Much of the money paid into the system isn t returned to the state to fund the programs employers paid for. FUTA dollars being held hostage to hide the true size of the federal deficit along with other dedicated trust funds like Transportation and Social Security. Proceeds from both reside in the Federal Unified Budget. The federal government appropriates and allocates administrative funding to states.
States draw down benefit funding as needed.
Employer FUTA taxes are allocated into two accounts 80 percent into administration and 20 percent into extended benefits. Over past 20 years, the civilian labor force has grown 40 percent while Employment Security staff was cut in half. In 1976, the extended benefit account was in debt. This surtax has been extended four times through 1998, with some plans for indefinite extension. Congress raised ceilings of extended and loan accounts to stop overflow to states.