State unemployment benefits are financed through state
payroll taxes, which are held in individual state trust fund accounts
in the U.S. Treasury's Federal Unemployment Trust Fund.
These funds are invested by the Secretary of the Treasury
in government securities in the same manner as are Social Security
Trust Funds. Federal law prohibits the use of these funds for any
purpose other than paying unemployment benefits.
The unemployment insurance (UI) system
has three basic goals:
To provide a temporary replacement of a portion
of wages lost due to involuntary unemployment.
To contribute to economic stability by maintaining
the purchasing power of unemployed individuals.
To stabilize employment levels by assessing unemployment
insurance taxes in relation to the employer's experience with
unemployment.
Unemployment
Insurance (UI) Benefits Handbook