Historical high jobless rates deplete state unemployment funds

There are so many people applying for unemployment benefits that callers often can’t get through, and even if they can, unemployment checks may not be available, according to a new Stateline.org report.

In North Carolina, where more people are out of jobs than ever, state employees are working overtime and on weekends to reduce a backlog of requests to verify unemployment benefits that has been as high as 17,000, compared to only a few cases a day a year ago. And in Michigan, which has the highest unemployment rate in the country at 8.9 percent, there isn’t enough money in its unemployment insurance fund to cover claims, so the state has been forced to borrow from the federal government to pay jobless benefits, Stateline reported.

The number of Americans filing new claims for unemployment benefits is at the highest levels since the Sept. 11, 2001 attacks. Weekly claims have exceeded 400,000 for 11 weeks, compared to 324,000 a year ago, a level that economists say indicates a recession, according to Stateline.

For example, I know someone who works in the construction industry, which has slow periods and seasonal layoffs, and this year has been especially slow. He recently had to file an unemployment claim for a couple of weeks, and dialed the number to the Rhode Island unemployment office - where unemployment is over 8% - and the line was busy for at least 25 minutes before it rang. The wait to talk to a person was well over an hour.

Also, I just spoke to Anne Nolan, the president of Crossroads RI, a homeless and womens' shelter. The non-profit organization was allotted $500,000 in state aid two years ago, but for the past two years has only gotten $200,000 in aid. In addition, she is worried that donations will slow down due to the economy.

"When people can't afford to pay for their own heat, they can't afford to donate to us," Nolan said. "Crossroads has been through tough times before, but this feels ominous. We are dealing with state cuts and at the same time, getting more people who are experiencing homelessness for the first time because they can not support themselves."

And if unemployment funds dry up, there will be even more people knocking on the doors of shelters like Crossroads.

The issue with unemployment funding is that states typically collect payroll taxes from employers to pay for jobless claims; lawmakers set the tax rates, the maximum amount of the unemployment checks and the duration of benefits. Many states have had to increase unemployment payments but have not increased payroll taxes to keep pace with the payments.


So far, unemployment insurance trust funds are in danger in California, Michigan, Missouri, New York, Ohio, South Carolina and Wisconsin, according to the National Employment Law Project, a policy group based in New York that advocates on behalf of the unemployed. That group reports 11 additional states are having trouble doling out jobless benefits.

Until economic confidence returns and banks make it easier for businesses, governments and consumers to borrow money to meet payrolls, pay bills and buy houses, companies will continue laying off workers. Major institutions like Bank of America saw steep revenue declines this week and some analysts say a number of banks won't make it through the current credit crisis, even with the ridiculous $700 billion federal bailout plan.