High unemployment is taking its toll on state compensation funds, with federal projections forecasting that 40 state unemployment programs will be penniless in two years and in need of $90 billion in loans. Lawmakers in states like South Carolina, Nevada, Kansas, Vermont, and Indiana are debating how to best meet the shortfall—generally either through raising taxes or lowering the aid payments—and 25 states have already borrowed some $24 billion from the government to cover their shortages. The problem, it seems, stems from a failure on the part of many states to prepare for the recession. According to the Urban Institute, unemployment programs were on average being funded only one-third what they should have been.
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