State unemployment fund at six months

Even as Congress extended jobless benefits for Connecticut residents, the state is at risk of exhausting its unemployment trust fund, according to a new report, a situation that may force the state to shore the fund up with additional state expenditures even as it is trying to find ways to cut costs.

The good news is Connecticut”™s unemployment balance sheet is healthier than most states”™.

Connecticut”™s unemployment trust fund (UTF) has sufficient capital to cover payments for just six months in a severe recession, the U.S. Department of Labor reported last month. The Department of Labor (DOL) projects the figure by analyzing the ratio between current UTF levels and the highest payments made in any fiscal year during the past two decades.

More than half the states are below DOL”™s minimal solvency ratio, including New York, which had drained its trust fund reserves to just a few months of payments during the current downturn; and New Jersey and Rhode Island, whose funds would last only until next spring if unemployment rolls continue expanding.

When states exhaust their UTF reserves, they can borrow funds from the Federal Unemployment Account to make benefit payments; but must also raise taxes on unemployment insurance carried by employers to replenish the coffers.

In mid-November, Congress passed the Unemployment Compensation Extension Act of 2008, providing an additional 13 weeks of federal unemployment checks for people in states with unemployment of at least 6 percent, including Connecticut.

At last report, the Rell administration projected a $356 million deficit for the current fiscal year, and more than $6 billion over the following two years at current spending levels.