Unemployment Programs Going Bust in 40 States States face raising taxes or slashing benefits By Rob Quinn, Newser Staff Posted Dec 22, 2009 3:41 AM CST Updated Dec 22, 2009 7:51 AM CST 19 comments Comments Unemployed people talk to officials before filling out paperwork at the California Employment Development Department office in San Jose, Calif. (AP Photo/Paul Sakuma) (Newser) – The combination of high unemployment and bad planning means that the jobless compensation programs of all but 10 states are on course to go broke by 2011. Some 25 states are already borrowing federal money to issue benefit checks. State lawmakers are coming under intense pressure to either shrink payments or hike payroll taxes to fund the programs, the Washington Post reports. The funds are facing huge shortfalls because few state governments adequately prepared for a downturn, experts say. Payroll taxes on employers are supposed to keep the funds at a sustainable level, but funding guidelines were rarely followed. "If you fund a program adequately, you don't need to come to these kinds of difficult decisions," said an Urban Institute expert in unemployment insurance.