States Mull Borrowing Cash to Pay Jobless Benefits

States running out of money to pay unemployment insurance for the 8 million Americans out of work are looking to the federal government for a loan.

Illinois is just the latest to seek federal aid to help pay support for jobless workers.

"The unemployment insurance trust fund is going to be in a deficit situation in 2003," said Jay Shattuck of Shattuck & Associates.

North Carolina also recently applied for a loan from the federal government so it can continue paying benefits to unemployed workers. New York, Texas and Minnesota have already borrowed funds.

But the loans are forcing the states into a two-pronged problem: They must find a way to replenish their unemployment funds and they also have to pay back the money they borrow, a situation made more difficult in the face of continuing budget deficits.

"It's not a lot of money," Frank Gruzewski, collecting jobless benefits since his company went out of business nine months ago, said of the state's aid. "But it helps with the groceries and paying for the odds and ends and stuff like that."

The solution for Illinois may mean either cutting benefits to jobless workers or increasing taxes to employers, or the possibility of both.

Organized labor leaders like Illinois AFL-CIO President Margaret Blackshere said cutting unemployment benefits is a bad idea.

"I would fight that with every breath of life that I have and I know that many else would," she said.

Business owners, however, complain that raising taxes on them will make it harder to hire new employees.

"I need to generate even more sales now to add on that one new employee," said Zachary Hoddman, owner of Wiley Office Furniture.

And that's the crux of the problem for people like Gruzewski, who said that while unemployment checks are important, what he would really like is a job.

Fox News' Steve Brown contributed to this report.