The investigative Web site Pro Publica (propublica.org) notes that South Carolina and North Carolina are among 14 states nationally whose unemployment funds have run out of money because they didn't put enough money aside to keep it going in a pinch or because they paid out too much in claims. Here's a link to the site.
In summary, Pro Publica says:
It used to be, unemployment insurance meant a sturdy back and a jalopy big enough to fit the whole family. That changed in 1935, when the government started offering unemployment insurance, and states began to save when times were good so there was money to spend to help workers and stimulate the economy when times were bad.
In all but a handful of states, it no longer works that way.
Fourteen states have already run out of funds to pay unemployment insurance claims and taken out a total of more than $8 billion in federal loans to cover the shortfalls. At least 18 more states are in danger of exhausting their unemployment insurance trust funds.
States with empty unemployment insurance trust funds have pointed to the severe recession as the cause for their plight, but a closer examination of their trust funds shows underfunding and poor planning as the main culprit. Instead of building up reserves during good years, legislatures in these states yielded to political pressure for high benefits and low taxes. The result: dangerously low trust fund balances.
Now, states with bankrupt trust funds will have to increase taxes or cut unemployment benefits at the worst possible time -- during a recession.
"This is not a very smart way to run a railroad, because you want benefits to be available quite freely when unemployment rates go up, and you don't want to raise taxes on employers during a recession," said Gary Burtless, an economics expert at the Brookings Institution. "There used to be rules most states abided by, but those standards kind of went the way of the dodo bird."
