Jobless benefits plunge states into debt
Chicago — Those tax dollars temporarily helping millions of unemployed workers to buy food and pay the rent are also sending many of the states they live in deeper into debt to Uncle Sam.
It's the other, largely unpublicized side of the unemployment problem.
As the national rate of unemployed workers edges above 10 percent, the highest point in four decades, so, too, the number of those reaching for their first unemployment checks has been hitting record highs this fall.
In all, by Labor Department estimates, some 10.3 million Americans by the end of this year will take home jobless benefits of $23.7 billion, 50 percent more than last year's total.
Most of the payments come out of state tax coffers. Yet in a growing number of states the amount paid into the unemployment insurance system by employer taxes is far short of the amount that must be paid out in benefits.
To make up the difference, 17 states have been borrowing large sums from the federal government. Michigan, which leads the pack in the amount borrowed, expects to tote up a $2.2 billion debt to Uncle Sam during 1982. Louisiana and Texas will join the list of federal borrowers before the end of the year. Another three or four states expect to begin borrowing federal dollars during 1983.
''There is no other federal-state relationship that includes this kind of borrowing,'' notes Robert Cline, a staff member of the Advisory Commission on Intergovernmental Relations. ''This is a fairly unique system and a fairly unique problem.''
Yet Washington, facing budget pressures of its own, promises to make an already tight state fiscal situation even tighter. It is clamping down on the payback requirements - adding 10 percent interest to new loans and increasing federal payroll taxes in states that do not repay old debts within two years.
''The states are in trouble,'' observes John Elwood, a professor with Dartmouth College's Tuck School of Business. ''The changes were made to save money from a federal perspective, but no one expected the recession to be as deep or as long as it has been.''
Unless the general economy improves, some states see no alternative ahead to going deeper and deeper into debt.
A few states with high unemployment rates have been looking to Congress for some kind of bail-out - either in easing the penalties on or forgiving the debts or, better yet, in ultimately taking over the whole unemployment insurance program. Ohio legislators, for instance, have seriously discussed what would happen if their state unemployment compensation law were repealed. But most experts say any more ''give'' from Washington is unlikely.
''In the past there was always some will-o'-the-wisp hope that the government would forgive the debt, but I think everyone now is convinced that the federal government isn't going to do anything further,'' observes Robert Queller, executive director of the Citizens Research Council of Michigan, a group specializing in public finance analysis. ''We're going to have to figure out how to pay it off while doing the least damage to the state's economic prospects. Everyone's going to have to bite part of the bullet. . . .''
A number of states, in reform efforts aimed at staying solvent, have raised taxes on employers, trimmed benefits, and tightened eligibility requirements. Alaska, Alabama, and New Jersey, in an effort to spread the burden, tax workers as well as employers. Illinois requires a one-week wait before the jobless can begin to collect benefits. Both Illinois and Michigan, two of the top three state borrowers, are now considering their second round of unemployment insurance reforms.
One way in which some states may save is by tighter administrative control over the system. A task force of labor, business, and government officials in Illinois asserted in a report last summer that the state's Bureau of Employment Security had lost control of unemployment benefits system and that many employers had not been paying their share of the tax.
For most state legislators who set the tax rates, however, the question of changing the unemployment compensation system - tax structure or benefits - is every bit as sensitive as any social security changes pondered by national lawmakers.
Labor wants no part of the tax burden. Constituents will go to almost any length to avoid losing benefits. Yet the higher the state tax rate on employers, the less appealing the state's business climate to anyone thinking of moving in.
States with the highest totals in outstanding federal loans Michigan $1.80 billion Pennsylvania $1.76 billion Illinois $1.71 billion Ohio $1.30 billion New Jersey $0.52 billion