Unemployment funds could run out early next year, officials say

KANSAS CITY, Mo. -- With its payouts greatly exceeding its receipts, the Missouri unemployment insurance trust fund will have to borrow from a federal bailout fund early next year, state officials said.

Heightened unemployment rates and an extended economic downturn have combined to drain the fund as checks written to unemployed Missourians have dwarfed the funds received from taxing employers, The Kansas City Star reported.

On Oct. 31, the state unemployment fund had $185 million. But at the current rate, the fund will run out in the first quarter next year, said Gracia Backer, director of the Missouri Division of Employment Security.

In June, Missouri's seasonally adjusted unemployment rate reached its highest level in eight years at 5.4 percent. Last month, the rate dipped to 4.8 percent.

In September, the fund paid out $47.8 million and took in only $11.9 from employers, Backer said.

A state law prevents the fund from building up excess reserves during strong economic periods like the late 1990s to prepare for slower periods. The law, which also restricts how quickly unemployment tax rates can be changed, was enacted after the fund became insolvent during a recession in 1992.

The fund also was insolvent during economic troubles in 1983.

Borrowing from the federal account will require the state to repay any funds with interest.

State legislators will be informed of the problem Tuesday at a hearing in Jefferson City, Backer said.

The fund has been drained despite temporary federal help over the last eight months. In March, Congress enacted a temporary program that allowed an extension of benefits for up to 13 weeks from federal funds without interest.

However, the temporary program was not extended before Congress ended its session earlier this month. The federal aid will end on Dec. 28.

Doug Kaylor, head of the state unemployment insurance program, said 12,500 to 15,600 Missourians that have run out of state unemployment benefits, will lose extended federal benefits at that time.