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Kansas and Vermont Are the Latest Unemployment Insurance Debtors

Twenty-nine states plus the Virgin Islands are now borrowing money from the federal government to pay jobless benefits. Kansas and Vermont have joined the list, and increases in their employer taxes are not expected to solve their problems.

This graphic shows the unemployment fund reserves for Kansas and Vermont. Click the graphic to view our Unemployment Insurance Tracker.Kansas and Vermont have become the two latest casualties of record unemployment insurance claims. Both states have exhausted their unemployment insurance trust funds and have turned to borrowing from the federal government to keep unemployment benefits flowing.

The 50 states, the District of Columbia, Puerto Rico and the Virgin Islands operate separate unemployment insurance systems, and have widely varying tax rates and benefits. While a few entered the recession with ample reserves, most had far less than the 18 months’ worth recommended by the federal government.

To see how your state’s fund is faring, click here for our unemployment insurance tracker, which has the most recent data available about funds in all the states plus D.C.

Besides Kansas and Vermont, 27 other states and the Virgin Islands have together borrowed more than $30 billion. The federal loans are interest-free until 2011, but after interest kicks in, it must be paid from the states’ general funds, taking money away from roads, schools and other priorities.

While Kansas has borrowed only about $7 million so far, officials estimate the state will borrow as much as $750 million this year. That’s a significant sum relative to the state’s $25 billion budget. (It’s also small potatoes compared with other states, which have borrowed billions. We’re looking at you Michigan and California.) Even a scheduled increase in the tax on employers, from an average of $162 to $350 per worker, will likely not make much of a dent in the Kansas’ borrowing.

Vermont, which has borrowed about $4 million so far, has already increased the average tax per worker from $239 to $329 by increasing the amount of workers’ wages that are taxed from $8,000 to $10,000, and lawmakers also canceled a scheduled benefit increase.

But that will not be enough to shore up the state’s trust fund, and lawmakers are considering legislation that would take the unusual step of imposing a .02 percent payroll tax directly on employees. (Most states fund their unemployment benefits solely through employer taxes; only Alaska, Pennsylvania and New Jersey also ask for worker contributions.) They would also increase the tax rate on employers by an as-yet-undecided amount. That tax rate has not been increased since 1983.

To see how your state’s fund is faring, click here for our unemployment insurance tracker, which has the most recent data available about funds in all the states plus D.C.

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