State's Unemployment Insurance Fund Runs Out Of Cash
December 01, 2009
The state's unemployment insurance fund became insolvent on Oct. 13, and Connecticut expects to borrow $900 million from the federal government to keep paying checks to a growing number of out-of-work residents.
The unemployment trust fund is funded by a two-part tax on employers that is on track to bring in $630 million to $650 million in revenue this year — far short of the $1.3 billion the state expects to pay out in unemployment benefits, said Carl Guzzardi, tax director for the state Department of Labor.
State unemployment increased to 8.8 percent in October, up from 8.4 percent in September, which is less than the national rate of 10.2 percent.
During years of economic prosperity and low unemployment, the fund builds. But it took a blow in recent years: falling short $25 million in 2007 and $170 million last year. On Oct. 13, the fund ran out. Connecticut's Department of Labor has borrowed more than $80 million this year from the federal Department of Labor to fill the gap between money coming in and checks paid out as joblessness goes up, Guzzardi said.
The state expects to pay as much in benefits next year as it will pay this year, running another shortfall of more than $500 million, Guzzardi said. The labor department expects to borrow $900 million through 2012 to cover shortfalls.
Connecticut is one of 25 states currently borrowing interest-free loans available through 2010 from the federal government to cover unemployment benefits. A federal interest rate applies to the state's debt after 2010, and is currently 4.635 percent.
The state is projected to pay back the debt by 2014, Guzzardi said
Reprinted with permission of the Hartford Courant.
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