MacIver News Service | August 4, 2010[Madison, Wisc…] The State of Wisconsin continues to be one of the largest debtors to the federal government when it comes to covering losses in its Unemployment Reserve.
Earlier, MacIver News reported the state had amassed a $1.4 billion dollar debt in their Reserves.
According to a new analysis by the Council of State Governments, that total puts Wisconsin as the nation’s fourth most indebted state, per capita.
By owing $251.96 per person to the federal government just to cover monies borrowed for the Unemployment Reserve, Wisconsin only trails Michigan ($382.57), Indiana ($272) and North Carolina ($253.31) for per capita indebtedness.
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. That figure continues to grow.
“We are coming out of the worst national economic times since the Great Depression,” said John Dipko, Wisconsin Department of Workforce Development Communications Director, told MacIver News when the figures were first reported in June. “Unemployment insurance has been a critical lifeline for many workers who are out of work through no fault of their own.”
According to the American Enterprise Institute, nationwide spending on extended unemployment insurance benefits since July 2008 has exceeded $131 billion, and the net federal spending in this area far exceeds even the Greek bailout.
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.
Updated figures which will include the borrowing done through the 2nd quarter of 2010 will be available soon. MacIver News will continue to follow this story and bring you reaction as it develops.