Sara Murray, reporting (1) for, reports on the $38 Billion owed to the federal government by 27 states for unemployment benefits. At a tricky point in our economic recovery, businesses are being hit with surcharges to cover the interest on the federal loans.

The increases in state and federal unemployment-insurance taxes—paid primarily by businesses—are hitting as the recovery appears close to stalling, consumer confidence is low and unemployment remains high at 9.1%.

  • California is #1 on the list, owing $9 Billion.
  • Current interest owed from California: $303 Million.
  • Michigan and Pennsylvania are tied for second, at about $3 Billion.

A National Association of State Workforce Agencies survey this year found that, of 26 states that responded and had outstanding balances on unemployment-insurance loans, 16 planned to rely on tax increases to pay the interest on their loans.

Ohio, where I’m writing from, is curiously not shown on the graphic in Sara’s article. For a moment, I was happily surprised that, perhaps, Ohio owes nothing. Not true, according to a staff article in the Salem News (2):

This fall, states are supposed to begin repaying those loans. Ohio owes as much as $2.8 billion.
From where will the money come? The state’s budget already is tight. Gov. John Kasich and legislators may have no option but to charge businesses higher rates for unemployment insurance. In addition, benefits may have to be limited.

It’s going to be interesting, to say the least.

[1] Sara Murray, Benefits Tax Hits Businesses Twice, September 28, 2011.

[2] September 20, 2011.