Many states are running out of funds to pay out their usual unemployment benefits through their unemployment compensation trust fund. This money typically comes from payroll taxes, meaning employers pay for it. Dr. Chhoda explores the question “Will states run out of money in order to pay unemployment benefits?”
A dozen states — including California, Delaware, Massachusetts, Minnesota and Texas — have basically exhausted their funds and requested federal loans to continue to make payments, which have been approved.
Some states, like California, which has already borrowed $6.5 billion from a federal trust fund, are looking into providing their own supplemental unemployment benefits if Congress doesn’t extend federal ones. California ended up borrowing $10.7 billion to pay unemployment benefits during the Great Recession and paid that money back just two years ago by raising taxes on employers, the Los Angeles Times reported.
As of July 1, 2020, 13 jurisdictions (California, Colorado, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, Minnesota, New York, Ohio, Texas, the Virgin Islands and West Virginia) have applied for and been approved to receive federal unemployment insurance (UI) Title XII advances (UI loans).