Monday, January 17, 2011
Things are not getting any easier for cash-strapped state governments. On top of the $82 billion deficit that states collectively face, more than half of them will soon have to pay interest on billion-dollar loans from the federal government to provide unemployment benefits.
The massive layoffs during the Great Recession left legislatures struggling to provide assistance to the unemployed, forcing 30 states to borrow about $40 billion from Washington. Until now, the loans were interest-free…but no longer.
Some states, like California and Michigan, face payments of more than $300 million this year, and the money owed can’t be repaid using unemployment insurance taxes. Borrowing more money from Washington is also out of the question. Federal Reserve Chairman Ben Bernanke has said that the central bank will not bail out states confronted with staggering debts.
This means state lawmakers will have to take funding from other programs in order to pay back the U.S. Treasury.
-Noel Brinkerhoff
States Will Soon Have To Start Paying Interest on Their Massive Unemployment Borrowing (by Olga Pierce, ProPublica)
Bernanke Rejects Bailouts (by Jon Hilsenrath and Neil King Jr., Wall Street Journal)
U.S. Bills States $1.3 Billion in Interest Amid Tight Budgets (by Michael Cooper and Mary Williams Walsh, New York Times)
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