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Debt in red with figures holding up the D and the T.
Over the past four years, a whopping 36 states have had to borrow from the federal government to pay unemployment insurance benefits. Obviously a recession with high unemployment has a lot to do with that, but not as much as you might think. Tax breaks for businesses (PDF) are once again a hidden culprit for state budget problems.

A new report from the National Employment Law Project shows that, recession or not, many states could have avoided borrowing for unemployment payments if they hadn't spent a decade weakening their unemployment insurance trust funds by slashing employer contributions:

Between 1995 and 2005, 31 states reduced employer contribution rates by at least one‐fifth (Henchman 2011, 16), causing the nation’s average employer contribution rate over the decade leading up to the Great Recession to fall to its lowest point in the program’s 75‐year history.
As a result, going into the recession, state unemployment insurance funds were short of recommended minimum solvency standards by a combined $38 billion, and 30 of the 34 states not meeting that minimum standard ended up borrowing, combined with just six of 19 states that started the recession with adequate funds. Adequate unemployment insurance reserves could have reduced borrowing to 13 states borrowing $9 billion rather than what ended up happening, with 31 states borrowing $42 billion.

But while the funding shortfalls came from employers contributing less than at any point in the previous 75 years, it's been jobless people who've gotten the blame and felt the pinch, with "At least ten states [passing] legislation to reduce the number of weeks of benefits available, severely restrict eligibility, or impose measures designed to discourage people from filing UI claims." Taxpayers, too, are paying, since states have already paid $3 billion in interest and penalties on what they've borrowed for unemployment, with more to come.

Businesses paid less when the economy was decent (not even good for many of the years of contribution cuts). Then the bad economy hit unemployed people first when they lost their jobs, second when their benefits were cut despite ongoing high unemployment. Again and again we're told that a bad economy is not the time to raise taxes on businesses or the wealthy—apparently it's never the moment for that, always the moment to cut another hole in the safety net.

Originally posted to Daily Kos Labor on Fri Aug 03, 2012 at 08:36 AM PDT.

Also republished by Daily Kos.

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Comment Preferences

  •  One example - the year CitiGroup received (2+ / 0-)
    Recommended by:
    Gemina13, hnichols

    $45 billion in TARP funds it received $39 billion dollar tax breaks.

  •  While true on the specifics (0+ / 0-)

    it's also worth noting that balanced budget rules make the states little Hoovers, rejecting economic wisdom that should have been obvious since the Great Depression.  That there hasn't seem to be any effort to even talk about rolling about such rules is insane.

    That said, every time they say we can't have something because of the budget, it's really because of tax cuts to the rich.  This bears repeating. A lot.

    Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity. Notes on a Theory

    by David Kaib on Fri Aug 03, 2012 at 06:06:03 PM PDT

    •  Only some budgets are balanced (1+ / 0-)
      Recommended by:
      Liberal Of Limeyland

      States play games with what is included in "operating budgets" which is officially constrained by the balancing laws, and "capital budgets", which are exempt from those constraints, though subject to other factors.

      When you are right you cannot be too radical; when you are wrong, you cannot be too conservative. --Martin Luther King Jr.

      by Egalitare on Sat Aug 04, 2012 at 07:17:49 PM PDT

      [ Parent ]

  •  Tax breaks so states can steal jobs (7+ / 0-)

    from each  other  which doesn't lower national unemployment figures

    The 1st Amendment gives you the right to say stupid things, the 1st Amendment doesn't guarantee a paycheck to say stupid things.

    by JML9999 on Sat Aug 04, 2012 at 07:04:14 PM PDT

  •  If I were on some Governor's staff, (4+ / 0-)

    I would suggest a publicity stunt. Some Dem. Gov. should fly to NYC and take a camera crew with him. He should go to the office of the New York Fed, and ask, innocently, a la Michael Moore, where the discount window is and can his state borrow at zero % interest like the banksters do.

    The GOP ... Government of the 1%, by the 1%, for the 1%

    by Azazello on Sat Aug 04, 2012 at 07:07:30 PM PDT

  •  Here in Florida, my corporation has received (4+ / 0-)
    Recommended by:
    JanL, Nebraskablue, Creosote, Amber6541

    an additional tax bill from the  Florida Unemployment Compensation Fund for the last two years. It is our share of the "Federal interest assessment."

    Florida's Unemployment Compensation Fund has been in desperate need of serious reform. The fund, fueled by state business taxes, ran out of money as recently as 2009. It was subsequently forced to tap into a $2 billion loan granted through federal stimulus spending. Beginning in September, the state will have to begin paying off this loan plus $61 million in interest.

    Florida Governor Signs Bill Reforming State Unemployment Compensation Program, July 5, 2011

    For me, Mitt reminds me of Jeff Bridges in Starman. He's like an alien that hasn't read the entire manual. You know, he's going, "Nice to be in a place where the trees are the right size. -- Robin Williams on Letterman 26 Apr 2012

    by hungrycoyote on Sat Aug 04, 2012 at 07:09:32 PM PDT

  •  Does this include (0+ / 0-)

    e.g., the tens of millions in tax breaks that Michigan gives GM? Just to pick a random example.

  •  Remember (3+ / 0-)
    Recommended by:
    enhydra lutris, JanL, shanikka

    The idea is to enrage the little guy and aim their ire at the government.

    That way, even though the screwing they're getting came from corporations, they won't see it that way.

    Dig the new single from Papa Knuckerhole himself:

    by Johnny Wendell on Sat Aug 04, 2012 at 07:21:39 PM PDT

  •  Here's the thing: republicans don't give a damn (2+ / 0-)
    Recommended by:
    Johnny Wendell, Mike Taylor

    because a report like this suggests their plan is working. That is, government is that much closer to fitting into the bath tub. And it ain't for a good cleaning.

    But for a civilized society, this should be considered intolerable that businesses are be getting the breaks while common folk are left high and dry.

    Now the question is, who will win the hearts and minds of those millions that only get their news via sound bite? Unfortunately, I think we all know who that will be.

    Romney - his fingernails have never been anything but manicured.

    by Pescadero Bill on Sat Aug 04, 2012 at 07:30:07 PM PDT

    •  Exactly (1+ / 0-)
      Recommended by:

      The mantra is to drive down taxes and then let the huge debt that is left in it's wake be the cause for reducing spending for the middle class.

      The GOP is the tax protest party - but always first in line to stuff their pockets with public money (and rename thier corruption as 'privatization')

      You see not all spending is created equal - if spending puts money into the hands of supply (AKA rich people, politically connected, the producers, etc...)  then its great.  If spending assists the so-called undeserving then it's bad.

      Guess who decides who is deserving and who is undeserving?  That's right...  You guessed it.

      Are there no prisons? No workhouses?

      by meatballs on Sat Aug 04, 2012 at 09:03:57 PM PDT

      [ Parent ]

  •  Another example how austerity is caused (4+ / 0-)

    by tax breaks to the wealthy and businesses.  If everyone paid their fair share, we'd not be in this mess.

  •  So for California.... (0+ / 0-)

    ...from table 2A, in 2007 California should have had reserves of $9.3 billion. Instead California had reserves of $2.5 billion for a shortfall of $6.8 billion.

    And from table 1A, as of May 1, 2012 California had borrowed $10.7 billion from the Feds. So if California had kept the reserves at the recommended level, California would still have had to borrow $3.9 billion.

    Then from table 3A for the California unemployment insurance fund to reach solvency by December 2016, employer contributions have to go from the current average of $390 per employee to $852 per employee starting now.

    Let's see Arnie was The Gubernator from November of 2003 to the end of 2010.  Wonder if we can just blame  him or if the California legislature was in on it.

    •  Too bad. Can't Blame Schwarzenegger (1+ / 0-)
      Recommended by:

      From the Legislative Analyst's Office:

      Our analysis found that in eight of the last ten years, California’s UI benefit costs have exceeded revenues into the UI fund, suggesting that California’s UI program has a structural mismatch between its revenues and benefit costs. This structural mismatch appears likely to persist in future years. One likely source of this mismatch is an increase of UI benefits enacted in 2001. Chapter 409, Statutes of 2001 (SB 40, Alarcón), established the benefit levels currently in effect by increasing the wage  replacement rate from 39 percent to 50 percent and the maximum weekly benefit from $230 to $450. This increase in UI benefit levels was not accompanied by an increase in UI taxes. The structural mismatch of UI revenues and benefit costs has contributed to a steady decline in the solvency of the UI fund over the last decade. Since implementation of the statutory increase in UI benefits just described, California’s UI fund reserve has not exceeded one-third of the federal minimum standard for solvency.
      Legislative Analyst's Office has this on the affect on the General Fund of the interest payments to the Federal Government:
      State Interest Payments on the Federal Loan Are a Significant General Fund Liability. As a condition of carrying a federal loan balance, the state is required to make annual interest payments. The state was required to make its first interest payment of $304 million in September 2011. The 2011-12 Budget Act made this payment from the General Fund but covered the cost to the General Fund with a loan for a like amount from the state’s Disability Insurance (DI) fund (Unemployment Compensation Disability Fund). The state’s next interest payment is due September 2012 and is expected to be $417 million. As federal law does not permit these interest payments to be made from existing UI employer taxes, the cost of these payments falls on the General Fund. These annual interest costs are expected to persist for the foreseeable future, resulting in more than $3 billion in General Fund costs through the remainder of the decade.

      Governor Jerry Brown's tax proposals shift the interest payments back to the employer:

      Governor proposes to establish a new employer surcharge which would be used to pay interest on the state's federal loan beginning in 2013-14 as well as cover the General Fund obligation to repay the DI fund loans made in 2011-12 and 2012-13.
      But, again from the Legislative Analyst's Office, Governor Brown's proposals do not address the long-term "structural mismatch."
  •  .... (0+ / 0-)

    "Fascism is attracting the dregs of humanity- people with a slovenly biography - sadists, mental freaks, traitors." - ILYA EHRENBURG

    by durrati on Sat Aug 04, 2012 at 07:54:55 PM PDT

  •  Giving the reward first. (3+ / 0-)
    Recommended by:
    meatballs, JanL, David Kaib

    Giving tax-cuts to job-creators (which has always been the conservative trickle-down philosophy) is the stupidest shit ever. It amounts to the same thing as giving a kid everything he/she wants, then saying “Now I want you to make strait As” etc. It’s just goddam dumb. It’s giving the reward first.
    Employees don’t get a raise until the company shows an increase in profits. Companies shouldn’t get a raise (via tax-cuts) until the general economy shows an increase in jobs.

    •  This is the same approach as paying CEOs (1+ / 0-)
      Recommended by:
      blue denim

      and other corporate bigwigs millions of dollars a year with little or no connection to whether the company itself is being successful and making money.

      There's always the excuse of 'We have to pay market rates for the best leaders' who are then free to lead the company off a cliff (Hello, Mr. Dimon) with no consequences.

      After all, if you're gonna get a golden parachute worth tens of millions of dollars no matter how bad you screw up, why bother playing within the rules or trying to build your company. It's little more than Monopoly money to these guys.


      NC-4 (soon to be NC-6) Obama/Biden 2012

      by bear83 on Sat Aug 04, 2012 at 08:35:34 PM PDT

      [ Parent ]

  •  Of course, this couldn't be the reason... (0+ / 0-)

    Yeah, that's right, it had to be the unemployment tax break business received.  Not the fact that stupid state governments overpaid.  of course, they really don't give a shit because it's not their money to begin with.  They just steal it from businesses to give to lazy bums who don't want to work.

    Government is good at one thing. Government breaks both your legs and then hands you a set of crutches and says, "See, you need government."

    by hankmed on Sat Aug 04, 2012 at 10:18:59 PM PDT

  •  Trickle down bull (0+ / 0-)

    Yet more evidence (as if we needed more) that trickle down is a lie.  

    "The real wealth of a nation consists of the contributions of its people and nature." -- Rianne Eisler

    by noofsh on Sun Aug 05, 2012 at 07:15:21 AM PDT

  •  Of the 31 states that (1+ / 0-)
    Recommended by:

    Worked against their best interests, how much of this erosion was based on ALEC Model Legislation?

    I am betting a connection could be made there, if it exists?

    Thanks for pointing out the study!

    Another flaw in the human character is that everybody wants to build and nobody wants to do maintenance. Kurt Vonnegut Economic Left/Right: -7.50 Social Libertarian/Authoritarian: -6.10

    by ToKnowWhy on Sun Aug 05, 2012 at 07:17:24 AM PDT

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