Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

States make big cuts to unemployment benefits

August 3, 2011 | 10:58 am

Jobs The economy is struggling, people are still losing their jobs and some are getting desperate. Seems like a bad time to cut back unemployment benefits, but that's what several states have done, according to a new report from the National Employment Law Project.

As states' insurance funds become insolvent, six states even decreased the amount of benefits available for the unemployed, to 20 weeks from the traditional 26. The biggest cuts came in the following states:

  • Arkansas cut the number of weeks that benefits are available, to 25, in March.
  • Florida cut benefits an unprecedented amount, with a maximum of 23 weeks available. As the state's unemployment rate falls from its current rate of 10.6%, so too will the amount of benefits available.
  • In Illinois, workers will receive up to 25 weeks of benefits, beginning in January.
  • Indiana adopted a more restrictive formula for calculating benefits in February, basing benefits on four quarters of a worker's earnings, rather than his highest quarter, which will drop average weekly benefits from $283 to $220.
  • Michigan reduced the duration of benefits from 26 to 20 weeks, as did Missouri and South Carolina.
  • Rhode Island adopted a new formula for calculating benefits, to begin July 1, which could decrease the average weekly benefit amount from $390 to $298.
  • States including Arkansas, Florida, Indiana, Missouri, Pennsylvania, Rhode Island, South Carolina and Wisconsin have adopted measures making it more difficult for workers to qualify for benefits.

The cuts come as states' unemployment insurance funds face insolvency, and many are forced to borrow more and more money from the federal government. Still, they take away an important lifeline for unemployed workers, the law project says.

"It’s disconcerting that these lawmakers would expend so much energy making cuts to state unemployment insurance programs when more people are out of work for longer than any other period on record," said Christine Owens, executive director of the National Employment Law Project.

Some economists have argued that cutting off benefits motivates the unemployed to find work. But in many fields, there are dozens of applicants for each job.

As of the end of July, 30 states are borrowing $40 billion from the federal government to pay for unemployment insurance benefits, and must begin to pay interest on those loans beginning Sept. 30. California's loan balance stands at $8.6 billion. Only Colorado and Rhode Island have adopted measures to add funding to their programs to keep them solvent in the long run.

In June, California had 2.2 million unemployed workers, 728,000 of whom have been out of work for a year or more. In June 2010, 579,000 workers had been out of work for a year or more. The California Employment Development Department has paid $10.5 billion in benefits this year, and pays about $350 million a week. There are nearly half a million Californians who have run out of benefits completely.

-- Alana Semuels


California job market is rebounding, but unevenly

Veterans face high employment after military service

State spent $90 million a day on unemployment benefits

Photo: Rosemead job search center. Credit: Gary Friedman / Los Angeles Times