State's unemployment insurance fund could face $1.2 billion deficit in 2010, projection warns

[Omaha Steve]

http://www.tmcnet.com/usubmit/2009/02/10/3979362.htm

(Wisconsin State Journal, The Via Acquire Media NewsEdge) Feb. 10--With a flood of workers being laid off around the state, Wisconsin's reserve fund for paying jobless claims could see a more than $1.2 billion shortfall by the end of 2010, a state projection shows.

The huge year-end deficits expected in the unemployment insurance fund -- stretching from this year out to at least 2013 -- will likely mean repeated rounds of borrowing from the federal government to ensure the state makes its required payments to the jobless, the report from the Wisconsin Department of Workforce Development projects.

In the first round of that borrowing, the state has requested a federal loan of $400 million to be delivered within weeks-- the first time it has done so in more than two decades.

If no state action is taken, employers in future years could see higher taxes as a result of some $165 million in decreased federal tax credits, according to the report. To rebuild the unemployment fund and pay off the federal loans and possible interest, state employer taxes and worker benefits could also be changed and federal bailout money might be used, experts said.

"What's going on in the economy is reflected in that report and it is absolutely terrifying what's going on," said Phil Neuenfeldt, secretary-treasurer for the Wisconsin AFL-CIO and member of the state's Unemployment Insurance Advisory Council.

The harsh recession has heightened the importance of what happens to the unemployment fund, sharply increasing demand for unemployment benefits for suffering workers and leaving struggling state businesses less able to handle possible tax increases. The financial stress on Wisconsin's unemployment program, the first of its kind in the nation, comes as the state budget faces a $5.7 billion deficit.

FULL story at link.