New York, NY —

While the unemployment rate in New York City continues to rise, the fund that pays out unemployment benefits continues to shrink. WNYC's Cindy Rodriguez reports:

REPORTER: Unemployment benefits are funded solely by businesses that pay an unemployment tax for each person they hire. But that hasn't been enough to keep up with the number of people losing their jobs and needing benefits. The Department of Labor says so far in 2009 it's borrowed $1.3 billion from the federal government to cover the cost. Patricia Smith is commissioner:

SMITH: We obviously haven't been building up the fund well enough in good years so when bad times come we're broke I mean we were insolvent two hours into 2009.

REPORTER: Smith says the state unemployment tax rate hasn't gone up in a decade. Both the assembly and senate failed to act on a bill that would have done that. The New York State Business Council opposed the bill saying it raised benefits for the unemployed without addressing the insolvency issue. For WNYC, I'm Cindy Rodriguez.