States owe billions in unemployment

TEXT OF STORY

Bill Radke: In other news, a study out today shows half of the state unemployment systems in this country are deeply in debt. The figures come from the investigative news organization ProPublica. Marketplace's Mitchell Hartman has that story.


Mitchell Hartman: First things first: Laid-off workers still get their unemployment checks when state funds go bust. States simply borrow from the Feds. They've borrowed $25 billion already. That'll go higher by mid-year, according to ProPublica, when another nine states run out of money.

Ultimately, the states have to pay the Feds back. Scott Pattison of the National Association of State Budget Officers says they've only got two choices:

Scott Pattison: Raising the taxes on businesses to pay for the unemployment benefits, or you decrease the available benefits.

It's a lousy choice in a recession, since higher employer taxes can stunt job growth.

Gary Burtless of the Brookings Institution says states are largely at fault here:

Gary Burtless: State legislatures should build up healthy reserves when times are good in order to cover benefit payments when times are bad.

In the past decade, though, businesses pushed for lower taxes. Now, he says, they're paying the price -- 36 states have already had to increase the tax on employers to balance the books in their unemployment funds.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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