With unemployment claims reaching record levels the state trust funds that provide the benefits are being rapidly depleted. From the Wall Street Journal:

Unemployment filings have soared so high in recent months that seven states have already emptied their unemployment-insurance trust funds, which were supposed to see them through recessionary periods. Another 11 states are in jeopardy of depleting reserves by year’s end, according to the National Conference of State Legislatures, which published a January report entitled “The Crisis in State Unemployment Trust Funds.” So far, states have borrowed more than $2.3 billion in emergency funds from the federal government, money they are required to pay back.

States across the country are facing a depletion of unemployment trust funds, with some borrowing from the federal government to keep their systems solvent. The Journal story highlighted in more detail some of the problems facing South Carolina:

In 2001, the fund had a balance of more than $600 million, according to the governor’s office. But the fund balance began to drop precipitously three years ago, as the state began paying out more for jobless benefits. The trust fund went broke last fall.

At the request of the state’s Employment Security Commission, Gov. Mark Sanford sought an emergency loan in September from the federal government. But Mr. Sanford balked at signing a second request in December, demanding that the state agency agree to an outside audit and prove the authenticity of its data, which he routinely questions. He relented hours before the New Year’s Eve deadline in what became a well-publicized standoff.

Even with funds borrowed from the federal government it appears that South Carolina will be coming up short again, as unemployment claims continue to spike.

So far, the state has borrowed more than $110 million in emergency funds from the federal government, according to the Department of Labor. But unemployment filings are rising so rapidly that the amount requested just weeks ago for this quarter won’t meet the growing need, Mr. Halley said. The amount the state paid in benefits per week reached $20 million in January, compared with $14 million in December, Mr. Halley said.

The impasse continues as Gov. Sanford threatens to fire agency officials unless they provide data by Feb. 9 proving the legitimacy of each unemployment filing, and more details about employers.

Not many states have provisos that mandate increases in the payroll tax that funds the unemployment trusts when they fall below a certain threshhold, so it will be up to legislatures to deal with the shortfalls. The solutions require tough decisions, which means that we can almost count on no action whatsoever from legislative bodies throughout the country. Kicking the can down the road has become the favored policy prescription for so many that real solutions are not likely until disaster strikes. Read the Wall Street Journal article here.