As part of our investigation into unemployment insurance, here’s a look at the trust funds of the first eight states to run out of money in the good years before the current recession. Each of the states had low -- or negative -- trust fund balances even before the recession started.
The blue horizontal line indicates the recommended amount a state should have in its trust fund for unemployment. The green horizontal line indicates the average amount states actually have in reserve.
How we arrived at these numbers: It matters how much money is in a state trust fund -- but it also matters how much is flowing out. To assess how long a state's reserves would last at a recession-level unemployment rate, the federal government uses the Average High Cost Multiplier, defined as how long a state could sustain payments equal to the highest amount they paid out in the last 20 years, without additional revenue coming in. So, an AHCM of 0.5 means a state has enough money saved to pay out recession-level benefits for 6 months. (Since the current recession is worse than any other period during the past 20 years, the estimate almost certainly lowballs states' needs.)
Source: Department of Labor, Significant Measures of UI Tax Systems