U.S. News: States Raise Payroll Taxes to Repay Loans --- Demands on Depleted Unemployment-Insurance Funds Led to Borrowing of Nearly $41 Billion From Federal Government
State governments are borrowing heavily from the federal government to keep paying unemployment-insurance benefits and, even with the weak job market, most states are raising payroll taxes to pay off the loans.</br></br>Thirty one states, their unemployment-insurance funds empty, have borrowed nearly $41 billion from the federal government. California alone has borrowed nearly $8.8 billion as of mid-November, according to the Labor Department.</br></br>As states try to replenish the funds and begin to repay the loans, employers are facing increases in both state and federal payroll taxes, a potential barrier to new hiring.</br></br>"Employers were hit with these adjustments quite a bit last year," said Richard Hobbie, executive director for the National Association of State Workforce Agencies. A National Employment Law Project analysis found that 41 states increased unemployment-insurance payroll taxes this year by an average of nearly 33.9%. The largest was a 168.5% boost from 2009 in Hawaii.</br></br>Payroll taxes levied by states fund unemployment benefits for up to 26 weeks -- and longer in some states. The federal government requires states to pay benefits even if their unemployment funds run out of cash. As in past periods of high joblessness, the federal government has paid for extended unemployment benefits, this time for as long as 99 weeks.