Half Of US State Unemployment Funds Are Broke

From Tyler Durden at Zero Hedge:

Zero Hedge recently highlighted the ever increasing Federal outlays on unemployment insurance, leading to questions on whether the true unemployment rate, as indicated by actual cash outlays, may be materially higher than indicated in increasingly dubious governmental reports. One proposed alternative has been that the Federal government is directly subsidizing standalone states' depleted unemployment insurance trust funds. Using data provided by ProPublica we have been able to confirm that indeed standalone states are for the most part now bankrupt and have no reserves left in their coffers when it comes to funding ever increasing insurance benefits. As ProPublica indicates, there are now 26 states which have depleted their trust funds, among these are the usual suspects including California, Michigan, New York, Pennsylvania and Ohio, which now rely exclusively on borrowings from the Federal government to prevent the cessation of insurance payments to recently unemployed workers. Currently all states collectively posses $10.7 billion in trust fund assets(with the bulk held by less impacted states such as Washington ($2.6 billion), Louisiana ($1.1 billion) and Oregon ($1.1 billion). On the other hand, 26 states currently rely exclusively on the Federal Government, and have borrowed a combined $30 billion through December to fund payments. ProPublica estimates that another 8 states will be insolvent within 6 months, as their trust funds also approach 0. 

So, basically by July two-thirds of state unemployment trust funds will be underwater and having to take Federal money to keep unemployment coming.  The Republican solution to this is easy:  cut off the states and people without unemployment benefits will "stop abusing the system" and magically get jobs...or more likely start to let their unhappiness become known:

At this point there is no question that the vast majority of the hardest hit states now subsist exclusively due to the generosity of the Federal Government, which in turn, courtesy of a 50%+ indirect take down of each and every Treasury auction (now that QE is over), is at the full mercy of foreign investors, yet as we pointed out, their custody holdings at the Fed have started declining. If the government is unable to finance its profligate ways, and today's budget announcement by Obama is just the icing on the cake, look for states to gradually reign in unemployment checks whether they like it or not, which would likely lead to some very interesting demonstrations of the broader population's lack of solidarity with Mr. Blankfein's $100 million, or whatever it may end up being, bonus number.

Let them eat cake, indeed. When states start cutting off those benefits in the second half of the year, things are going to start getting rather bad for us.  At best, absolute best, we're still looking at 10% unemployment a year from now.  Only we'll have had another year of decreased spending and falling housing prices to go along with it.  It's bad now folks.

It will get worse in 2010 and beyond.  Much worse.