One by one state unemployment agencies are going bankrupt. Of course, with so many people out of work and a record number of people collecting unemployment benefits it should be no surprise. So far, there are twenty-five states that have hit the bottom of the unemployment barrel.
What does a state do when it runs out of money? It borrows from the (already broke) federal government.
Each state has its own unemployment system, this means that they can set their own taxes and decide their own benefit levels. In fact, some states pay twice as much as other states. No matter where you live, if you’re unemployed you have to get by on whatever they give you. Check out this map to see where your state falls on the unemployment payout spectrum.
Some states, such as Indiana, Florida, Nevada, and California are borrowing billions. With unemployment numbers not letting up any time soon, states are not going to be paying back any money, instead, they are going to be borrowing more. This means they are going to have to pay interest—lots and lots of interest—hundreds of millions of dollars in interest. Paying all of this interest means that states won’t have money for other things, like fixing roads, prosecuting criminals, and snow removal, the basic things that allow the citizens in a state to function.
Ideally, states would accumulate reserves during the good times, money they could pull from when they needed it in the bad times. However, many states didn’t do that, and now, they’re broke.
Worried about what’s happening in your state? Check this list.
By Cara Newman for YoungMoney
