AABP Award 728x90

Jobless benefits drain state funds, place burden on businesses


Out-of-work Americans have collected $319 billion in unemployment benefits during the past three years, CNNMoney.com reported.

In the coming weeks, members of Congress are expected to debate the cost of such benefits as they consider whether to extend the safety net for the fifth time this year.

If lawmakers don’t act by the end of November, 2 million people will begin losing extended benefits next month. The extensions have been part of the government’s unprecedented response to the Great Recession.

The high unemployment rate has drained many of the state accounts that typically fund jobless benefits, forcing many states to borrow cash from the federal government to cover their payouts.

Those costs will trickle down to employers, who are responsible for replenishing those accounts and paying back the loans. Their tax burden is expected to grow to $64 billion in 2015, up from $38 billion last year, according to the U.S. Department of Labor.

Thirty-one states have $41 billion in loans outstanding.

Some companies, however, are lobbying Congress to waive certain penalties and interest related to the loans, which will likely cost them more than $9 billion over the next two years.

“It will discourage employers from hiring new employees just at a time when we want them to be hiring,” said Douglas Holmes, president of UWC Strategic Services on Unemployment & Workers’ Compensation, a Washington, D.C.-based trade association.

He said businesses, which are typically hit with higher unemployment tax rates for several years following a recession, may think twice about expanding their payrolls.

“For every employee they hire, this is an additional cost they have to bear,” he said.

dentons brweb 090123 300x250