Unemployment insurance programs in the states have been approaching insolvency for more than a decade, putting pressure on states to raise payroll taxes, cut benefits, or seek federal loans. None of these options are desirable during a recession, when individuals need the benefits most.
The Federal Government's recent "stimulus" package allocated $140 billion to help states' budgets, but it hasn't been nearly enough to prop up the unsustainable spending states are engaged in. The authors detail the fiscal crisis still looming in state budgets.
In the public sector, no tool adjusts spending to changing conditions. In the current recession, many states have decreased revenues, but little decreased spending has been seen. This pattern raises a difficult question: How do states correct for the inflexibility in spending cuts?