States Hobbled By Unemployment Bills
Four States' Jobless Benefit Funds Already Underwater; 14 More At Risk

CBS Evening News | January 24, 2009
By Michelle Miller

(CBS) One fallout of the economic crisis has been the rise in unemployment, which stood at 7.2 percent in December.

More than 4.6 million Americans are now receiving jobless benefits, and that's putting a serious squeeze on state budget, reports CBS News correspondent Michelle Miller.

Twenty-six year-old Michelle Bozikova was laid off in early December. Since then she's been e-mailing resumes - about 100 so far, she says - and receiving unemployment checks.

She's now in the ranks of more than half a million New Yorkers collecting unemployment benefits - three times the number from last year.

"New York's unemployment insurance fund went insolvent about two hours into 2009," says Patricia Smith, commissioner of the New York labor department 

Since Jan. 1, that flood of jobless claims has forced New York and four other states-South Carolina, Indiana, Ohio and Michigan - to borrow money from the federal government to pay benefits. Fourteen more states are at major risk of breaking the unemployment bank in the next year.

"Many states just didn't think we were going to have a recession this severe and didn't build the savings," says Andrew Stettner, deputy director of the National Employment Law Project.

If states don't pay back the loans by Sept. 30, they'll have to start paying interest. In New York's case, that could mean $100 million in interest payments by 2010.

"What's going to happen to employers in that state is the federal tax is increased on them to get the money back," Stettner says. "So the feds are going to get the money back one way or another."

An under-funded unemployment system is creating other problems, too. In a state like New York where the cost of living is already high, premiums haven't kept up with inflation. About two dozen other states pay higher benefits, including Kansas and Iowa.

Michelle Bozikova is receiving $405 a week - less than half of what she made in her job as a sales rep for a hotel chain.

After past failures, New York lawmakers are pushing legislation to raise benefits and increase fees paid by employers. But labor department officials are already looking ahead."

"After this type of unemployment crisis, about a year later, you'll see a spike in welfare cases," says smith.

With the clock ticking on her benefits, Michelle Bozikova is working hard to ensure she's not one of them.