not out to actually help anyone with interest free fiat currency.
They print the money out of thin air, and then charge interest on its "repayment".
Looking at the data, it would appear that MD is managing its unemployment fund just fine.
While many may criticize the taxes imposed in MD (does the term "tax hell" come to mind?) at least in this case, MD has a good outlook.
OF course, it could be said that the federal gov't is one of the largest employers in MD, giving it a cushion that many other states could never achieve ....
I'm confused, I thought employers paid into an unemployment insurance. Someone please explain to me why the state has to cover this?
9:09, employers do pay into the unemployment trust fund. The problem is there have been so many folks filing for benefits, that the funds have been spent.
Many states opted for the easy, cash-advance mentality offered by the federal gov't. Maybe they thought that it would be a freebie and not have to be repaid? Unfortunately, that has been the attitude of many federal programs lately, this being one of many at the money trough.
But now, it appears that the piper must be paid, and many states have been caught with their pants down.
Offering further comments about MD, it should be pointed out that the tax rates to employers have skyrocketed in the past couple of years. I can speak with first hand knowledge about this.
Here is a comparison: In the year 2008, I had to pay $25.50 per employee in state unemployment taxes. This was the lowest possible rate, based on no claims being filed against my business.
In 2009, that rate doubled to $51.00. In 2010, the minimum rate went up to $187.00. This is more than seven times the rates from 2008.
For an employer who has been assessed higher rates due to claims being filed, the maximum amount per employee can be as high as 13.5% of the first $8500 in wages, or $1147.50.
For an employer who had been paying the lowest rates in 2008, but then had claims filed against them, this represents a 45 times increase in rates.
The previous high-end rates were 7.5%,in 2008 and 9% in 2009.
Point blank theres just too many people collecting unemployment.Alot of them need it, but I see so much abuse of it too.It has to come from somewhere.Unfortauntely the fruits of the working class' labor will be plucked to subsidize the jobless.
12:47 PM
What abuse do you see? Or is it abuse you 'think' you see? Even if what you say is true, there is a number you can call to report it.
What 'fruits' are you referring to? Taxes? That is nothing new. You have been paying taxes since your first job.
You want to cut off all benefits to the unemployed? You want people to starve?
They won't starve. They will rob, kill and any thing else to survive and so would you if things got that bad.
You and others complain, complain and complain some more but offer no hint of a useable solution.
No surprise there. When things get bad people always try to blame others for their misfortunes. Human nature I suppose. But it solves nothing.
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