WXXI: State Will Go to Feds for Unemployment Cash (2008-12-29)

Just as many New Yorkers use credit to make ends meet after losing a job, the state's labor department is also leaning on a loan.

The state's unemployment insurance fund - the source of unemployment benefits - will be forced to borrow cash from the federal government in January.

A higher number of unemployment claims have caused the account balance to drop below $100 million at present. Last year at this time, the balance was around $425 million.

Leo Rosales, a spokesperson for state Department of Labor, says the fund levels, coupled with high unemployment rates, are as bad as they were after September 11th, 2001.

"The reason it's so low is because of the high unemployment rate. There [have] been a lot of lay-offs throughout New York, as has been throughout the country. So more lay-offs obviously cause more withdrawals from the [unemployment insurance] trust fund."

Rosales says that while the fund is getting low, the NYS Department of Labor can use federal labor department funds as a safety net. That means borrowing federal cash to make the payments until spring, when employers refuel the state's Unemployment Insurance Trust Fund, with their taxes. The state has used the federal assistance program about six times in the past ten years.

But if New York can't pay back its loan, it has to pay interest on the debt, which effectively increases the cost of unemployment benefits. The last time that happened was in 2005, and it cost the state $40 million.

Rosales says the state is hopeful that it will be able to pay the state back without racking up any interest. But he says with the economy's prospects looking grim, he doesn't yet know how much the state will have to borrow to pay out unemployment benefits, to make ends meet until spring.

How much will be available to New York to pay back that loan is also unknown. The state is reliant on unemployment taxes to both pay benefits, and to pay back the loans it takes out from the federal government. But as the economy forces companies out of business, the pool of companies making up the revenue in the trust fund grows smaller.

Rosales says with those challenges, the state labor department is focusing on getting people into jobs, to cut down on the number of people who need to collect unemployment.