Nineteen states—including New York, Ohio, Indiana, and North Carolina—are in danger of running out of money to pay unemployment benefits. Michigan already has drained its state fund and is $340 million in debt. Unemployment benefits are paid from a tax charged to businesses. But so many people currently are unemployed that benefits payments exceed employer contributions.

During the 2001 recession, the federal government gave $8 billion to replenish state unemployment accounts nationwide. But many states used the money to lower taxes instead. Now they may have to reduce benefits, redefine who is eligible, or require that recipients do a certain number of job searches or be out of work for a set number of weeks before they get any money.

“The financial picture is looking pretty dismal,” says Sujit CanagaRetna of the Council of State Governments. “Perhaps states will learn this time that they need to replenish funds during strong economic years to have enough cash on hand to cope with a downturn.”

— Lyric Wallwork Winik