States' Bills for Unemployment Due

States must begin repaying the federal government for loans they took to pay unemployment benefits.
by | January 19, 2011

States will soon have to start repaying more than $1 billion in interest payments on loans they took from the federal government to pay unemployment benefits, ProPublica reports, and those loans are being called at a time when states are already facing budget struggles.

According to the website, 30 states have had to borrow more than $40 billion from the federal government so that they can continue unemployment benefits to their residents. Initially, the federal stimulus legislation made loans interest-free and created a grace period.

But the grace period, now over, wasn't extended in the tax cut extension passed late last year. Now, 14 states will have to start paying interest on the loans before then end of 2011.

(View the handy application constructed by ProPublica to see the status of each state’s unemployment fund.)

Federal rules prohibit states from paying those loans with unemployment insurance, so they'll be forced to pay from their general budgets -- at the expense of things like roads and schools, according to ProPublica.

Meanwhile, states reportedly face a collective $82 billion shortfall for 2012, which will pose a challenge when it’s time to make those payments. And some states are still continuing to borrow the federal funds, even as they are struggling to figure out how to make interest payments, ProPublica reported.

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