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Prolonged Job Losses Strain State Agencies

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By Christine Vestal

RISMEDIA, April 25, 2009-(MCT)-Sixteen months into this recession, the total number of jobs lost is nearly twice what it was during the last big recession from 1981 to 1982, and experts predict the American economy has not yet hit bottom. As more workers get laid off each month, adding to the millions still searching for work, more people are collecting unemployment checks than at any time in U.S. history.

“Today’s jobless numbers are striking given both the staggering number of newly unemployed as well as the swelling ranks of long-term unemployed,” said Sylvia Allegretto, an economist at the Institute for Research on Labor and Employment, at the University of California, Berkeley.

That has put unprecedented pressure on state unemployment agencies despite nationwide efforts to beef up staffing, phone lines and computer systems. And states’ more than $6.5 billion monthly tab for benefit checks is siphoning so much money from their trust funds that all but a few have either borrowed money from the federal government already or will soon need to do so.

In Florida, where the unemployment rate is near 10%, the state employment agency has hired 400 new workers, extended its hours and added new phone lines and a computer server to its antiquated call center. Like many other states, Florida has not updated its computer systems in more than a decade because of federal budget cuts in state grants for administrative costs.

California is having similar problems. In January, the employment agency received 48 million phone calls, because jobless workers were redialing an average of 30 times after hanging up in frustration because of long hold times. “Right now states are treading water trying to stay afloat. They’re getting out claims as fast as they can by eliminating other functions such as employer compliance,” said Rich Hobbie, director of the National Association of State Workforce Agencies.

Unemployment insurance is a federal-state program that temporarily provides laid-off workers with a portion of their paychecks. States administer the program, determining who is eligible, how much the benefit will be and the length of time benefits are available. The program is funded through federal and state employer payroll taxes, with states levying the lion’s share of the tax.

As unemployment rises, states raise business taxes to cover the added expense. But with the prolonged job losses in this recession, state payroll taxes have shrunk, requiring 14 states to borrow a total of $8.9 billion to cover unemployment checks and 18 more are likely to need a cash infusion within six months. Already this year, 31 states have raised business taxes either through automatic adjustments or new legislation, and many more are expected to do so by the end of the year.

State unemployment taxes paid by businesses are designed to fund benefits, while the smaller federal tax covers administrative costs and any additional benefits needed during an economic downturn. In this recession, the federal government already has drawn billions from its unemployment trust fund to provide emergency compensation for those whose benefits have run out, and the stimulus package includes billions more to further extend the length of time jobless workers can receive benefits in states with high unemployment rates. But some states have failed to enact the laws necessary to take advantage of the program, preventing thousands of workers whose benefits have expired from receiving federally funded checks.

Under normal circumstances, states with high unemployment can extend the number of weeks people receive checks and the federal government will pay half the bill. Under the stimulus package, however, Washington has offered to pay 100% of the cost of extending benefits until the end of this year.

The problem is laws governing extended benefits in most states use an arcane formula for triggering the program that makes it impossible to qualify for federal assistance even in a deep recession.

Since the stimulus package was enacted, six states have adopted new laws allowing long-term unemployed workers to receive benefits checks for up to 20 additional weeks, joining 11 other states that already had the updated measure on the books. Other states have failed to make the changes for fear the state would end up paying for the added benefits when the stimulus money runs out on Dec. 31, 2009, even though the U.S. Department of Labor has said the laws can be scheduled to expire on that date.

The stimulus package also includes $7 billion that states can use if they loosen their eligibility requirements to include part-time, temporary and other categories of mostly low-income workers that otherwise would be disqualified. For similar reasons, not all states are expected to take advantage of this money.

In March, the unemployment rate moved to 8.5% nationally, compared with 4.9% in December 2007 when the recession began. By the end of this year, the rate is expected to reach 9.5%, still shy of the nation’s post-World War II peak of 10.8% in November and December 1982.

Currently, more than four unemployed workers are available for every job opening and nearly one-quarter of jobless workers have been unemployed for six months or longer, according to the Economic Policy Institute, a research group that supports low- and middle-income workers. Since the start of the recession, new job creation has declined by more than 30%, reflecting companies’ reluctance to hire new workers or replace those who leave.

© 2009, Stateline.org
Distributed by McClatchy-Tribune Information Services.

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