Unemployment insurance funds are counter-cyclical, taking in revenue from taxes on businesses in good times and paying out benefits in bad. Those states, including Texas, that did not build up the fund during the recent boom now have to find a way to provide the economic safety- net for workers riding out the bust.
Despite some problems, most state unemployment insurance funds are still relatively healthy. Only a handful of states are significantly below the federal government's suggested level of solvency--the point at which they are able to fund benefits at peak levels for a year.
This is not to say that the past year wasn't a busy one for the funds: Of a possible 127.7 million workers covered by the insurance, 11.8 million received benefits totaling almost $45 billion dollars. Many states taxed businesses substantially during the last few years and so had sizeable insurance funds. Also, the federal government distributed $8 billion in surplus federal funds to the states in March, which relieved some pressure. "Most funds," says Maurice Emsellem, unemployment insurance specialist for the National Employment Law Project, "are in good shape considering that we're this far into a recession."
