Strapped states chop jobless aid

on August 04 2011 12:20 PM
A day labourer stands behind a sign for an employment center in San Diego
A day labourer stands behind a sign for an employment center in San Diego, January 6, 2011. New claims for jobless benefits moved higher last week, but a decline in the four-week average to a nearly 2-1/2-year low suggested the labor market continues to improve. The center still attracts day laborers looking for work despite being closed due to budget cutbacks. Reuters

U.S. states are making "unprecedented" cuts to unemployment benefit programs, hoping to keep their budgets in line as the country's jobless rate shows no sign of budging, according to a report the National Employment Law Project released on Wednesday.

The group, which tracks labor issues, found six states in 2011 shortened the amount of time the unemployed can collect insurance payments. For 50 years, states offered at least 26 weeks of benefits, with the federal government recently helping to cover additional weeks.

Other states altered the formulas for determining the amount of benefits people can receive or tightened eligibility in order to reduce spending on the program.

"Most states that addressed solvency concerns this year favored policies that limit the amount of benefits ... by cutting them absolutely or by reducing the number of workers they may reach," the group found.

The national unemployment rate has been above 8 percent for 29 months, and analysts polled by Reuters expect the Labor Department to report on Friday it was 9.2 percent in July.

With reserves to pay benefits running low, more than half the states rushed to borrow from the federal government when the recession caused the demand for jobless aid to spike.

The 2009 economic stimulus plan suspended interest charges on the loans, but, now that the stimulus plan has ended, 30 states will have to make interest payments next month totaling $1 billion. As of July 27, they had borrowed $40 billion and the amount will likely rise to $65.2 billion in 2013, according to the employment group.

Starting next year, the U.S. government will raise taxes on employers in borrowing states until the loans are fully repaid.

The group said Florida has enacted changes that are "among the deepest and most sweeping cuts." Starting in January, the number of weeks a person can collect benefits will be based on a sliding scale, with a maximum of 23 weeks.

In Michigan, Missouri, and South Carolina claimants will only be able to take 20 weeks of benefits.

Most states began their fiscal years on July 1. Because all states except Vermont must balance their budgets, they had to slash spending and raise taxes to close $100 billion in potential shortfalls.

The federal government also provided extra benefits in the stimulus plan. Currently, 3.2 million people are relying on the emergency aid.

President Barack Obama and Democrats in Congress have called for lawmakers to begin addressing the country's "jobs deficit." On Tuesday, Obama said Congress should extend unemployment benefits and in February he proposed waiving interest on states' loans and pushing off the tax hike on businesses for two more years.

But so far Congress has only moved on legislation that would allow states to pay off the loans using funds allocated for the extended benefits. The bill, which was introduced in the House and Senate, stalled in Congress earlier this summer.

On Tuesday Representative Rick Berg introduced similar legislation. Berg is from North Dakota, which had the lowest unemployment rate in the country during the deepest economic downturn since the Great Depression. Under his bill, states could redirect unemployment funds for "reemployment" programs.

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