VIDEO: Unemployment levels reached record highs during the recent recession and as a result, many unemployed workers turned to their state for unemployment benefits (SUTA Trust Fund / SUTA Tax). Due to the high levels of unemployment claims, over 70% of these state SUTA funds have become insolvent and the problem is growing. To continue paying unemployment claims, states turn to the federal government for funding. These Federal loans require repayment – with interest. If states cannot pay these loans they are faced with penalties and the loss of federal incentives.
The Department of Labor forecasts, that by 2012 over 40 states will have accumulated a debt around $90 billion dollars in loans. In order to pay off these loans and rebuild the trust fund balances, the only current legislative answer is to raise the SUTA tax rates charged to employers – which increases expenses, reduces working capital and most importantly the ability to hire more employees.
No one disputes the need for a comprehensive unemployment program and this problem continues to grow. Any plan to revitalize it cannot be solely funded by employers.