Nation's Unemployment Programs Running Out of Money

When Doug Wood lost his job managing a Ruby Tuesday restaurant near Los Angeles in late 2008, he figured on collecting unemployment for only a couple of months until he found another job.

He's still looking.

"In a few weeks the benefits completely run out," said Wood, 47, a resident of Norco, Calif. "I'm trying to look on the bright side of things, but I'm running out of time, and options."

Wood is one of more than 11 million Americans currently collecting unemployment insurance benefits, paid for by a mix of state and federal money. Some 40 percent of the nation's jobless, like Wood, have collected benefits for at least the past six months.

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With the national jobless rate still near 10 percent, the recession grinding onward and benefits claims continuing to mount, the entire unemployment system is being stretched beyond capacity.

Since the end of 2008, some 29 states, including California, have completely run out of funds to pay unemployment claims, and have resorted to borrowing federal money. It comes to about $33 billion, according to George Wentworth, a policy analyst with the New York-based National Employment Law Project.

If jobless claims continue at current rates, the Federal Unemployment Account (FUA), part of the Unemployment Trust Fund (UTF), which is administered by the Department of Labor, could, by 2012, be facing billions in shortfalls. By that time, a projected 40 states will have borrowed approximately $90 billion, twice as much as what the government earmarked last year for the entire UTF. Private employers will likely face higher state and federal taxes to keep the Labor Department's trust funds solvent, Wentworth explained.

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Pushed to the Limit

"This recession is pushing the country's unemployment system to the limits," Wentworth said. "With the majority of state trust funds insolvent it's time for Congress to get involved."

This weekend Congress was unable to provide even a basic stopgap measure that would have extended federal benefits, due to staunch opposition from Republican Sen. Jim Bunning of Kentucky.

But Bunning now seems ready to negotiate, and today told ABC News that he is working on a deal to allow the unemployment extension bill to pass.

Sen. Judd Gregg, R-N.H., tells ABC the deal would allow for a vote on off-setting the bill's $10 billion price tag with cuts in other programs followed by a vote on the bill itself. This was an offer Bunning rejected last Thursday.

Bunning, who is set to retire, had repeatedly resorted to a filibuster, objecting to the addition of $10 billion to the deficit without Congress having identified a way to pay for the measure.

The bill would extend jobless benefits for as many as 400,000 people, among other things.

States Short Billions

Senate Majority Leader Harry Reid has vowed to move ahead with efforts to get the temporary measure passed, as well as proceed with a separate plan to shore up the federal extended benefits program permanently, at a cost of $100 million.

"We'll keep pressing this until GOP leaders talk some sense into Bunning," said Jim Manley, a spokesman for Reid.

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