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States Respond To Rising Unemployment Claims

Compiled By Yaffa Klugerman
December 18, 2009

As the number of unemployment insurance claims go up, many states are responding by raising rates and dipping into federal dollars in order to keep funds solvent.

The Washington Post reports that unemployment insurance rates for Maryland business owners are expected to increase an astonishing 267 percent, from $51 per employee to $187 beginning January 1. While the fund currently has about $200 million, the state has been forced to pay twice the usual amount--about $24 million per week--to cover the rise in claims, and may go bankrupt as early as March.

Yesterday, Maryland Gov. Martin O'Malley proposed a plan which would limit employers' costs to $153 per employee by making changes to unemployment insurance systems , making the state eligible for $127 million in federal stimulus funding. Among the changes that would be required include better reporting of employees' employment eligibility, extending unemployment insurance for those enrolled in training programs, and providing benefits to part-time workers.

But business leaders opposed the plan, saying that it would ultimately lead to more money being paid out in unemployment benefits. "We appreciate what the governor is trying to do," said Tom Saquella, executive director of the Maryland Retailers Association, who was quoted by the Baltimore Business Journal. "But we don't want to add on long-term liabilities, especially in this economy."

Similarly, the Texas Workforce Commission announced last week that two-thirds of Texas businesses will be required to pay almost triple the tax for unemployment benefits next year. In 2010, the rate will jump from about $23 per employee to $65, reports The Dallas Morning News.

Texas could have cut the increase by nearly half this year if Gov. Rick Perry had accepted $556 million in federal stimulus funding. But as in Maryland, business groups opposed accepting the funds--as did Perry--saying that there were too many strings attached.

Other states have had no choice but to borrow from the federal government. In Georgia, for example, state labor officials will be taking out $70 million in federal loans for the state's unemployment insurance trust fund or it will have no money left by next week, reports the Associated Press [from an article originally located at http://www.google.com/hostednews/ap/article/ALeqM5jWK9c9Pu5CWUWzoGA9CM0lmDIDnQD9CL9KMO0]. Unemployment insurance premiums will rise as well for 15 percent of employers--although not as dramatically as in Maryland.

The AP Notes that according to the U.S. Department of Labor, 25 other states and the Virgin Islands are also borrowing more than $24 billion in federal loans to cover unemployment benefits. Labor Commissioner Michael Thurmond explained that states can continue to borrow funds, but interest will begin to accrue in December 2010, and officials are still unsure how the loans will be repaid.

As claims keep on rising, other states will also very likely be forced to dip in to federal funds or raise unemployment rates in order for unemployment funds to remain solvent. In a nod to the unfortunate trend, CNN reports that unemployment claims rose unexpectedly last week, with a total of 29 states saying that their claims increased by more than 1,000.

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