States low on unemployment benefits
Up to 30 states may run out of reserves for unemployment benefits in the next month. In a throwback to the early 1980's, they may soon need to borrow from the federal government. Janet Babin reports.
Benefits forms (iStockPhoto)
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Renita Jablonski: We'll get January's job numbers in a few hours. We know they're not going to be pretty, and for a lot of states, that's going to mean more of a headache. A lot of places are running out of money to cut those benefit checks. Marketplace's Janet Babin reports from North Carolina Public Radio:
Janet Babin: States pay for unemployment benefits through a tax on employers. Usually it's enough. But this economy is not "usually." Twenty to 30 states could use up their unemployment reserves within the next month. What do they do then?
Moses Carey is with the North Carolina Employment Security Commission:
Moses Carey: At some point in the near future, we may need to borrow money from the federal government.
The last time states borrowed heavily from the Feds to cover unemployment costs was in the early 1980's. Rich Hobbie at the National Association of State Workforce Agencies says back then, 30 states had outstanding federal loans:
Rich Hobbie: And it took them until the late 1980's to repay those loans.
The interest rate on those borrowed funds is zero if the money's paid back within the year. If not, the interest rate rises to 4.8 percent. Steep compared to the rate banks have to pay, now around a half a percent.
I'm Janet Babin for Marketplace.
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