State of the States: 2011 UI Outlook
Collectively, states owe the federal government $42.6 billion for loans to meet their unemployment compensation obligations, which have been estimated at over $319 billion paid out to claimants over the past three years.[1],[2] On account of these astronomical costs, according to Office of Management and Budget estimates, by the end of 2013, state unemployment funds will be approximately $90 billion in debt.[3]
Over 30 states that have already started borrowing from the federal government are slated to pay an estimated $1.4 billion in interest payments alone for those loans in 2011. Most of those states have already begun raising taxes in order to pay back the money they owe, shifting the burden of their debt squarely onto the shoulders of employers who will ultimately foot the bill.[4] Estimates of the total rise in state unemployment insurance (SUI) payments made by employers in 2010 range from 34% to 37%, as a share of total wages.[5] In dollar amounts, SUI rates may increase by $11 billion before the end of 2011, and another $5 billion before the end of 2012, according to U.S. Department of Labor projections.[6] Those projections, it should be noted, were made prior to President Obama’s FY 2012 budget proposals.
Delaying the automatic tax increase until 2014, as the Obama administration has proposed, will save employers an estimated $5 to $7 billion in taxes.[7]
Any tax or legal information addressed here is provided solely as a courtesy summary and is not intended to be exhaustive in nature. Although this information was current to the best of our knowledge at time of publishing, tax law and policy evolve rapidly and should always be verified for accuracy with the respective agencies. Please consult a tax professional for advice and information concerning your particular tax situation.
[1] Kuhnhenn, J. (2011, February 8). Obama Wants Jobless Aid Help for States. Associated Press, MSNBC.com. Retrieved from http://www.msnbc.msn.com/id/41471897/ns/politics-more_politics/.
[2] Luhby, T. (2010, November 17). Jobless Benefits Cost So Far: $319 Billion. CNNMoney.com. Retrieved from http://www.cnnmoney.com
[3] Kuhnhenn, J. (2011).
[4] Luhby, T. (2010, November 22). Another Hit to States: Interest Payments to Uncle Sam. CNNMoney.com. Retrieved from http://www.cnnmoney.com
[5] National Employment Law Project figures cited in Pugh, T. (2010, December 22). No Free Lunch: States Seek Ways to Repay Jobless Benefits. McClatchy Washington Bureau. Retrieved from http://www.mcclatchydc.com. Also referenced DOL figures given by the Wall Street Journal (2011, February 5). Number of the Week: Businesses’ Unemployment Taxes Rise. Retrieved from http://www.wsj.com.
[6] Fiore, T. (2010, November). SUCAP Legislative Advisory. Strategic Services on Unemployment & Workers’ Compensation. Via email.
[7] Cooper, M., Stolberg, SG. (2011, February 8). Obama Plans to Rescue States with Debt Burdens. The New York Times. Retrieved from http://www.nytimes.com.