State's jobless fund in the red

Minnesota's jobless benefits trust fund ran a deficit in July for the first time this recession.

The Minnesota Department of Employment and Economic Development says the trust fund ran a deficit of about $19 million in July.

Lee Nelson, DEED's chief jobless benefits attorney, says the state gets revenue four times a year from unemployment taxes on employers. But because of a high number of layoffs and long stays on the unemployment insurance rolls, payouts are exceeding revenues.

"We are predicting in 2009 in regular benefits we'll pay somewhere around $1.8 billion in benefits, and revenue is only going to be about $1 billion. So you know you have a problem," he said.

Nelson said the state anticipated this shortfall and tapped a line of credit from the federal government, which it paid back once more revenues came in.

But the trust fund is expected to keep running deficits over the next few years. The state could end up owing the federal government in excess of $1 billion.

Nelson says once the state has been in borrowing mode for more than two calendar years, it will start losing federal tax credits.

"The net effect is that the employers' federal unemployment tax will increase, and that increase will be used to help pay back the loan," said Nelson.

Nelson said the state Legislature could also determine other means to repay the loan. He adds that recipients of jobless benefits are unaffected by the deficit.