State’s Unemployment Fund Goes Broke (may need to borrow up to $900 million)

[Omaha Steve]

http://www.hartfordbusiness.com/news11111.html

By Greg Bordonaro

[e-mail]

11/30/09

Connecticut’s unemployment insurance fund has become insolvent, which will force the state to borrow nearly $1 billion over the next two years so jobless residents can continue to collect unemployment checks.

The state’s unemployment insurance fund ran out of money Oct. 13, and the state has already borrowed $80 million to make up for the shortfall. By the end of 2009, those loan amounts are expected to increase to $260 million. Through 2012, state officials predict the state may need to borrow up to $900 million.

Connecticut officials expect the state’s unemployment insurance fund to continue to fall short during the next few years. State unemployment insurance premiums — paid for by Connecticut businesses — are not expected to generate enough money to cover jobless claims.

The premiums are projected to generate about $650 million this year, about half of the $1.3 billion needed to cover expected jobless claims, said Carl Guzzardi, tax director for the state Department of Labor.

“It’s the cyclical nature of the business we are in,” Guzzardi said. “This is not something that is unexpected in a recession of this nature.”

Connecticut will keep paying unemployment benefits even though the insurance fund has run out, but will now have to borrow money from the U.S. Department of Labor to make up for the shortfall.

FULL story at link.

[Skink]

1. I know ask wall street.