MacIver News Service [Madison, Wisc…] The State of Wisconsin has run out of money to pay unemployment benefits and has borrowed one point four billion dollars from the federal government to fill the gap.
Wisconsin’s loans place the state as one of the largest Unemployment Reserve debtors in the country.
As the economic climate worsened in Wisconsin the past few years, more and more people lost their jobs and the state’s Unemployment Reserve Fund became insolvent.
“We are coming out of the worst national economic times since the Great Depression,” said John Dipko, Wisconsin Department of Workforce Development Communications Director. “Unemployment insurance has been a critical lifeline for many workers who are out of work through no fault of their own.”
The Wisconsin DWD administers the state’s Unemployment Reserve Fund.
If the amounts in Wisconsin’s Unemployment Reserve account in the U.S. Treasury are not sufficient to cover anticipated unemployment payments, the state can borrow funds from the federal government.
Despite receiving $134 million in Stimulus funds, Wisconsin’s Unemployment Reserve Fund ended 2009 with a deficit of nearly one billion dollars.
DWD’s most recent forecast for the Fund, released in April, indicates that deficit is expected to double by the end of this year, leaving a closing balance of –$1,946,000,000.
“These benefits help these workers put food on the table, pay their electric bills, fuel their cars and cover other necessities while they search for work,” said Dipko.
The deficit numbers are staggering to critics of the Doyle Administration, who also chide the Governor and legislative Democrats for their poor record on job creation.
“These alarming figures should be another wake-up call for state government leaders to focus on improving Wisconsin’s business climate for permanent, high wage jobs, rather than creating temporary government make-work at taxpayer expense,” said State Senator Alberta Darling (R-River Hills), a member of the Legislature’s Joint Committee on Finance.
The federal loan could have been even more detrimental to the State; however, the federal government has waived the interest for all funds borrowed through the end of this year.
Normally, the interest rate charged on these funds either 10 percent or the average rate on specified federal securities. However, no interest is charged if a) the loan is made in the first nine months of a year b) the loan is repaid prior to October 1st of the same year and c) no additional loans are made before the end of that calendar year.
Future interest obligations, according to a memo from the Wisconsin’s Legislative Fiscal Bureau, are significant. Based on the projected deficits in the Reserve Fund, Wisconsin’s DWD has estimated the state would owe the feds $317 million dollars in interest by 2014 if it were to continue to borrow funds from the Treasury to cover the shortcomings in the state account.
According to the National Conference of State Legislatures’ analysis of statistics provided by the U.S. Department of Labor, more than 30 states have borrowed unemployment funds and Wisconsin’s total places the state in the top one third of borrowers.