Alaska, like all other states, has a trust fund at the center of its Unemployment Insurance (UI) financing system. The fund receives taxes paid by employers and workers, and pays out benefit payments to qualified workers during periods of unemployment. The fund maintains a reserve to carry the system through a severe recession until it can be rebuilt afterward. Alaska is one of a few states with a sound fund. Most others are insolvent or facing solvency problems.
Today half of the states have tapped out their funds, and are using money borrowed from Uncle Sam to keep their UI systems afloat. These are the “red ink” states of 2009. So far, the 25 states have borrowed $23.7 billion in total from the federal government. Many of these states probably would have handled a typical recession just fine, but were caught far short when a big one hit.
Alaska’s fund is fully solvent, and at tax computation time (November 2009) was meeting its solvency goal. The fund has more than $300 million. The average UI tax rate for employers in 2010 will be the second lowest on record, following the record low tax rate of 2009. Alaska’s situation is due to the good design of our financing system, as well as the fact that Alaska is not under the severe economic stress of some states.