Rhode Island has become the eleventh state to apply for an interest-free line of credit from the federal government to replenish its state unemployment insurance trust fund, administered by the RI Department of Labor and Training. The state has been approved for a $75 million line of credit from the Federal Unemployment Insurance Trust Fund.

Other states who have borrowed from the federal trust fund include California, Indiana, Kentucky, Michigan, Missouri, New York, North Carolina, Ohio, South Carolina and Wisconsin. Pennsylvania and Texas have also been reported to be considering similar arrangements for their state trust funds.

At 10.3 percent unemployment, Rhode Island’s unemployment insurance system is experiencing unprecedented demand, paying out more than $38 million in benefits in the month of February alone. As of Monday, March 2, the balance of the state trust fund had reached $23,609,703; the low balance triggered Department of Labor and Training officials to request the line of credit in order to ensure that Rhode Island unemployment insurance payments to customers continue without interruption.

Because the line of credit from the federal government is both guaranteed and immediate, unemployment insurance customers should not experience any delays in receiving their weekly payments.

Under the new federal stimulus program, the American Recovery and Reinvestment Act, the U.S. government allows state unemployment insurance programs to borrow from the federal unemployment insurance trust fund through December 2010. The fact that the government is not charging interest was a determining factor in choosing to borrow from the federal trust fund and not another source, such as the state's Temporary Disability Insurance Fund, an option which had been discussed as recently as last month.

The last time Rhode Island borrowed money from the federal unemployment insurance fund was between 1975 and 1980, when it borrowed $129.4 million. The state paid back the full amount by 1984. For a portion of that five-year time period in which it had borrowed from the government, Rhode Island experienced double-digit unemployment. The current unemployment rate in Rhode Island, 10.3 percent, is the highest in more than 30 years.

In 2008, approximately 32,500 Rhode Island employers paid unemployment insurance tax, which ranges from 1.9% to 10% of the first $18,000 in wages a business pays per employee. The tax rate is based on an employer's experience rating, which is determined by how frequently that employer has drawn on unemployment insurance in the past. Unemployment insurance tax payments are apportioned to both the state and the federal unemployment insurance trust funds.