Last week I showed you a chart from ProPublica in my post State unemployment insurance insolvency: 50 little Hoovers which demonstrated how states are being killed by the financial strains of unemployment insurance. Well, this week ProPublica is back with more detail behind that chart – and, as you can imagine, it’s not exactly bullish.
If you’ve been following our coverage of the nation’s unemployment insurance system, you may have concluded that things are pretty bad. (See our interactive feature showing whether your state’s fund is in the red.)
But what about some historical perspective?
It’s official, recession hounds: The 26 states with insolvent unemployment insurance trust funds have now borrowed more than they did during 1981 and 1982, the last time there was a severe recession in the U.S., and oft-used benchmark for when things are Officially Really Bad.
According to this long-buried CBO document (.pdf), in March of 1983, total outstanding state loans were 13.7 billion, a figure which includes borrowing during 1981 and 1982 and the first quarter of 1983 plus carried-over borrowing from 1975 to 1980.
In 2009 dollars, that’s $29.5 billion. Current state borrowing is now just over $30 billion.
As we’ve written, borrowing from the federal government, which occurs when states have spent all of their own unemployment trust fund reserves, will affect states for years to come. States that cannot repay their loans before 2011 will face tens or hundreds of millions of dollars in interest payments. To shore up their funds, states have also been forced to raise taxes and in some cases cut benefits.
You should see this as another data point which signals a looming retrenchment or tax hike at the state level. The problems are not at all dissimilar to what is happening in the Eurozone given the fiscal and currency binds in which Eurozone members find themselves (see my July post Depressionary bust in Ireland is echoed in California and EconomPic’s recent post Comparing U.S. and E.U. Unemployment). If you have data that can paint this in a better light, please link to it in the comments. Right now, this is not looking good.