Unemployment benefits drying up; Georgia's stable

The safety net for the nation’s unemployed is fraying just as the country heads into a serious downturn.

The system created 73 years ago by President Franklin Roosevelt to help out-of-work Americans weather the Great Depression is straining to make it through the current economic crisis. In fact, many states will not be able to pay unemployment benefits in a protracted recession without federal help, experts predict.

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LOUIE FAVORITE/lfavorite@ajc.com

It’s been a hard year for Simone Campbell, shown leaving the state Department of Labor’s Toco Hill career center. She spent her savings to move to Georgia, lost her car and then her job.

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“States are in worse shape now than they were in 2000 in terms of getting ready for a recession,” said Rick McHugh, a staff attorney for the National Employment Law Project, which recently analyzed the health of the country’s multibillion-dollar unemployment benefits system. “Some states are going to have a very tough time.”

Georgia’s Unemployment Insurance Trust Fund stands at about $1 billion and is relatively stable. But 19 other states’ unemployment insurance funds are depleted or are close to running out of money within a year, according to the employment law group. Michigan, the most severe case, already has had to borrow more than $300 million from the federal government to meet its unemployment payment obligations.

The problems are likely to get worse as the economy deteriorates. Alarmed by a flood of new jobless claims, Congress last week approved a measure that will extend unemployment benefits to those who have run out. Also last week, a leading economist in Georgia warned that the U.S. economy won’t see any significant improvements until late 2010.

Georgia State University economist Rajeev Dhawan predicted in his quarterly forecasting report that the United States will lose 2 million more jobs during the next year, in addition to the 1 million that have already been lost.

With the unemployment rate already at 7 percent, Georgians won’t see any real signs of recovery for at least another 18 months, said Dhawan, director of the Economic Forecasting Center at Georgia State.

By the end of 2009, Georgia will have lost more than 147,000 jobs in the past two years. Most of the losses will be in metro Atlanta, he said.

That will mean longer lines at unemployment offices.

On a recent Monday, dozens of people jammed the lobby of the state Labor Department’s career center at Toco Hill shopping center in DeKalb County.

The state agency expanded the hours of each of its centers to accommodate the flood of jobless workers coming in for help.

“I’m just holding my breath,” said Vivian Richardson, who oversees the Labor Department’s metro Atlanta district. “Mondays are always extremely busy.”

Simone Campbell, a 34-year-old single mother, arrived at 8:30 a.m. after taking a 90-minute bus and train ride from Dunwoody. She was laid off Oct. 24 from her job as an accounts payable clerk at Kaiser Permanente.

“It’s been a tough year for me, said Campbell, who has a 10-year-old daughter. “My car was repossessed Aug. 1, and I was told on Aug. 27 I’d be laid off.”

She used all her savings to move from Florida to Georgia a year ago, and now her severance is about gone. She’s been to two temporary agencies looking for work. Nothing so far.

“Even before the economy went down, jobs in Georgia were very hard to get,” she said.

Also at the Toco Hill office was Michael Hammen, who filled out an application for unemployment benefits and other services. It was a first for the 69-year-old former salesman.

When the economy was booming, Hammen sold security and electronic equipment to banks and credit unions. But as housing and credit markets dried up, Hammen knew it was a matter of time before his job was over.

“I probably knew it was coming before [my boss did],” said the Dunwoody resident who’s looking for part-time work to supplement his Social Security benefits.

Benefits end too soon

At the other end of the unemployment cycle are many out-of-work Georgians who are running out of benefits and options before finding a job.

Congress stepped in last week with $6 billion to extend benefits by 13 weeks in states where the unemployment rate exceeds 6 percent, such as Georgia. Those in states with lower unemployment will get a seven-week extension.

While helpful, the federal money does not address the growing financial drain for many states. All told, reserves of state unemployment funds fell to $36.7 billion by Sept. 30 of this year, a 10 percent drop from a year ago when the funds stood at $40.8 billion, according to the National Employment Law Project study.

This year marks the first time in several years that unemployment benefit payments have exceeded payroll tax revenues, the study said. That trend is expected to continue for several years. The shortfalls are likely to push some states deep into debt by 2010.

Workers will still get their checks because the federal government steps in to make good on FDR’s promise.

But long-term borrowing from the feds comes at a cost. States must repay the federal government fairly quickly to avoid interest charges.

Also, as the economy worsens, employers and their former employees could be penalized.

“You’d be looking at a situation where employers may be facing higher unemployment insurance taxes and legislators may be tempted to cut or limit people’s [unemployment] benefits,” said McHugh of the law project.

Georgia Labor Commissioner Michael Thurmond hasn’t ruled out higher unemployment insurance taxes down the road.

“These unemployment systems were not designed to withstand … a 100-year economic crisis, and this is the mother of all economic crises,” Thurmond said recently. “It’s a finite resource. We’re very fortunate to be one of the … states not facing immediate insolvency.

“If we have to borrow, we could increase tax rates for employers and that could negatively impact economic expansion because employers will be saddled with higher taxes.”