California's UI Fund To Run Huge Deficits

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How bad are things in the state of California?

Well according to an Unemployment Insurance (UI) Fund forecast issued by California's Employment Development Department (EDD), the fund which is currently about $8 billion underfunded will be over $27 billion in the red by 2011!

That's almost $1,000 for every man, woman and child in the state of California---Or almost $2,000 for every worker in the state---It will likely be many many years before CA is able to dig out of this hole.

Texas Raising Unemployment Insurance Taxes in 2010

According to the Houston Business Journal, the state of Texas is going to raise the taxes from 0.46% to 0.72%.

That means an employer will pay $64.80 in tax per employee in the 2010 calendar year compared with $23.40 per employee in 2009.

The TWC attributed the rate hike from 0.26 percent to higher unemployment insurance outlays this year.

The tax revenue replenishes the fund that pays workers who involuntarily lose their jobs. About 67 percent of experience-rated businesses pay the minimum.

Meanwhile, the maximum tax rate - paid by 3.3 percent of Texas employers - will increase to about 8.6 percent, up from 6.26 percent, this calendar year. The average tax rate will rise to 1.83 percent from 0.99 percent in 2009.

40 Years of UI Continuing Claims

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So just how many people are collecting unemployment insurance benefits? As of July 2009, there are more then 6 million Americans collecting UI benefits---This is a record high amount and there is several reasons for this. First, the population is bigger than it has been in the prior 40 years and the amount of availabe workers is also larger than what it was in the decades past. Additionally, many more states are offering extended UI benefits--Tier 1, Tier 2 and Tier 3 benefits can stretch benefits out to over 70 weeks in many states.

Nonetheless, there just aren't that many jobs out there and the continuing claims is bound to decrease in the coming weeks---aided of course by people finding jobs, but also from people exhausting all of their benefits.

Looking at the chart, you can see that sometimes continuing claims plateaus and other times it shoots down as fast as it shot up---what will this great recession do? It's anybody's guess---but I feel comfortable in guessing that it will stay above 5 million people for at least another year.

15 States have borrowed Federal Funds to pay UI benefits

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According to Data from May, 2009---14 states have borrowings from the federal government for funding of their depleted unemployment insurance funds---and in the coming months several more states will be added to the list.

Michigan, California, New York, Ohio and Indiana have borrowed the most money---while Arkansas, Kentucky, Missouri, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina and Wisconsin also have borrowed funds.

California's Unemployment Trust Fund $2.35 Billion underfunded

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According to California's Employment Development Department (EDD), the state's unemployment insurance trust fund is currently at a $2.3 billion deficit and is increasing the deficit by ~ $700million a month.

Things are likely to get worse for the state because its unemployment rate continued to climb in the month of May (not shown on the chart)--and is likely to continue to climb for a few months---So that means fewer employers paying taxes into the system, and more unemployed workers collecting benefits.

California's Unemployment Insurance Fund could be $18 Billion underfunded

The SF Gate reports that the state of California could see it's unemployment insurance system run an $18 billion deficit by 2010.

The state currently taxes employers ~$434/employee per year to fund the unemployment insurance trust fund---this calculation hasn't changed since the mid 1980's even though the average weekly payout to the jobless has increased to a maximum $450 per week of unemployment benefit.

The state which has already run into issues with balancing its books will defiinitely see legislators debate this issue---Either raise taxes on employers, cut benefits to the jobless, or both.

Higher Taxes to fix Indiana's busted unemployment system

With the Hoosier State being forced to borrow money from the federal government to make unemployment insurance benefit payments to the state's jobless, the state legislature has decided to increase the taxes it charges to employers in order to fund the system.

According to the Courier Press the

Currently, employers pay between 1.1 percent and 5.6 percent on the first $7,000 a worker earns, or between $77 and $392 per year.

In 2010, that will increase to between 0.7 percent and 9.5 percent on a wage base of $9,500. That's between $66.50 and $902.50.

Then in 2011, that again jumps to between 0.75 percent and 10.2 percent on the first $9,500, leaving the final range between $71.25 and $969 each year

Everything is bigger in Texas---Even Unemployment

According to the San Antonio Business Journal the number of jobless Texans receiving unemployment insurance benefits has increased by over 160% in the past year.

Last year, there were ~104,000 Texans receiving unemployment benefits. Today there are over 275,000 jobless Texans receiving weekly checks from the unemployment fund.

At the current rate, Texas' nearly $1 billion reserve for unemployment funds will be depleted in October, resulting in the need to borrow money from the federal government to help people out while they search for jobs.

Florida Declines some Stimulus Money for the Jobless

According to the NY Times Florida legislators refused a bill to collect over $400 million of stimulus cash meant to expand unemployment insurance coverage for the state's jobless.

According to the article, the sunshine state's (whose unemployment insurance fund is expected to run out of money by August) law makers are uncomfortable with some of the strings attached to accepting the money---including the provisions that require unemployment insurance benefits be paid to spouses who have to relocate b/c of their signicant other.

Half of Americans will run into financial problems after not getting a pay check for 4 weeks

According to a study released by Met Life, 50% of Americans are just 2 paychecks away from not being able to meet their financial obligations. The data also shows that the youngest workers (Gen X & Gen Y) are most likely to run into financial difficulties with-in 4 weeks of losing their jobs.

This data is sobering and reinforces the negative feedback cycle---As more people lose their jobs, more people are cutting their spending and getting foreclosed on their homes---this causes more companies to lay-off more people.

Florida Cell Phone Companies Block Calls to the Unemployment Hotline

According to the Miami Herald several wireless phone companies, including Alltel have blocked calls made from their mobile phones to the state of Florida's Unemployment Insurance line.

This is because the Florida Unemployment Line delivers so many busy signals, the phone companies decided to block it (along with many other chronically busy numbers)...

The best advice, is to use a land-line (if you have one), to call the State of Florida's unemployment hotline---or else get a new cell phone provider!

How good is your state's unemployment insurance reserve?

The folks at IBM's many eyes have produced this interesting chart which shows the "Average High Cost Multiplier"---essentially how long the state's unemployment insurance reserves would last if funds were depleted at a rate that equals the worst rate in the last 20 years with no incoming revenue.

The darker the color, the better the reserve situation is.

Missouri's unemployment insurance fund runs out of money

According to the St. Louis Business Journal, the state of Missouri has had to borrow $15 million from the federal government as its unemployment insurance fund ran dry earlier this week.

The state is expected to borrow $260 million from the feds to cover their costs through May. If you're currently collecting unemployment insurance from Missouri, don't worry the checks will still be coming.

Nebraska's jobless now eligable for Tier 2 Unemployment Insurance payments

According to the AP for unemployed Nebraskans who have exhausted their regular unemployment insurance benefit of 26 weeks are now eligable to file for the emergency unemployment benefits, through December 31, 2009.

This filing date was pushed back from March 31, 2009 with Barack Obama's signing of the stimulus package.

Pennsylvania borrows money to keep unemployment fund going

According to msnbc.com the state of Pennsylvania has resorted to a short term loan from the federal government to keep the unemployment insurance benefits going to the jobless in the liberty bell state.

Department of Labor and Industry spokesman Troy Thompson said Friday this will be the third time in the last six years that Pennsylvania has had to seek such a loan.

The problem is that more people are seeking benefits after being laid off, while shrinking payrolls mean less is being paid into Pennsylvania's unemployment compensation trust fund.

7 States have borrowed money from the Feds to pay unemployment insurance benefits

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According to the Department of Labor there are 7 states which currently have run out of money in their unemployment funds and have been forced to borrow money from the feds in order to keep the unemployment insurance checks flowing.

• The state of Michigan has already borrowed almost $1.2 Billion
• The state of Indiana has borrowed $351 million
• The State of New York has borrowed over a quarter of a billion dollars
• Ohio has borrowed $186 million
• South Carolina has borrowed $123 million
• California has borrowed $113 million--and is quickly borrowing more.
• Kentucky has borrowed $39 million

My guess is that with New York and California being the most populous states and having quickly rising unemployment rates will quickly surpass Indiana for the #2 spot on this list---and given time, California could even surpass Michigan.

It's also safe to say that in 6 months time, there will be a lot more states on this list

North Carolina's Unemployment Insurance fund will run out this week

According to allheadlinenews.com the state of North Carolina started this week with $16million of cash in its unemployment insurance fund...

Since it paid out $160million in insurance benefit payments last month, that means that it's a matter of days before the state of North Carolina will have to start borrowing from the feds to keep the unemployment insurance checks coming.

Michigan may have to increase its unemployment insurance tax on businesses

According to Crains Detroit the state of Michigan will likely face higher taxes on businesses in order to compensate for the bulging borrowings to pay for unemployment insurance claims.
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State's UI debt may mean higher taxes

Business groups, state look for fed help

By Amy Lane

LANSING - Michigan employers will face higher federal unemployment taxes next year if the state doesn't repay the federal government loans used to pay unemployment insurance benefits.

The outstanding loans have ballooned to more than $1 billion, and are likely to go higher, as state unemployment continues to climb.

The higher taxes would be used to help repay the loans. Some employers already were assessed higher taxes by the state last month to help defray the interest.

If Michigan or any other state has an outstanding loan balance for two consecutive years, there is an automatic increase in the federal unemployment tax that all employers pay. The tax would continue to increase each year the loans aren't repaid.

The situation has some business interests and state officials looking to Washington for help.

Florida Tier 2 Unemployment Insurance

For those Floridians that need to know the details of the state's extended unemployment compensation plan you should check out this information

Essentially:

To be eligible for the additional EUC benefits, the claimant must:

• Have filed a claim on or after May 2, 2006
• Have exhausted all rights to regular UC under state or federal law.
• Have no rights to regular or extended UC in any other state.
• Not eligible for benefits in Canada.

and

Calculation of EUC Benefits for the Additional Extension

• Weekly Benefit Amount of the EUC claim will be the same amount received on the regular claim that the extension is based on.

• The total EUC Available Credits will be the lesser of:

• 80 % of the Available Credits on the regular UC claim up to a maximum of 20 weeks.OR
• 20 times the individuals weekly benefit amount

California's Unemployment Insurance fund has run out of money

According to SFGate.com the state of California's Unemployment Insurance fund went insolvent on Monday.

Don't worry, the state will be borrowing ~$2.4 Billion from the federal government for the rest of year. Odds are that the state won't be increasing the Unemployment Tax enough to counter this deficit, and will likely be borrowing more money in 2010, and having to pay over $150million per year in interest payments to the feds.

Read all of my California related links here.