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As Congress Votes on Unemployment Insurance Extension, Deeper Problems Remain

Congress is expected to reinstate extended unemployment benefits, but state unemployment trust funds are still in a shambles.

Members of Congress are back from recess, and now that they’ve traded in their flip-flops for sensible shoes, their first order of business will likely be voting on whether to extend unemployment benefits for more than 10 million Americans who are in imminent danger of losing their benefits.

As part of our ongoing effort to cover the crisis in state unemployment insurance systems, we have been hearing from people in that very situation, like 61-year-old Kathairein Magdalena in Irving, Texas, who lost her unemployment benefits this month.

She has been cutting grass and cleaning houses for extra cash, but if her benefits are not reinstated, she writes, “I do not know what will happen to me. I have set aside money for utilities, etc. and I have rent money set aside that will carry me through August 20.

“After that, if I have not found work … I will be homeless.”

Congress’s delay in extending benefits is responsible for much of Magdalena’s distress, but for many other Americans, the roots of the problem lie in state decision-making.

Before the stimulus bill was passed last year, states paid for the first 26 weeks of unemployment insurance benefits. Then, depending on the state unemployment rate, states had the option of accepting a 50 percent federal subsidy to provide up to 53 more weeks of coverage.

The stimulus bill increased that subsidy for extended benefits to 100 percent, and added an extra 13 to 20 weeks of benefits, again based on each state’s unemployment rate. It also provided for a COBRA subsidy for jobless workers buying health insurance from their former employers.

If Congress does not act today to extend benefits, anyone like Magdalena who is receiving federal extended benefits will be without unemployment insurance. But states still have the option of offering up to 53 weeks past the standard 26 weeks with a 50 percent federal subsidy. Some are doing just that – like Washington – but most simply can’t afford it.

As we have been reporting, state unemployment insurance finances are in a shambles. Each state is responsible for maintaining its own unemployment trust fund, and many states had allowed their reserves to dwindle to dangerously low levels long before the Great Recession began.

So far states have borrowed more than $30 billion from the federal government just to keep paying benefit checks, and that interest-free lending is coming direct from U.S. taxpayers also.

To see how your state’s unemployment trust fund is faring, check out our Unemployment Insurance Tracker.

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