Puzzled why your state keeps raising unemployment insurance taxes even though the economy continues to expand albeit at a snow pace?

The reason is fairly simple: More than $26 billion in lingering debt and billions more in mounting interest have forced a number of states to scale back unemployment benefits, raise taxes, tap general funds and even turn to the private bond market as they look to shore up unemployment insurance trust funds that plunged into the red during the Great Recession.

And now, years removed from the depth of the crisis, theres concern some of funds are being refilled so slowly if at all that certain states could be in an even worse position when the next downturn comes, compounding a problem thats plagued them for years.

On Sept. 30, 18 states and the Virgin Islands paid about $2 billion in interest to the federal government to cover debts remaining from tens of billions in loans taken during the worst of the Great Recession to cover shortfalls in trust funds.

The payment, and the debts themselves, have gained little notice outside a small circle of analysts, state officials and federal actuaries.

But the fact is that states still have $26 billion in debts, and some say the longer the red ink remains, the harder it will be for them to climb back into solvency.

"The states have a fundamental problem: Theyre not funding these trust funds appropriately," says Mike Evangelist of the National Employment Law Project. "You just keep digging the hole deeper, you keep losing more. It is a compounding problem."

Designed to cover unemployment benefits, the trust funds ebb and flow with the economy. The funds comprise taxes on both employers and wages, and ideally would remain flush during a strong economy and be drawn down when unemployment spikes.

But that didnt happen before the Great Recession, or downturns before it.

As the National Employment Law Project found, 31 states cut unemployment insurance taxes by at least a fifth from 1995 to 2005. Making matters worse, the average contribution to funds hit historical lows from 2000 to 2009.

Heavy borrowing

All told, states borrowed nearly $50 billion from Washington during the recession to cover jobless benefits. That figures been halved in the years since, but many still have significant debt, and many are still borrowing.

And, as the economy continues to grow slowly, with the threat of another dip into recession always present, some are sounding the alarm that this is just the latest example in a long trend of mismanagement.

Some states weathered the Great Recessions toll on their funds with stimulus-backed, interest-free federal loans. But those ended in 2010, and a year later states still owed nearly $40 billion.

Today, many big states have substantial debts. California, for example, has nearly $10 billion, while New York has $3.1 billion. North Carolina stands at nearly $2.5 billion, while Ohio and Indiana are carrying more than $1.7 billion each.

Historically low interest rates have kept costs manageable. But many states have automatic business tax hikes that go into effect if states fail to pay back their debts.

Benefits being cut

Others have slashed benefits: Florida linked benefits to the states unemployment rate in an effort to cut costs, reduce benefits and replenish its fund. Thats meant some of the most restrictive unemployment benefits in the country, but it has also helped to reduce its debt by more than $1 billion since August 2011.

"Theyre imposing sacrifices on claimants because of the debts," said Wayne Vroman of the Urban Institute, who has studied state unemployment trust funds. "States are being quite slow in paying things off, and in some cases theyre putting off their payments."

An increasing number of states have also turned to a relatively novel - and controversial - approach to cover their debts: the private bond market. So far, six states have issued bonds for their debt, totaling nearly $10 billion, on top of the $26 billion owed to the federal government.

More are expected to take that approach. The hope is that theyll get better terms from private investors, and so far, credit rating agencies have viewed the bonds favorably. But some say the private market simply offers a false sense of fiscal security.

The Urban Institutes Vroman calls the number of states turning to the private market "unprecedented."

"Basically theyve swapped one form of debt for another," he says. "The problem is what the states are doing to their own funds."

Not enough reserves

And that remains the problem. Just as insufficient reserves cost states ahead of the Great Recession, some are now in an even weaker position should another downturn take hold.

"The fact is that theres going to be another recession in the near future, and well be right back where we were," Evangelist says. "You just keep moving backward."

The news isnt all dire. There are states that have reduced their debts. New Hampshire, for example, was facing a nearly insolvent fund during the recession and instituted an emergency surcharge to close the gap. The charge was repealed last month. Others managed to avoid borrowing entirely.