Statestats: Unemployment Trust Funds: June 2010 

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Claims for unemployment benefits have skyrocketed during the recession. According to the U.S. Department of Labor, 34 states and the U.S. Virgin Islands are currently borrowing to pay the costs of unemployment benefits. 

Under the Federal Unemployment Tax Act, the federal government levies an unemployment tax on employers to finance administrative costs of the system, fund loans to states during economic downturns, and cover extended benefits.

State governments also tax employers to pay for the unemployment insurance benefits that are deposited into the federal Unemployment Trust Fund. Each state, plus the District of Columbia, Puerto Rico and the U.S. Virgin Islands, has its own account within the trust fund.

Many states have been forced to take out loans from the trust fund because their individual state accounts have been depleted. These loans must eventually be repaid. A provision of the American Recovery and Reinvestment Act temporarily waives interest on the loans, but the waiver is set to expire on Dec. 31, 2010.