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Unemployment Insurance: Programs and Benefits

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. Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Julie M. Whittaker Specialist in Income Security Alison M. Shelton Analyst in Income Security Julie M. Whittaker SpecialistKatelin P. Isaacs Analyst in Income Security April 2, 2009May 5, 2010 Congressional Research Service 7-5700 www.crs.gov RL33362 CRS Report for Congress Prepared for Members and Committees of Congress c11173008 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Summary Various benefits may be available to unemployed workers to provide income support. When eligible workers lose their jobs, the Unemployment Compensation (UC) program may provide up to 26 weeks of income support through the payment of regular UC benefits. UC benefits may be extended for additional weeks at the state level by the Extended Benefit (EB) program if certain economic situations within the state exist. In July 2008, a new temporary unemployment benefit, the Emergency Unemployment Compensation (EUC08) program, began. EUC08 now provides up to an additional 20 weeks of unemployment benefits. In addition, if certain economic conditions exist within the state, a second tier of EUC08 benefits may be available for up to an additional 13 weeks of EUC08 benefitsUnemployment benefits may be extended for up to 53 weeks by the temporarily authorized Emergency Unemployment Compensation (EUC08) program and additionally extended for up 13 or 20 weeks by the permanent Extended Benefit (EB) program if certain economic situations exist within the state. Certain groups of workers who lose their jobs because of international competition may qualify for additional or supplemental income support through Trade Adjustment Act (TAA) programs. Unemployed workers may be eligible to receive Disaster Unemployment Assistance (DUA) benefits if they are not eligible to receive UC benefits and if for regular UC and if their unemployment may be directly attributed to a declared major disaster. The American Recovery and Reinvestment Act of 2009, P.L. 111-5 (the 2009 stimulus package), contains several provisions affecting unemployment benefits. The stimulus package will increase unemployment benefits by $25 per week through December 2009. The supplemental $25 per week benefit will be available to all individuals receiving regular unemployment, Extended Benefits (EB), Emergency Unemployment Compensation (EUC08) benefits, Trade Adjustment Act (TAA) programs, and Disaster Unemployment Assistance (DUA), and will be grandfathered for individuals who are receiving benefits under one of these programs in the last week of December 2009. The stimulus package also extends the temporary EUC08 program through end2009, to be financed by the U.S. Treasury through general revenues. The stimulus package provides for 100% federal financing of the EB program through January 1, 2010, and allows states the option of temporarily easing EB eligibility requirements. The stimulus package suspends income taxation on the first $2,400 of unemployment benefits received in 2009. In addition, states would not owe or accrue interest, through December 2010, on federal loans to states for the payment of unemployment benefits. Finally, the 2009 stimulus package provides attributed to a declared major disaster. The authorization for the EUC08 program expires on June 2, 2010. Those beneficiaries receiving tier I, II, III, or IV EUC08 benefits before May 29, 2010, are “grandfathered” for their remaining weeks of eligibility for that particular tier only. There will be no new entrants into any tier of the EUC08 program after May 29, 2010. If an individual is eligible to continue to receive his or her remaining EUC08 tier benefit after May 29, 2010, that individual would not be entitled to tier II benefits once those tier I benefits were exhausted. The American Recovery and Reinvestment Act of 2009 (ARRA), P.L. 111-5, contained provisions affecting unemployment benefits: temporarily increased benefits by $25 per week (Federal Additional Compensation, or FAC); extended the EUC08 program through the end of 2009; provided for 100% federal financing of the EB program through January 1, 2010; and allowed states the option of temporarily easing EB eligibility requirements. ARRA also suspended income taxation on the first $2,400 of unemployment benefits received in 2009. In addition, states would not owe or accrue interest, through December 2010, on federal loans to states for the payment of unemployment benefits. ARRA also provided for a special transfer of up to $7 billion in federal monies to state unemployment programs as “incentive payments” for changing certain state UC laws. In addition, the stimulus package would transfer a total of as well as transferred $500 million to the states for administering their unemployment programs. (For more information on unemployment provisions in the stimulus package, please see CRS Report R40368, Unemployment Insurance Provisions in the American Recovery and Reinvestment Act of 2009.) The President’s 2010 budget outline suggests that legislation is needed to make the UC system more responsive to changing economic conditions, with a focus on the EB program. In a letter transmitting the Views and Estimates of the House Committee on Ways and Means on aspects of the federal budget for FY2010, the Committee states that it will continue to monitor the effectiveness of the stimulus package (P.L. 111-5), including unemployment insurance programs. Congressional Research Service administering unemployment programs. P.L. 111-92 expanded the number of weeks available in the EUC08 program through the creation of two additional tiers. P.L. 111-118 extended the EUC08 program, 100% federal financing of the EB program, and the $25 FAC benefit through the end of February 2010. P.L. 111-144 extended the EUC08 program, 100% federal financing of the EB program, and the $25 FAC benefit to April 5, 2010. On March 10, 2010, the Senate passed H.R. 4213, the Tax Extenders Act of 2010. H.R. 4213 would extend the availability of EUC08, 100% federal financing of EB, and the $25 FAC benefits, through the end of December 2010. Because the original bill was amended by the Senate in the nature of a substitute (S.Amdt. 3336), the Senate-passed version must now go back to the House for consideration. On April 15, 2010, the President signed P.L. 111-157, the Continuing Extension Act of 2010, into law. P.L. 111-157 extends the availability of EUC08, 100% federal financing of EB, and the $25 FAC benefits, until the week ending on or before June 2, 2010. Congressional Research Service . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Contents Introduction ................................................................................................................................1 Unemployment Compensation (UC)....................................................................................................2 Authorization..................................................................................................................2 Appropriation and Outlays ..............................................................................................2 Administration ..................................2 Administration ..............................................................................3 Eligibility for Regular Unemployment Compensation .........................................3 UC Eligibility ..................3 Broad Federal Guidelines Result in Different State Requirements....................................3 Base Period.............................................................................................3 Broad Federal Guidelines Result in Different State Requirements....................................3 Base Period........................3 Qualifying Wages or Employment...................................................................................4 2009 Stimulus Provisions Relating to Regular Unemployment Compensation .................5 Data Collection Considerations .......................................................................................6 Determination and Duration of Regular Unemployment Compensation .................................6 UC Benefit Financing: Unemployment Taxes on Employers..................................................8 Federal Unemployment Tax Act .......................3 Qualifying Wages or Employment...................................................................................4 2009 Stimulus Provisions Relating to Regular Unemployment Compensation .................5 Data Collection Considerations 8 ARRA Temporary Changes Federal Financing of Unemployment Benefits......................9 State Unemployment Tax Acts.......................................................................................5 UC Benefit Determination and Duration....................9 Outstanding Loans from the Federal Unemployment Account ....................................... 12 Emergency Unemployment Compensation Program................................................................6 UC Benefit Financing: Unemployment Taxes on Employers.. 12 EUC08 Benefit Amounts, Tiers and Duration ..................................................8 Outstanding Loans from the Federal Unemployment Account (FUA) ............................ 12 Extended Benefit (EB) Program .................... 14 Tier I............................................................................................................................. 14 Tier II ........................................................................................................................... 14 Tier III .......................................................................................................................... 14 Tier IV.......................................................................................................... 12 EB Triggers May be Reviewed in 2010 ............................................................................... 13 EB Eligibility Requirements Beyond Requirements for Regular UC .................................... 14 2009 Stimulus Provisions Affecting EB Level and Duration ................................................ 16 2009 Stimulus Provisions Affecting EB Financing............................................................... 16 Emergency Unemployment Compensation (EUC08) Program ................................................... 17 EUC08 Benefits Tiers and Duration .................................................................................... 17 Tier I............................................................................................................................. 18 Tier II ........................................................................................................................... 18 Tier I EUC08 Eligibility Requirements................................................................................ 18 Tier II EUC08 Eligibility Requirements .............................................................................. 19 EUC08 Financing ............................................................................................................... 20 EUC08 and EB Interactions ................................................................................................ 20 Disaster Unemployment Assistance (DUA) ............................................................................... 21 DUA Eligibility................................................................................................................... 21 DUA Benefit Determination and Duration........................................................................... 21 DUA Financing................................................................................................................... 22 Legislative Issues ...................................................................................................................... 22 111th Congress..................................................................................................................... 22 2010 Budget.................................................................................................................. 22 American Recovery and Reinvestment Act of 2009 ....................................................... 22 Tables Table 1. State Unemployment Compensation Benefits Amounts, January 2009............................6 Table 2. State Unemployment Taxes: Taxable Wage Base and Rates, January 2009.....................9 Table 3. Revenue and Spending Associated With Unemployment Compensation, FY2001-FY2009.................................................................................................................... 11 Congressional Research Service Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Contacts Author Contact Information ...................................................................................................... 25 Congressional Research Service ................ 14 Special Case: Exhausted Tier II EUC08 Benefits Before November 8, 2009 ........................ 15 No Retroactive Payments for Special Case .................................................................... 15 Tier I EUC08 Eligibility Requirements................................................................................ 16 First Claimed Regular UC Benefits On or After May 7, 2006 ........................................ 16 Exhausted Regular UC Benefit...................................................................................... 16 “20 Weeks” of Full-Time Insured Employment or Equivalent........................................ 16 Tier II EUC08 Eligibility Requirements .............................................................................. 16 Exhausted Tier I EUC08 Benefit ................................................................................... 16 Tier III EUC08 Eligibility Requirements ............................................................................. 17 Exhausted Tier II EUC08 Benefit .................................................................................. 17 At or After the Period of Tier II EUC08 Exhaustion, the State Must Currently Have At Least 6% Unemployment Rate...................................................................... 17 No Retroactive Payments .............................................................................................. 17 Tier IV EUC08 Eligibility Requirements ............................................................................. 17 Exhausted Tier I, Tier II, and Tier III EUC08 Benefits ................................................... 17 At or After the Period of Tier III EUC08 Exhaustion, the State Must Currently Have At Least 8.5% Unemployment Rate................................................................... 17 No Retroactive Payments .............................................................................................. 18 EUC08 Financing ............................................................................................................... 18 EUC08 and EB Interactions ................................................................................................ 18 Extended Benefit Program ........................................................................................................ 18 EB Triggers May be Reviewed in 2010 ............................................................................... 19 EB Eligibility Requirements Beyond Requirements for Regular UC .................................... 21 Congressional Research Service . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity 2009 Stimulus Provisions Affecting EB Level and Duration ................................................ 22 2009 Stimulus Provisions Affecting EB Financing............................................................... 23 Short-time Compensation (Work Sharing) ................................................................................. 23 Legislative Issues ...................................................................................................................... 24 111th Congress..................................................................................................................... 24 2010 Budget.................................................................................................................. 24 P.L. 111-5, The American Recovery and Reinvestment Act of 2009 ............................... 25 P.L. 111-92, The Worker, Homeownership and Business Assistance Act of 2009............ 27 P.L. 111-118, The Department of Defense Appropriations Act ....................................... 27 P.L. 111-144, The Temporary Extension Act of 2010 ..................................................... 27 P.L. 111-157, The Continuing Extension Act of 2010..................................................... 27 Current Legislation ....................................................................................................... 27 Figures Figure A-1. Unemployment Insurance: Available Unemployment Benefits ................................ 29 Tables Table 1. State Unemployment Compensation Benefits Amounts, January 2010............................6 Table 2. State Unemployment Taxes: Taxable Wage Base and Rates, January 2010................... 10 Table 3. Revenue and Spending Associated With Unemployment Compensation, FY2001-FY2010.................................................................................................................... 12 Table B-1. Emergency Unemployment Compensation Program: Public Law, Benefits, Effective Dates, and Financing............................................................................................... 30 Appendixes Appendix A. Unemployment Insurance Benefits ....................................................................... 29 Appendix B. Summary of EUC08 Program ............................................................................... 30 Contacts Author Contact Information ...................................................................................................... 31 Congressional Research Service . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Introduction A variety of benefits may be available to unemployed workers to provide them with income support during a spell of unemployment. The cornerstone of this income support is the joint federal-state Unemployment Compensation (UC) program, which may provide income support through the payment of UC benefits. for up to a maximum of 26 weeks.1 Other programs that may provide workers with income support are more specialized. They may target special groups of workers, be automatically triggered by certain economic conditions, be temporarily created by Congress with a set expiration date, or target typically ineligible workers through a disaster declaration. UC benefits may be extended at the state level by the permanent Extended Benefit (EB) program if high unemployment exists within the state. Once regular unemployment benefits are exhausted, the EB program may provide up to an additional 13 or 20 weeks of benefits, depending on worker eligibility, state law, and economic conditions in the state. The EB program is funded 50% by the federal government and 50% by the states, butalthough the 2009 stimulus package (P.L. 111-5, as amended) temporarily provides for 100% federal funding of the EB program through December 2009. A new . A temporary unemployment insurance program, the Emergency Unemployment Compensation (EUC08) program, began in July 2008. This is the eighth time Congress has created a federal temporary program that has extended unemployment compensation during an economic slowdown.1 The EUC08 benefit is 100% federally funded. State unemployment compensation (UC) agencies administer the EUC08 benefit along with regular UC benefits. The EUC08 program provides two tiers of benefits. The first tier provides up to 20 additional weeks of unemployment benefits and is available to all workers who are still unemployed and who have exhausted regular UC (or EB depending on whether the state has elected to pay EUC08 or EB first). The second tier of EUC08 benefits is available to workers in states with high unemployment and provides up to a maximum of an additional 13 weeks of tier II EUC08 benefits (for up to a cumulative 33 weeks of EUC08 benefits). 2 Compensation (EUC08) program, began in July 2008. The authorization for the EUC08 program expires on June 2, 2010. Those beneficiaries receiving tier I, II, III, or IV EUC08 benefits before May 29, 2010 (May 30, 2010, in New York) are “grandfathered” for their remaining weeks of eligibility for that particular tier only. There will be no new entrants into any tier of the EUC08 program after May 29, 2010. If an individual is eligible to continue to receive his or her remaining EUC08 tier I benefit after May 29, 2010, that individual would not be entitled to tier II benefits once those tier I benefits were exhausted. This was the eighth time Congress has created a federal temporary program that has extended unemployment compensation during an economic slowdown.2 The EUC08 benefit is 100% federally funded. State UC agencies administer the EUC08 benefit along with regular UC benefits. See Appendix A for a diagram of the various unemployment benefits available to workers. If an unemployed worker is not eligible to receive UC benefits and the worker’s unemployment may be directly attributed to a declared major disaster, a worker may be eligible to receive Disaster Unemployment Assistance (DUA) benefits. The disaster declaration will include information on whether DUA benefits are available. For information on Disaster Unemployment Assistance, see CRS Report RS22022, Disaster Unemployment Assistance (DUA), by Julie M. Whittaker and Alison M. Shelton. Certain groups of workers who lose their jobs because of international competition may qualify for additional or supplemental support through Trade Adjustment Act (TAA) programs or (for certain workers ageaged 50 or older) through Reemployment Trade Adjustment Assistance (RTAA). This report does not describe the TAA or RTAA programs. (Please see CRS Report RS22718, 1 Montana provides 28 weeks and Massachusetts provides 30 weeks of regular unemployment benefits. 2 Please see CRS Report RS22718, Trade Adjustment Assistance for Workers (TAA) and Reemployment Trade Adjustment Assistance (RTAA), by John J. Topoleski, for information on these programs. 1 The other temporary programs became effective in 1958, 1961, 1972, 1975, 1982, 1991, and 2002. For details on these programs, see CRS Report RL34340, Extending Unemployment Compensation Benefits During Recessions, by Julie M. Whittaker. 2 For a detailed explanation of the EUC08 program, see CRS Report RS22915, Temporary Extension of Unemployment Benefits: Emergency Unemployment Compensation (EUC08), by Julie M. Whittaker and Alison M. Shelton. Congressional Research Service 1 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Congressional Research Service 1 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Trade Adjustment Assistance for Workers (TAA) and Reemployment Trade Adjustment Assistance (RTAA), by John J. Topoleski, for information on these programs.) This report describes four kinds of unemployment benefits: regular UC, EB, EUC08, and DUA. The report explains their basic eligibility requirements, benefits, and financing structure. Unemployment Compensation (UC) UC is a joint federal-state program financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under the State Unemployment Tax Acts (SUTA). The UC program has a direct impact on almost every business in the United States as most businesses are subject to state and federal unemployment taxes. An estimated $7.36.0 billion in federal unemployment taxes and $32.244.9 billion in state unemployment taxes werewill be collected in FY2008. Approximately 133.4 million jobs are covered by the UC program. In December 2008, 5.1 million unemployed workers received UC benefits in a given week and the average weekly UC benefit amount was $297. In FY2008, states spent an estimated $38.1 billion on regular UC benefits and an additional $4.1 million on EB payments. In FY2008, the federal appropriation for administration of the UC program was $2.7 billionFY2010. In FY2010, states will spend an estimated $66.7 billion on regular UC benefits and the state share of the EB program. The federal government will spend additional amounts described in section “Appropriation and Outlays” below. Approximately 131.7 million jobs are covered by the UC program. At the end of the week of April 10, 2010, 5.0 million unemployed workers received UC. The average weekly UC benefit was $310 in March 2010 (and this amount is supplemented by the $25 weekly federal additional compensation [FAC] program payment). Originally, the intent of the UC program, among other things, was to help counter economic fluctuations such as recessions. 3 This intent is reflected in the current UC program’s funding and benefit structure. When the economy grows, UC program revenue rises through increased tax revenues while UC program spending falls as fewer workers are unemployed. The effect of collecting more taxes than are spent dampens demand in the economy. This also creates a surplus of funds or a “cushion” of available funds for the UC program to draw upon during a recession. In a recession, UC tax revenue falls and UC program spending rises as more workers lose their jobs and receive UC benefits. The increased amount of UC payments to unemployed workers dampens the economic effect of earnings losses by injecting additional funds into the economy. Authorization The underlying framework of the UC system is contained in the Social Security Act (the Act). Title III of the Act authorizes grants to states for the administration of state UC laws, Title IX authorizes the various components of the federal Unemployment Trust Fund (UTF), and Title XII authorizes advances or loans to insolvent state UC programs. Appropriation and Outlays The federal government appropriates funds for federal and state UC program administration, the federal share of EB payments, the EUC08 program, and federal loans to insolvent state UC programs. In FY2008, the FY2009, states received an estimated $2.73$4.32 billion from the federal government for the administration of their UC programs and $4.1 million, $4.12 billion for the federal share of EB payments. payments, and $32.66 billion for the temporary, federally financed EUC08 program. In FY2010, a preliminary 3 See, for example, President Franklin Roosevelt’s remarks at the signing of the Social Security Act at http://www.ssa.gov/history/fdrstmts.html#signing. Congressional Research Service 2 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity estimate (which did not include the extension of EUC08 and 100% federal financing of the EB program after February 2010) is that the states will receive an estimated $5.87 billion from the federal government for the administration of their UC programs, $10.5 billion for the federal share of EB payments, and $43.57 billion for the temporary EUC08 program. Administration The U.S. Department of Labor (DOL) administers the federal portion of the UC system, which operates in each state, the District of Columbia, Puerto Rico, and the Virgin Islands. Federal law sets broad rules that the 53 state programs must follow. These include the broad categories of workers that must be covered by the program, the method for triggering the EB and EUC08 programs, the floor on the highest state unemployment tax rate to be imposed on employers (5.4%), and how the states will repay UTF loans. If the states do not follow these rules, their employers may lose a portion of their state unemployment tax credit when their federal income tax is calculated. The federal tax pays for both federal and state administrative costs, the federal share of the EB program, the EUC08 program, loans to insolvent state UC accounts, and state employment services. The 2009 stimulus package providesprovided a total of $500 million in additional funds to states to help with administrative costs of the regular UC program, the EB program, and the EUC08 program. UC EligibilityEligibility for Regular Unemployment Compensation Broad Federal Guidelines Result in Different State Requirements Whereas federal laws and regulations provide broad guidelines on UC benefit coverage, eligibility, and benefit determination, the specifics of regular UC benefits are determined by each state. This results in essentially 53 different programs. States determine UC benefit eligibility, payments, and duration through state laws and program regulations. Generally, UC eligibility is based on attaining qualified wages and employment in covered work over a 12-month period (called a base period) prior to unemployment. Base Period The base period is the time period during which wages earned and/or hours/weeks worked are examined to determine a worker’s monetary entitlement to UC. Almost all states use the first 4 of four of the last 5five completed calendar quarters preceding the filing of the claim as their base period. This This may result in a lag of up to five months between the end of the base period and the date a worker worker becomes unemployed. As a result there are some instances when workers with substantial labor labor market attachment are ineligible for UC benefits. In particular, recent entrants to the workforce, or re-entrants, may be ineligible under this definition. Federal law allows states to develop develop expanded definitions of the base period. Alternative Base Period (ABP) Several states use an ABP for workers failing to qualify under the regular base period. For example, if the worker fails to qualify using wages and employment in the first 4 of the last 5 completed calendar quarters, then the state might use wages and employment in the last 4 completed calendar quarters. Extended Base Period (EBP) A list of states’ base periods can be found at http://www.workforcesecurity.doleta.gov/unemploy/ pdf/uilawcompar/2010/monetary.pdf, Table 3-2. Congressional Research Service 3 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Alternative Base Period Almost two-thirds of states use an alternative base period (ABP) for workers failing to qualify under the regular base period. For example, if the worker fails to qualify using wages and employment in the first four of the last five completed calendar quarters, then the state might use wages and employment in the last four completed calendar quarters. Extended Base Period Several states allow workers who have no wages in the current base period to use older wages and employment under certain conditions. These conditions typically involve illness or injury. For Congressional Research Service 3 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity example, a worker who was injured on the job and who has collected workers’ compensation benefits may use wages and employment preceding the date of the worker’s injury to establish eligibility. Base Period Provisions in the 2009 Stimulus Package The 2009 stimulus package (P.L. 111-5) providesprovided up to $7 billion to states as an incentive to make make changes to their unemployment programs. One As of May 5, 2010, $2.8 billion of this fund had been distributed to states. One-third of a state’s share of this amount would be contingent on state law allowing use of a base period that includes the most recently completed calendar quarter before the start of the benefit year for the purpose of determining UC eligibility. The remaining two-thirds of a state’s share of the $7 billion would be contingent on qualifying for the first 1/3onethird payment (by adopting an alternative base period definition), plus adopting two of four additional provisions (described on page 5in section “2009 Stimulus Provisions Relating to Regular Unemployment Compensation” below).4 Qualifying Wages or Employment All states require a worker to have earned a certain amount of wages or to have worked for a certain period of time (or both) within the base period to be monetarily eligible to receive any UC benefits. The methods that states use to determine monetary eligibility vary greatly. Multiple of High-Quarter Wages. Under this method, workers must earn a certain dollar amount in the quarter with the highest earnings of their base period. Workers must also earn total baseperiod wages that are a multiple—typically 1.5—of the high-quarter wages. For example, if a worker earns $5,000 in the high quarter, the worker must earn at least another $2,500 in the rest of the base period. States require earnings in more than one quarter to minimize the likelihood that workers with high earnings in only one quarter receive benefits. Although the worker might be monetarily eligible through the earnings accrued in one quarter, these “multiple of high quarter wages” states do not deem those workers to be substantially attached to the labor market. Multiple of Weekly Benefit Amount. Under this method, the state first computes the worker’s weekly benefit amount. The worker must have earned a multiple—often 40—of this amount 4 For more information on unemployment modernization provisions in the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), please see CRS Report R40368, Unemployment Insurance Provisions in the American Recovery and Reinvestment Act of 2009, by Alison M. Shelton and Julie M. Whittaker. Congressional Research Service 4 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity during the base period. For example, if a worker’s weekly benefit amount equals $100, then the worker will need base period earnings of 40 times $100, or $4,000, before any UC would be paid. Most states also require wages in at least two quarters. Some states have weighted schedules that require varying multiples for varying weekly benefits. Flat Qualifying Amount. States using this method require a certain dollar amount of total wages to be earned during the base period. This method is used by most states with an annual-wage requirement for determining the weekly benefit and by some states with a high-quarter wage/weekly benefit requirement. Weeks/Hours of Employment. Under this method, the worker must have worked a certain number of weeks/hours at a certain weekly/hourly wage. 4 For more information on unemployment modernization provisions in the American Recovery and Reinvestment Act of 2009, please see P.L. 111-5 CRS Report R40368, Unemployment Insurance Provisions in the American Recovery and Reinvestment Act of 2009, by Alison M. Shelton, Kathleen Romig, and Julie M. Whittaker. Congressional Research Service 4 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity 2009 Stimulus Provisions Relating to Regular Unemployment Compensation The American Recovery and Reinvestment Act of 2009 (P.L. 111-5, the 2009 stimulus package) , as amended, provides for a supplementary benefit payment of $25 per week for unemployment compensation compensation programs (regular UC, EB, EUC, TAA and DUA) through December 2009. The supplemental June 2, 2010. The supplemental $25 weekly benefit will be grandfathered for individuals who have not exhausted regular compensation as of January 1 benefits as of June 2, 2010, although no supplementary compensation will beis payable for any week beginning after June 30October 5, 2010. States will not be allowed to alter the method of computing computing unemployment compensation in such a manner that the weekly benefit amount would be less than the benefit amount that would have been payable under state law as of December 31, 2008. The $25 weekly additional benefit will beis financed by the federal government through general revenues. The stimulus package also providesprovided up to $7 billion to states as an incentive to make changes to their unemployment programs. One -third of this amount will be contingent on states allowing use of a base period that includes the most recently completed calendar quarter before the start of the benefit year for the purpose of determining UC eligibility. The remaining two -thirds of a state’s share of the $7 billion will be contingent on the state qualifying for the first 1/3 payment, and one-third payment, and state law containing at least two of four additional provisions. These additional provisions include: 1. making unemployment compensation available to workers seeking part-time work; 2. making unemployment compensation available to individuals who quit their jobs voluntarily for compelling family reasons (domestic violence, illness or disability of an immediate family member, spouse relocating for a new job); 3. providing at least 26 additional weeks of unemployment benefits to workers who have exhausted all rights to regular benefits but are enrolled and making satisfactory progress in a state-approved training program or in a job training program authorized under the Workforce investment Act of 1998; and 4. providing dependents’ allowances to all individuals with a dependent at a level equal to at least $15 per dependent per week. Congressional Research Service 5 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Data Collection Considerations The wide variation seen in state UC program laws and regulations also exists among the states’ data collections. All states collect information on earnings by quarter for each worker. A handful of states collect information on the number of weeks worked during the base period. Even fewer states collect information on the numbers of hours worked during a quarter. As a result, most states use information on quarters worked, quarterly earnings, and cumulative earnings in determining eligibility and the amount of benefit.5 It does not appear that any state measures both hours of work and weeks of work in the base period. 5 In the 2008 Comparison of State Unemployment Insurance Laws the following states used the measure of “weeks” in determination of eligibility or benefit amount: New Jersey, Ohio, and Pennsylvania. Only Washington appears to use the number of hours worked in eligibility or benefit determination. Congressional Research Service 5 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity UC Benefit Determination and DurationDetermination and Duration of Regular Unemployment Compensation Generally, benefits are based on wages for covered work over a 12-month period (the “base period” or “alternative base period,” described above). Most state . Most state benefit formulas replace half of a claimant’s average weekly wage up to a weekly maximum. All states disregard some earnings during unemployment as an incentive to take short-term or parttimepart-time work while searching for a permanent position. Generally, the worker’s UIUC payment equals the difference between the weekly benefit amount and earnings. Table 1 lists the minimum and maximum UC benefits for each state. 6 Weekly maximums in January 20092010 ranged from $230235 (Mississippi) to $628629 (Massachusetts) and, in states that provide dependents’ allowances, up to $942943 (Massachusetts). In December 2008March 2010, the average weekly benefit was $297. Benefits benefit was $310 (and this amount is supplemented by the $25 weekly FAC program payment). Benefits are available for up to 26 weeks (28 weeks in Montana and 30 weeks in Massachusetts). The average regular UC benefit duration in December 20082009 was 15 weeks. 6 In December 2008, 19 weeks. In April 2010, approximately 5.10 million unemployed workers received regular state UC benefits in a given week. Table 1. State Unemployment Compensation Benefits Amounts, January 20092010 (in dollars) Minimum Weekly UC Weekly UC Benefit Amount Minimum If Dependents’ Allowancea Maximum Weekly UC Benefit Amountb Maximum If Dependents’ Allowancea Weekly UC Benefit Amountb Alabama 45 Alaska 56 255 Arizona 60 240 Arkansas 77 431 California 40 450 Colorado 25 431 475 Connecticut 15 519 594 128 30 370 Delaware 20 District of Columbia 50 Florida 32 275 Georgia 44 330 Hawaii 5 545 Idaho 65 Illinois 51 Indiana 50 Iowa 53 442 330 359 362 57 385 534 390 65 361 443 6 The permanent federal-state extended benefits (EB) program offers benefits for an additional 13 to 20 weeks in states with unemployment rates above certain levels. The temporary, federally-financed EUC08 program offers a first tier of benefits to all workers for up to an additional 20 weeks, and a second tier of benefits for up to an additional 13 weeks (for a total of up to 33 weeks of EUC08 benefits) for workers in states with certain economic conditions. The EB and EUC08 programs are discussed later in this report. Congressional Research Service 6 Arizona 60 240 Arkansas 79 441 Maximum If Dependents’ Allowancea 265 128 370 442 5 In the 2010 Comparison of State Unemployment Insurance Laws the following states used the measure of “weeks” in determination of eligibility or benefit amount: New Jersey, Ohio, and Pennsylvania. Only Washington appears to use the number of hours worked in eligibility or benefit determination. 6 The temporary, federally financed EUC08 program offers up to 53 additional weeks of unemployment benefits for workers in states with certain economic conditions. The permanent federal-state EB program offers benefits for an additional 13 to 20 weeks in states with unemployment rates above certain levels. The EB and EUC08 programs are discussed later in this report. Congressional Research Service 6 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Minimum Weekly UC Weekly UC Benefit Amount Minimum If Dependents’ Allowancea Maximum Weekly UC Benefit Amountb Kansas 105 423 Kentucky 39 415 Louisiana 10 284 Maine 60 90 344 Maryland 25 65 380 Massachusetts 34 51 628 Michigan 117 147 362 Maximum If Dependents’ Allowancea 516 942 Minnesota 38 351 Mississippi 30 230 Missouri 35 320 Montana 120 407 Nebraska 30 308 Nevada 16 393 New Hampshire 32 New Jersey 85 97 584 New Mexico 67 100 359 New York 64 405 North Carolina 42 494 North Dakota 43 406 Ohio 105 372 Oklahoma 16 409 Oregon 113 482 Pennsylvania 35 43 558 566 Rhode Island 68 118 528 660 South Carolina 20 326 South Dakota 28 298 427 Tennessee 30 275 Texas 58 392 Utah 28 444 Vermont 64 425 Virginia 54 378 Washington 129 541 West Virginia 24 424 Wisconsin 54 363 Wyoming 30 415 Congressional Research Service 566 459 503 7 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Weekly UC Benefit Amountb Maximum If Dependents’ Allowancea California 40 450 Colorado 25 443 487 Connecticut 15 537 612 30 Delaware 20 330 District of Columbia 50 359 Florida 32 275 Georgia 44 330 Hawaii 5 559 Idaho 72 334 Illinois 51 Indiana 50 Iowa 56 Kansas 109 436 Kentucky 39 415 Louisiana 10 247 Maine 62 93 356 Maryland 25 65 410 77 385 531 390 67 374 459 534 Massachusetts 33 49 629 Michigan 117 147 362 Minnesota 38 377 Mississippi 30 235 Missouri 35 320 Montana 125 422 Nebraska 30 318 Nevada 16 400 New Hampshire 32 427 New Jersey 87 100 600 New Mexico 71 106.50 426 New York 64 405 North Carolina 43 505 North Dakota 43 431 Ohio 106 375 Oklahoma 16 430 Oregon 115 493 Pennsylvania 35 43 564 572 Rhode Island 68 118 546 682 South Carolina 20 326 South Dakota 28 309 Congressional Research Service 943 585 526 503 7 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Minimum Weekly UC Benefit Amount Minimum If Dependents’ Allowancea Maximum Weekly UC Benefit Amountb Tennessee 30 275 Texas 59 406 Utah 29 451 Vermont 64 425 Virginia 54 378 Washington 133 560 West Virginia 24 424 Wisconsin 54 363 Wyoming 31 438 Maximum If Dependents’ Allowancea Source: Congressional Research Service (CRS) table compiled from Significant Provisions of State Unemployment Insurance Laws, January 20092010, U.S. Department of Labor, Employment and Training Administration, at http://www.owsworkforcesecurity.doleta.gov/unemploy/content/sigpros/2000-present/January20092010-2019/January2010.pdf. a. The figures for minimum and maximum benefits include dependents’ allowances for the maximum number of dependents. b. If a state has dependents’ allowances and only one amount is given, the maximum is the same with or without the allowance. UC Benefit Financing: Unemployment Taxes on Employers UC benefits are financed through employer taxes.7 The federal taxes on employers are under the authority of the Federal Unemployment Tax Act (FUTA), and the state taxes are under the authority given by the State Unemployment Tax Acts (SUTA). These taxes are deposited in the appropriate accounts within the Unemployment Trust Fund (UTF). Federal Unemployment Tax Act If a state UC program complies with all federal rules, the net FUTA tax rate for employers is 0.8% (the 6.2% FUTA tax rate less the full 5.4% federal tax credit) on the first $7,000 of each worker’s earnings. (Most recently, because New York had unpaid loan balances, the New York employers’ rate was higher for 2004 and 2005.) The 0.8% FUTA tax funds both federal and state administrative costs as well as the federal share of the EB program, loans to insolvent state UC accounts, and state employment services. Federal law defines which jobs a state UC program must cover for the state’s employers to avoid paying the maximum FUTA tax rate (6.2%) on the first $7,000 of each employee’s annual pay. The net FUTA tax rate on employers in states with UC programs that are in compliance with all federal rules is 0.8% on the first $7,000 of each worker’s earnings. The FUTA tax rate for employers is 6.2% on the first $7,000 of each worker’s earnings, but a 5.4% credit against the federal FUTA tax is available to employers in states with complying UC programs, bringing the net FUTA tax down to 0.8%. (In tax year 2009, Michigan employers were required to pay a net FUTA tax of 1.1% because of outstanding federal loans to their state’s UTF account.) The 0.8% FUTA tax funds both federal and state administrative costs as well as the federal share of the EB program, loans to insolvent state UC accounts, and state employment services. Federal law defines which jobs a state UC program must cover, provides rules concerning state borrowing from the UTF, and provides broad guidelines concerning benefit eligibility, in order for the state’s employers to avoid paying the maximum FUTA tax rate (6.2%) on the first $7,000 of each employee’s annual pay. 7 For a more detailed description of UC financing, see CRS Report RS22077, Unemployment Compensation (UC) and the Unemployment Trust Fund (UTF): Funding UC Benefits, by Julie M. Whittaker. Congressional Research Service 8 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Federal law requires that a state must cover jobs in firms that pay at least $1,500 in wages during any calendar quarter or employ at least one worker in each of 20 weeks in the current or prior year. The FUTA tax is not paid by government or nonprofit employers, but state programs must cover government workers and all workers in nonprofits that employ at least four workers in each of 20 weeks in the current or prior year. (States are reimbursed for expenditures related to federal workers by the federal government.) An estimated $7.38 Approximately $6.7 billion in FUTA taxes were collected in FY2008. After the payments to the state accounts for administrative expenses, the expected net balance in the UTF of the FY2009. The net balance in the federal accounts of the UTF (the Employment Security Administration Account, the Extended Unemployment Compensation Account (for the EB and EUC08 programs), and the Federal Unemployment Account (for federal loans to the states) was $36.0 billion at the end of September 2008. Expiring Provision: P.L. 110-343. At the end of CY2009, the effective FUTA tax on employers for each employee will decrease to 0.6% (down from 0.8%) on the first $7,000 of wages. 7 For a more detailed description of UC financing, see CRS Report RS22077, Unemployment Compensation (UC) and the Unemployment Trust Fund (UTF): Funding UC Benefits, by Julie M. Whittaker and Kathleen Romig. Congressional Research Service 8 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity ARRA Temporary Changes Federal Financing of Unemployment Benefits The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) made several important, albeit temporary, changes to the federal role in financing unemployment benefit programs. Under ARRA, the federal government will use UTF monies to finance 100% of EB payments through 2009 (under permanent law EB payments are financed 50% by the federal government and 50% by states). The federal government will use UTF funds to finance a $500 million transfer to states for administering unemployment programs, and also for the $7 billion in incentive monies to states for undertaking modernization of their unemployment programs. ARRA also changes the financing of the EUC08 program, which from its implementation in July 2008 had been financed from the UTF, but starting with enactment of ARRA (on February 17, 2009) will be financed from general revenues of the Treasury through expiration of the EUC08 program on December 26, 2009. States will still finance regular unemployment compensation (UC) loans to the states) on February 1, 2010, was approximately $6.0 billion. This figure includes $28 billion in general revenue advances to the UTF as of February 1, 2010, “incentive monies” for states to modernize their UC programs under the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), and is net of payments to state accounts for administrative expenses and UTF lending to state accounts for the payment of UC benefits. Congress first passed a temporary FUTA surtax in 1976, and since 1983 the surtax has been applied in its current form (0.2% on the first $7,000 of employee wages). P.L. 111-92 extended the authorization of the FUTA surtax through June 2011. ARRA Temporary Changes Federal Financing of Unemployment Benefits ARRA (P.L. 111-5) made several important, albeit temporary, changes to the federal role in financing unemployment benefit programs. Under ARRA (as amended), the federal government temporarily uses UTF monies to finance 100% of EB payments through June 2, 2010 (under permanent law EB payments are financed 50% by the federal government and 50% by states). The federal government also used UTF funds to finance a $500 million transfer to states for administering unemployment programs, and uses UTF funds for the $7 billion in incentive monies to states for undertaking modernization of their unemployment programs. ARRA also changed the financing of the EUC08 program, which from its implementation in July 2008 had been financed from the UTF, but starting with enactment of ARRA (on February 17, 2009) has been financed from general revenues of the Treasury. States continue to finance regular UC through SUTA revenues. State Unemployment Tax Acts States levy their own payroll taxes (SUTA taxes) on employers to fund regular UC benefits and the state share of the EB program. The state unemployment tax rate on an employer is “experience rated” in all states, that is, the SUTA rate is based on the amount of UC paid to former employees. Generally, the more UC benefits paid to its former employees, the higher the tax rate of the employer, up to a maximum established by state law. The experience rating is intended to ensure an equitable distribution of UC program taxes among employers and to encourage a stable workforce. State ceilings on taxable wages in January 20092010 ranged from the $7,000 FUTA federal ceiling (eight states) to $35,700 (Washington38,900 (Hawaii). The minimum SUTA rates ranged from 0% (eight states) to 1.84% (Pennsylvania) in January 2009. Maximum SUTA rates ranged from 5.4% (15 states) to 10.96% (Massachusetts) in January 2009. Approximately $32.2 billion in SUTA taxes were collected in FY2008 ranged 8 Employers who are required to provide unemployment insurance coverage, but who are not required to pay the FUTA tax, generally reimburse state governments for the benefit payments related to their workers. States are reimbursed for expenditures related to federal workers by the federal government. Congressional Research Service 9 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity from 0% (11 states) to 1.84% (Pennsylvania) in January 2010. Maximum SUTA rates ranged from 5.4% (15 states) to 13.16% (Pennsylvania) in January 2010. Approximately $31.1 billion in SUTA taxes were collected in FY2009. State UC revenue is deposited in the U.S. Treasury. These deposits are counted as federal revenue in the budget. State accounts within the UTF are credited for this revenue. The U.S. Treasury reimburses states from the appropriate UTF state accounts for their benefit payments. These payments do not require an annual appropriation, but the reimbursements do count as federal budget outlays. Table 2. State Unemployment Taxes: Taxable Wage Base and Rates, January 20092010 Wages Subject to Tax ($) Minimum State Unemployment Tax (%)a Maximum State Unemployment Tax (%)a Alabama 8,000 0.44 6.04 Alaska 32,70034,100 1.00 5.40 Arizona 7,000 0.02 5.40 Arkansas 1012,000 0.8090 6.7080 California 7,000 1.50 6.20 Colorado 10,000 0.00 5.40 Connecticut 15,000 1.20 6.10 State Alabama Congressional Research Service 9 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Wages Subject to Tax ($) Minimum State Unemployment Tax (%)a Maximum State Unemployment Tax (%)a90 6.80 Delaware 10,500 0.10 8.00 DC 9,000 1.5030 6.8060 Florida 7,000 0.1012 5.40 Georgia 8,500 0.03 5.40 Hawaii 13,00038,800 0.00 5.40 Idaho 3233,200 0.2645 5.40 Illinois 12,300 0.80 7.20 Indiana 7,000520 0.60 6.80 Indiana 9,500 1.10 5.60 23,700Iowa 24,500 0.00 8.00 Kansas 8,000 0.00 7.40 Kentucky 8,000 0.60 9.751.00 10.00 Louisiana 7,000700 0.10 6.20 Maine 12,000 0.4244 5.40 Maryland 8,500 0.60 9.00 Massachusetts 14,000 1.26 12.27 Michigan 9,000 0.608,500 0.30 7.50 14,000 1.12 10.96 9,000 0.06 10.30 Minnesota 2627,000 0.56 10.70 Mississippi 7,000 0.70 5.40 Missouri 12,50013,000 0.00 9.1075 Montana 25,100 0.13 6.50 Nebraska 9,000 0.24 5.40 26,600 0.25 5.40 8,000 0.10 6.50 New Jersey 28,900 0.30 5.40 New Mexico 20,900 0.03 5.40 8,500 0.50 8.50 North Carolina 19,300 0.00 6.84 North Dakota 23,700 0.20 9.86 9,000 0.50 9.20 Oklahoma 14,200 0.10 5.50 Oregon 31,300 0.70 5.40 Pennsylvania 8,000 1.84 9.98 Rhode Island 18,000 1.69 8.59 South Carolina 7,000 1.24 6.10 South Dakota 9,500 0.00 8.50 Tennessee 7,000 0.40 10.00 State Delaware Iowa Maine Maryland Massachusetts Michigan Nevada New Hampshire New York Ohio Congressional Research Service 10 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity State Wages Subject to Tax ($) Minimum State Unemployment Tax (%)a Maximum State Unemployment Tax (%)a Texas 9,000 0.22 6.22 Utah 27,800 0.10 9.10 Vermont 8,000 0.80 6.50 Virginia 8,000 0.12 6.22 35,700 0.00 5.40 8,000 1.50 7.50 Wisconsin 12,000 0.05 9.80 Wyoming 21,500 0.27 9.03 Washington West Virginia26,000 0.00 6.12 State Congressional Research Service 10 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Wages Subject to Tax ($) Minimum State Unemployment Tax (%)a Maximum State Unemployment Tax (%)a Nebraska 9,000 0.00 5.40 Nevada 27,000 0.25 5.40 New Hampshire 10,000 0.10 6.50 New Jersey 29,700 0.30 5.40 New Mexico 20,800 0.03 5.40 New York 8,500 0.70 8.70 North Carolina 19,700 0.00 6.84 North Dakota 24,700 0.20 9.86 Ohio 9,000 0.30 9.00 Oklahoma 14,900 0.10 5.50 Oregon 32,100 0.90 5.40 Pennsylvania 8,000 1.84 13.16 Rhode Island 19,000 1.69 9.79 South Carolina 7,000 1.14 6.00 South Dakota 10,000 0.00 8.50 Tennessee 9,000 0.50 10.00 Texas 9,000 0.26 6.26 Utah 28,300 0.20 9.20 Vermont 10,000 0.80 6.50 Virginia 8,000 0.18 6.28 Washington 36,800 0.00 5.40 West Virginia 12,000 1.50 7.50 Wisconsin 12,000 0.00 8.50 Wyoming 22,800 0.30 9.10 State Source: CRS table compiled from Significant Provisions of State Unemployment Insurance Laws, January 20092010, U.S. Department of Labor, Employment and Training Administration, at http://www.owsworkforcesecurity.doleta.gov/ unemploy/content/sigpros/2010-2019/January2010unemploy/ contentsigpros/2000-present/January2009.pdf. a. Tax rates apply only to experience-rated employers; states apply different rates to new employers. Generally, during economic expansions, FUTA and SUTA revenue collections will exceed UC outlays. During economic recessions, revenues generally will be less than UC outlays. For example, UTF outlays significantly exceeded trust fund revenue in FY2001-FY2004, and again starting in FY2008. From . From FY2005 to FY2007, UC revenue exceeded total UC outlays. Table 3 lists the total revenue and outlays associated with the UC program from FY2001 through FY2009 FY2010 (estimated). Congressional Research Service 11 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Table 3. Revenue and Spending Associated With Unemployment Compensation, FY2001-FY2009FY2010 (in billions of dollars) 2001 2002 2003 2004 2005 2006 2007 2008a 2009a2008 2009 2010a 27.8 27.5 33.2 39.3 41.8 43.0 41.2 4139.4 4437.8 51.3 6.9 6.6 6.5 6.6 6.7 7.1 7.3 7.3 6.22 6.7 6.8 20.8 20.9 26.7 32.7 35.1 35.9 33.7 34.1 38.132.2 31.1 44.5 31 53.8 57.4 40.9 35.0 34.3 34.7 44.2 52.341.7 117.2 27.3 42 42 36.9 31.2 30.2 31.4 38.4 44.71 75.3 84.1 b 0.16 0.32 0.16 0.00 0.20 0.00 b 0.160.02 4.1 17.8 Emergency UC — 7.9 11 4.1 — — — 4.4 5.83.6 32.7 43.6 Federal Additional Compensation — — — — — — — — 6.5 9.6 Administrative Costs 3.6 3.7 4.1 3.9 3.8 3.9 3.7 3.9 34.3 5.9 UC revenue, total FUTA tax State UC taxes UC outlays, total Regular benefits Extended benefits 155.1 Source: U.S. Department of Labor, UI Outlook, January 2001-March 2009February 2010, and updates. a. Estimated for 2008 and 2009. b. Less than $5 million. Congressional Research Service 11 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity2010. Estimates assumed authorization for EUC08, EB, 100% federal EB financing, and FAC expired at the end of February. b. Less than $5 million. Outstanding Loans from the Federal Unemployment Account (FUA) If a state trust fund account becomes insolvent, a state may borrow federal funds.8 The Department of Labor9 DOL maintains a list of all states with loans and includes the loan amounts.9 10 States are charged interest on loans that are not repaid by the end of the fiscal year in which they were obtained. The American Recovery and Reinvestment Act of 2009 (P.L. 111-5, the 2009 stimulus package) temporarily waives interest payments, and no interest will accrue, on interest payments that come due from the time the stimulus package was enacted (February 17, 2009) until December 31, 2010. Although states will not need to pay interest during this period, they must still repay the principal on the underlying loans. If a state does not pay back loaned funds within the prescribed amount of time or make good progress as determined by the U.S. Secretary of Labor, the state unemployment tax credit will be reduced. Extended Benefit (EB) Program The Extended Benefit program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA), P.L. 91-373 (26 U.S.C. 3304, note). EUCA may extend receipt of unemployment benefits (extended benefits) at the state level if certain economic situations exist within the state. The EB program is triggered when a state’s insured unemployment rate (IUR)10 or total unemployment rate (TUR)11 reaches certain levels. All states must pay up to 13 weeks of EB if the IUR for the previous 13 weeks is at least 5% and is 120% of the average of the rates for the same 13-week period in each of the two previous years. There are two other optional thresholds that states may choose. (States may chose one, two, or none.) If the state has chosen a given option, they would provide the following: • Option 1: an additional 13 weeks of benefits if the state’s IUR is at least 6%, regardless of previous years’ averages. • Option 2: an additional 13 weeks of benefits if the state’s TUR is at least 6.5% and is at least 110% of the state’s average TUR for the same 13 weeks in either of the previous two years; an additional 20 weeks of benefits if the TUR is at least 8 For detailed information on loans to the states within the UTF, see CRS Report RS22954, The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States, by Kathleen Romig and Julie M. Whittaker. 9 See http://www.workforcesecurity.doleta.gov/unemploy/budget.asp#tfloans. 10 The IUR is the ratio of UC claimants divided by individuals in UC-covered jobs. The IUR is substantially different than the TUR because it excludes several important groups: self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several other, primarily seasonal, categories of workers. In addition to those unemployed workers whose last jobs were in the excluded employment, the insured unemployed rate excludes the following: those who have exhausted their UC benefits (even if they receive EB or EUC08 benefits); new entrants or reentrants to the labor force; disqualified workers whose unemployment is considered to have resulted from their own actions rather than from economic conditions; and, eligible unemployed persons who do not file for benefits. 11 The TUR is the ratio of unemployed workers to all workers (employed and unemployed) in the labor market. The TUR is essentially a weekly version of the unemployment rate published by the Bureau of Labor Statistics and based on data from the BLS’ monthly Current Population Survey. Congressional Research Service 12 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity 8% and is at least 110% of the state’s average TUR for the same 13 weeks in either of the previous two years. Each state’s IUR and TUR are determined by the state of residence (agent state) of the unemployed worker rather than by the state of employment (liable state). EB benefits are not “grandfathered” when a state triggers “off” the program; that is, EB benefit payments in the state cease immediately. EB Triggers May be Reviewed in 2010 The President’s 2010 budget outline suggested the EB program be modified in order to make the UC system more responsive to changing economic conditions. The current EB triggers have been criticized for deploying in many states long after a recession has started, for not deploying at all in some states with high unemployment, and for triggering off too quickly in some states. Analysts cite several reasons for this: (a) a secular decline in unemployment rates has made the current triggers irrelevant; (b) the rate and lookback provisions work against each other; and (c) amendments to the program in the early 1980s changed the IUR calculation in a way that made EB activation less likely.12 At the same time, analysts and legislators have also questioned the use of emergency extended programs (such as EUC08) because these temporary programs can be subject to delays related to the recognition of a recession and legislative activity. As a result, there is interest in modifying the EB program, and especially the EB triggers, so that the EB program can deliver timely and welltargeted benefits. Some of the issues concerning the EB trigger include national- versus state-level triggers, use of the IUR versus the TUR, and the use of lookbacks that compare current unemployment with conditions one and two years earlier. The EB trigger is composed of two components, a level and a lookback. (The EUC08 trigger also consists of these two components). The EB is said to be triggered “on” in a state when both components have met or exceeded the thresholds. The level component of a trigger is a threshold rate, such as the IUR or the TUR. The lookback component compares the current period’s level (rate) to the level in the same period in some reference time such as the previous two years. A national trigger may seem appropriate since the definition of a recession is that it is national in scope, and the federal government’s interest in reversing an economic decline is national as well. On the other hand, recessions have often been primarily regional in impact, with the result that a national trigger could cause extended benefits to be paid to individuals in states that do not face unusually weak labor markets. Regional or sub-regional triggers have also been suggested as a means to improve the targeting of benefits, because labor markets can span state boundaries or be confined to rural or urban areas within a state (especially where a single industry is involved). It would be very difficult, however, to define appropriate regional or sub-state boundaries. There is also concern about data accuracy and availability at regional or sub-state levels. With the EUC08 program, Congress opted for a combination of national- and state-level triggers: EUC08 tier I 12 The Omnibus Budget Reconciliation Act of 1981 redefined the IUR to remove UC exhaustees and EB beneficiaries from the numerator. The Act also eliminated the national IUR trigger, and raised the states’ trigger to 5%. Congressional Research Service 13 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity provides benefits to all unemployed workers, and EUC08 tier II provides additional weeks of benefits to unemployed workers in states that face high unemployment. The IUR and the TUR have been used as triggers for the EB and EUC08 programs, and each has merits as well as drawbacks. The calculation of the IUR is the ratio of the number of people claiming regular UC benefits to the number of insured workers. The IUR is arguably the more accurate indication of actual demand for EB. The IUR’s numerator can change with noneconomic factors such as state eligibility rules and administrative practices, however, and this in turn can affect whether the EB triggers on in a particular state. The TUR is defined as the number of all unemployed individuals divided by the size of the civilian labor force (employed and unemployed). The TUR represents a larger population because it includes uninsured workers (such as the self-employed) and because it includes all unemployed workers, including those who failed to qualify for regular UC benefits or who have exhausted regular UC. Recent studies have found that whether an IUR or TUR trigger is used, the secular decline in unemployment over the past several decades means that the current trigger levels are too high. Lookbacks (e.g. the EB requirement that the IUR requirement be at least 120% of the average of the rates for the same 13-week period in the each of the previous two years) are useful for measuring changes in unemployment relative to a baseline, but have also been controversial. The EB lookback has been criticized for forcing the trigger off too quickly, before the end of a recession. This can occur, for example, when high unemployment rates reach a—still high— plateau and the rate change from the reference period falls below 20% (in the case of a lookback requirement of 120%). Some analysts have proposed that the trigger not include a lookback; others have suggested that the trigger refer to a fixed point in time at some date before the declaration of a recession. The Advisory Council on Unemployment Compensation recommended in 1994 that the EB program use a state TUR of 6.5%, and that the EB program not use a lookback. Other potential EB triggers could include the increase in the number of unemployed over a period such as the previous year; the increase the number of long-term unemployed (unemployed for over 26 weeks); or changes in the number of UC exhaustees. Although the UC exhaustion rate is intuitively appealing, potential problems with this trigger include inaccurate data and a built-in delay of up to 26 weeks until benefit exhaustion that could prevent timely launch of the EB program. It would be important in any reform to build in a mechanism for reviewing and updating EB triggers. EB Eligibility Requirements Beyond Requirements for Regular UC The EB program imposes additional federal restrictions on individual eligibility for benefits beyond the state requirements for regular UC. The EB program requires that a worker make a “systematic and sustained” work search. Furthermore, the worker may not receive benefits if he or she refused an offer of “suitable” work, which is defined as “any work within such individual’s capabilities”. In addition, P.L. 97-35, among other items, amended the EUCA to require that claimants work at least 20 weeks of full-time insured employment or equivalent in insured wages during their base period. Congressional Research Service 14 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity The 2009 stimulus package affects a further requirement for EB eligibility. As the EB program has operated in the past, a beneficiary had to be within their original “benefit year”13 when the EB program triggered “on” in their state in order to receive EB benefits. Thus, on the condition that the state triggered “on” during an individual’s benefit year, he or she could receive EB benefits during the benefit year, or even after the benefit year expired, i.e. at the time he or she exhausted regular unemployment compensation or EUC08 benefits even if this occurred after the expiration of the benefit year. However, if the state’s most recent EB period triggered on after the individual’s benefit year ended, the beneficiary would not receive EB. As a result, in states that have recently triggered “on” to EB because of rising unemployment rates, many individuals may be ineligible for EB benefits. For example, if an individual’s benefit year expired in July 2008, this person would be ineligible for EB benefits if his or her state triggered “on” for EB in November 2008. Under the 2009 stimulus package, however, states have the option of ignoring the benefit year requirement and instead using EUC08 exhaustion as an eligibility requirement, as long as the state’s EB period falls between enactment of the stimulus package and December 2009. This has the effect of allowing more individuals to be eligible for the EB program. In addition, states can opt to grandfather those who exhaust their EUC08 benefits after December 31, 2009.14 As described below, the EUC08 program contains a “reachback” clause under which EUC08 benefits were made available to individuals who had exhausted regular UC benefits with respect to a benefit year that expired during or after the week of May 6, 2007. Before the stimulus package, many individuals who had exhausted EUC08 benefits would have been ineligible for EB benefits if the state triggered “on” for EB after their benefit year expired. Under the stimulus package, however, all individuals who have exhausted EUC08 benefits would be eligible for EB benefits, regardless of the timing of their benefit years. Methods for Determining 20 Weeks of Full-Time Insured Employment States use one, two, or three different methods for determining an “equivalent” to 20 weeks of full-time insured employment. These methods are described in both law (Section 202(a)(5) of the EUCA) and regulation (20 CFR 615.4(b)). In practice, states that require any of these three methods for receipt of regular UC benefits and do not allow for exceptions to those requirements do not need to establish that the worker meets the 20 weeks full-time insured employment.15 The three methods are listed below. • earnings in the base period equal to at least 1.5 times the high-quarter wages; or 13 The benefit year is a one-year period during which a worker may receive benefits based on a previous period of unemployment. In all states, the beginning date of the benefit year depends on when a worker first files a valid claim, meaning the worker meets minimal wage and employment requirements. 14 States would once again be responsible for 50% of the cost of new entrants to the EB benefit program after December 2009, however, as 100% federal financing of the EB plan ends in December, 2009. The federal government would continue to pay 100% of EB benefits for individuals who were receiving EB during the last week of 2009, for the duration of their EB receipt. 15 According to the 2008 Comparison of State Unemployment Insurance Laws the following states require at least one of the “20 weeks” requirements for regular UC benefits: Alabama, Colorado, Connecticut, Florida, Georgia, Kentucky, Louisiana, Michigan, Mississippi, Missouri, New York, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, and Utah. Congressional Research Service 15 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Emergency Unemployment Compensation Program On June 30, 2008, the President signed the Supplemental Appropriations Act of 2008 (P.L. 110252) into law. Title IV of this act created a new temporary unemployment insurance program, the EUC08 program. This is the eighth time Congress has created a federal temporary program that has extended unemployment compensation during an economic slowdown. Until February 16, 9 For detailed information on loans to the states within the UTF, see CRS Report RS22954, The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States, by Julie M. Whittaker. 10 See http://www.workforcesecurity.doleta.gov/unemploy/budget.asp#tfloans. Congressional Research Service 12 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity 2009, the EUC08 program was financed with funds within the UTF. However, with the passage of P.L. 111-5, the EUC08 benefit is now 100% federally funded from general funds within the U.S. Treasury. State UC agencies will administer the EUC08 benefit along with regular UC benefits. On November 21, 2008, the President signed P.L. 110-449, the Unemployment Compensation Extension Act of 2008, into law. P.L. 110-449 expanded the potential duration of the EUC08 benefit from up to 13 weeks of EUC08 to a maximum of 20 weeks. It also created a second tier of benefits for workers in states with high unemployment of up to a maximum of an additional 13 weeks of tier II EUC08 benefits (for up to a cumulative 33 weeks of EUC08 benefits). On February 27, 2009, the President signed the 2009 stimulus package, P.L. 111-5, known as the American Economic Recovery and Reinvestment Act, or ARRA. ARRA authorized the EUC08 program through December 2009. The 2009 stimulus package also contained temporary provisions for 100% federal financing of the EB program and to create an additional $25 weekly benefit for those receiving regular UC, EUC08, or EB. EUC08 benefits have been financed from the EUCA in the UTF. Starting from enactment of the 2009 stimulus package, however, EUC08 benefits are financed from general revenues through the termination of the EUC08 program. On November 6, 2009, the President signed P.L. 111-92, the Worker, Homeownership, and Business Assistance Act of 2009, into law. P.L. 111-92 expanded benefits available in the EUC08 program. Tier I benefits continue to be up to 20 weeks in duration and tier II benefits are now 14 weeks in duration (compared with 13 previously) and no longer are dependent on a state’s unemployment rate. The new tier III benefit provides up to 13 weeks of EUC08 benefits to those workers in states with an average unemployment rate of 6% or higher. The new tier IV benefit may provide up to an additional six weeks of benefits if the state unemployment rate is at least 8.5%.11 On December 21, 2009, the President signed P.L. 111-118, the Department of Defense Appropriations Act of 2010, into law. P.L. 111-118 extended the EUC08 program, 100% federal financing of the EB program, and the $25 supplemental weekly benefit through February 28, 2010. On March 2, 2010, the President signed P.L. 111-144, the Temporary Extension Act, which extends the EUC08 program, 100% federal financing of the EB program, and the $25 weekly supplemental benefit until April 5, 2010. On April 15, 2010, the President signed P.L. 111-157, the Continuing Extension Act of 2010 into law. P.L. 111-157 extends the availability of EUC08, 100% federal financing of EB, and the $25 FAC benefits, until the week ending on or before June 2, 2010. See Appendix B for a summary of public laws, benefits, effective dates, and financing issues related to the EUC08 program. 11 For details on the EUC08 program, see CRS Report RS22915, Temporary Extension of Unemployment Benefits: Emergency Unemployment Compensation (EUC08), by Katelin P. Isaacs, Julie M. Whittaker, and Alison M. Shelton. Congressional Research Service 13 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Previous Temporary Unemployment Compensation Extensions Previously, Congress acted seven times—in 1958, 1961, 1971, 1974, 1982, 1991, and 2002—to establish similar temporary programs of extended UC benefits. These programs extended the period an individual might claim UC benefits (ranging from an additional 6 to 33 weeks) and had expiration dates.12 Some extensions took into account state economic conditions; many temporary programs considered the state’s total TUR or the state’s IUR or both. EUC08 Benefit Amounts, Tiers and Duration The amount of the EUC08 benefit is the equivalent of the eligible individual’s weekly regular UC benefit and includes any applicable dependents’ allowances. The 2009 stimulus package, as amended, provides a federally financed, supplemental $25 per week benefit for unemployment compensation, including EUC08 tier I-tier IV benefits. Tier I The maximum number of weeks an individual may be eligible for tier I EUC08 benefits is capped at 20 weeks. Some individuals may be eligible for fewer weeks of the tier I EUC08 benefits if their regular UC benefit entitlement was less than 26 weeks. Tier II Once an individual has exhausted tier I benefits, a second tier of EUC08 benefits may be available if the individual remains unemployed and satisfies the EUC08 conditions to entitlement. P.L. 111-92 expanded tier II benefits. They are now 14 weeks in duration (compared with 13 previously) and no longer are dependent on a state’s unemployment rate. Tier III The new tier III benefit provides up to 13 weeks of EUC08 benefits to those workers in states with an average total unemployment rate of 6% or higher or in states with an average insured unemployment rate of 4% or higher. Tier IV The new tier IV benefit may provide up to an additional six weeks of benefits if the state average total unemployment rate is at least 8.5% or in states with an average insured unemployment rate of at least of 6%. 12 For more information on these programs, see CRS Report RL34340, Extending Unemployment Compensation Benefits During Recessions, by Julie M. Whittaker. Congressional Research Service 14 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Terminates June 2, 2010 All tiers of EUC08 benefits are temporary and will expire on June 2, 2010. Those unemployed individuals who had qualified for a tier I, II, III, or IV EUC08 benefit by May 29, 2010,13 are “grandfathered” for their remaining weeks of eligibility for only that specific tier, and would continue to receive payments for the number of weeks they were deemed eligible. However, there will be no new entrants into any tier of the EUC08 program after the week that ends on June 2, 2010. In other words, to be eligible for an EUC08 tier 1 benefit, an individual must exhaust his or her regular UC benefits before or during the week ending May 22,14 so as to enter the first tier of EUC08 benefits during the week ending June 2, 2010, and be grandfathered for tier 1 benefits after June 2, 2010. If an individual is eligible to continue to receive the tier I benefit after May 29, 2010, that individual would not be entitled to tier II benefits once those tier I benefits were exhausted. Similarly, if an individual is eligible to continue to receive the tier II benefit after May 29, 2010, that individual would not be entitled to tier III benefits once those tier II benefits were exhausted. Likewise, if an individual is eligible to continue to receive the tier III benefit after May 29, 2010, that individual would not be entitled to tier IV benefits once those tier III benefits were exhausted. No EUC08 benefits—regardless of tier—are payable for any week after November 6, 2010. Special Case: Exhausted Tier II EUC08 Benefits Before November 8, 2009 If an individual had exhausted the tier II EUC08 benefit before November 23, 2008, the individual may be eligible for up to a total of 14 weeks EUC08 benefits. Administratively this will be two separate entitlements: an individual will potentially be entitled to an additional 1 week of tier II EUC08 benefits and up to 13 weeks of tier III benefits. This is a result of P.L. 11192, which expanded tier II from 13 to 14 weeks and dropped the state unemployment rate requirement. Once the new full entitlement (of up to a total of 14 weeks) of tier II EUC08 benefits has been completed, the individual will then be considered to have exhausted the newly expanded tier II EUC08 benefit. The individual may then be eligible for the additional 13 weeks of tier III benefits. (Thus, generally for individuals who had exhausted EUC08 benefits before November 8, 2009, the new entitlement for H.R. 3548 will be an additional 14 weeks of EUC08 benefits.) P.L. 111-92 allows states to temporarily pay tier III benefits before tier II benefits if that will help the states disburse benefits to individuals faster. No Retroactive Payments for Special Case There is no payment for the weeks of unemployment during the period when the individual had exhausted the earlier EUC08 benefit and November 8, 2009. If that individual continues to be 13 14 May 30, 2010, for New York state. May 23, 2010, for New York state. Congressional Research Service 15 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity unemployed, the individual may be entitled to additional weeks of EUC benefits for the weeks of unemployment that occur on or after November 8, 2009. Tier I EUC08 Eligibility Requirements First Claimed Regular UC Benefits On or After May 7, 2006 Applicants must have been eligible for regular UC benefits and have exhausted their rights to regular UC compensation with respect to a benefit year that expired during or after the week of May 6, 2007.15 For most states, this would apply to individuals who had filed UC claims with an effective date of May 7, 2006 or later. For the state of New York this would apply to original claims filed with an effective date of May 1, 2006 or later. 16 Exhausted Regular UC Benefit The right to regular UC benefits for an individual must be exhausted to be eligible for EUC08 benefits. Although federal laws and regulations provide broad guidelines on regular UC benefit coverage and eligibility determination, the specifics of regular UC benefits are determined by each state. As noted earlier, this results in 53 different programs. 17 In particular, states determine UC benefit eligibility, amount, and duration through state laws and program regulations.18 “20 Weeks” of Full-Time Insured Employment or Equivalent In addition to all state requirements for regular UC eligibility, the EUC08 program requires claimants to have at least 20 weeks of full-time insured employment or the equivalent in insured wages in their base period. The definition of “20 weeks” is discussed in the “Methods for Determining 20 Weeks of Full-Time Insured Employment” section of this report. Tier II EUC08 Eligibility Requirements Exhausted Tier I EUC08 Benefit The right to tier I EUC08 benefits must be exhausted to be eligible for the tier II EUC08 benefits. 15 Arkansas has a unique approach to calculating a benefit year. In Arkansas, the benefit year begins the first day of the quarter in which an individual files a valid UC claim. Thus, it is unlikely that many individuals in Arkansas who filed UC claims before July 2006 would be eligible to receive EUC08 benefits. 16 Note that the effective date is not necessarily the actual date when an individual filed for UC. A claim filed on May 10, 2006, may have had an earlier effective date if a state allows retroactive claims. 17 The 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands provide UC benefits to their workers. 18 Individuals in the Massachusetts and Montana UC programs may have regular UC durations that exceed 26 weeks. Those additional weeks are not used to calculate EUC08 duration. Congressional Research Service 16 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Tier III EUC08 Eligibility Requirements Exhausted Tier II EUC08 Benefit The right to tier II EUC08 benefits must be exhausted to be eligible for the tier III EUC08 benefits. States have the ability to waive this requirement and pay tier III before tier II if doing so would aid in prompt payment of EUC08 benefits. At or After the Period of Tier II EUC08 Exhaustion, the State Must Currently Have At Least 6% Unemployment Rate The individual must have worked in a state with unemployment currently of at least 6% or an IUR of at least 4%. If the state’s unemployment rate meets one of these conditions, a (still) unemployed tier II benefit exhaustee would be eligible for tier III benefits at that time. Each Monday the Department of Labor issues its “Emergency Unemployment Compensation Trigger Notice” at http://www.workforcesecurity.doleta.gov/unemploy/claims_arch.asp. If the status column for tier III within the notice is “on” for a particular state’s row, that state is considered to be high unemployment for the purposes of EUC08 tier III benefits. No Retroactive Payments No retroactive EUC08 payments exist for the period during which the individual had exhausted tier II benefits but the state did not meet the high unemployment criteria. However, once a state reaches the 6.0% level, a still unemployed tier II exhaustee would be able to receive tier III benefits. Tier IV EUC08 Eligibility Requirements Exhausted Tier I, Tier II, and Tier III EUC08 Benefits The right to tier I, tier II, and tier III EUC08 benefits must be exhausted to be eligible for the tier IV EUC08 benefits. At or After the Period of Tier III EUC08 Exhaustion, the State Must Currently Have At Least 8.5% Unemployment Rate The individual must have worked in a state with unemployment currently of at least 8.5% or an IUR of at least 5%. If the state’s unemployment rate meets one of these conditions, a (still) unemployed tier III benefit exhaustee would be eligible for tier IV benefits at that time. Each Monday the Department of Labor issues its “Emergency Unemployment Compensation Trigger Notice” at http://www.workforcesecurity.doleta.gov/unemploy/claims_arch.asp. If the status column for tier IV benefits within the notice is “on” for a particular state’s row, that state is considered to be high unemployment for the purposes of EUC08. Congressional Research Service 17 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity No Retroactive Payments No retroactive EUC08 payments exist for the period during which the individual had exhausted tier IV benefits but the state did not meet the tier IV high unemployment criteria. However, once a state reaches the 8.5% level, a still unemployed tier III exhaustee would be able to receive benefits. EUC08 Financing Until February 16, 2009, the EUC08 program was federally financed from the extended unemployment compensation account (EUCA) within the Unemployment Trust Fund (UTF). With the passage of the 2009 stimulus package (P.L. 111-5), however, EUC08 is now financed from general funds of the U.S. Treasury through the expiration of the EUC08 program. States do not need to repay these funds. EUC08 and EB Interactions The EUC08 program should not be confused with the similarly named EB program (see description below). The EUC08 program is temporary and tiers 1 and 2 of EUC08 apply to all states while tier III and IV of EUC08 apply to states with high and very high unemployment, respectively. The EB program is permanently authorized and applies only to certain states on the basis of state unemployment conditions specified in law. The EUC08 program allows states to determine which benefit, EB or EUC08, is paid first. Most states have opted to pay EUC08 benefits before EB. Alaska has opted to pay EB before EUC08 benefits. An exception to the payment order may be made if an individual claimed EB for at least one week of unemployment after exhausting the first two tiers of EUC08 and prior to the enactment P.L. 111-92, which created new EUC08 tiers III and IV. P.L. 111-92 gives states the option of paying EB to an otherwise eligible individual prior to the payment of any EUC08 benefits that are payable on account of the Worker Assistance Act amendments to the EUC08 program (or vice versa in the case of Alaska). Extended Benefit Program The EB program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA), P.L. 91-373 (26 U.S.C. 3304, note). EUCA may extend receipt of unemployment benefits (extended benefits) at the state level if certain economic situations exist within the state. The EB program is triggered when a state’s IUR19 or TUR20 reaches certain levels. All states must pay up to 13 weeks of EB if the IUR for the previous 13 weeks is at least 5% and is 120% of the 19 The IUR is the ratio of UC claimants divided by individuals in UC-covered jobs. The IUR is substantially different than the TUR because it excludes several important groups: self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several other, primarily seasonal, categories of workers. In addition to those (continued...) Congressional Research Service 18 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity average of the rates for the same 13-week period in each of the two previous years. There are two other optional thresholds that states may choose. (States may choose one, two, or none.) If the state has chosen a given option, they would provide the following: • Option 1: an additional 13 weeks of benefits if the state’s IUR is at least 6%, regardless of previous years’ averages. • Option 2: an additional 13 weeks of benefits if the state’s TUR is at least 6.5% and is at least 110% of the state’s average TUR for the same 13 weeks in either of the previous two years; an additional 20 weeks of benefits if the TUR is at least 8% and is at least 110% of the state’s average TUR for the same 13 weeks in either of the previous two years. Each state’s IUR and TUR are determined by the state of residence (agent state) of the unemployed worker rather than by the state of employment (liable state). EB benefits are not “grandfathered” when a state triggers “off” the program; that is, EB benefit payments in the state cease immediately. EB Triggers May be Reviewed in 2010 The President’s 2010 budget outline suggested the EB program be modified to make the UC system more responsive to changing economic conditions. The current EB triggers have been criticized for deploying in many states long after a recession has started, for not deploying at all in some states with high unemployment, and for triggering off too quickly in some states. Analysts cite several reasons for this: (1) the general long-term decline in unemployment rates has made the current triggers irrelevant; (2) the rate and lookback provisions work against each other; and (3) amendments to the program in the early 1980s changed the IUR calculation in a way that made EB activation less likely. 21 At the same time, analysts and legislators have also questioned the use of emergency extended programs (such as EUC08) because these temporary programs can be subject to delays related to the recognition of a recession and legislative activity. As a result, there is interest in modifying the EB program, and especially the EB triggers, so that the EB program can deliver timely and welltargeted benefits. Some of the issues concerning the EB trigger include national- versus state-level triggers, use of the IUR versus the TUR, and the use of lookbacks that compare current unemployment with conditions one and two years earlier. (...continued) unemployed workers whose last jobs were in the excluded employment, the insured unemployed rate excludes the following: those who have exhausted their UC benefits (even if they receive EB or EUC08 benefits); new entrants or reentrants to the labor force; disqualified workers whose unemployment is considered to have resulted from their own actions rather than from economic conditions; and, eligible unemployed persons who do not file for benefits. 20 The TUR is the ratio of unemployed workers to all workers (employed and unemployed) in the labor market. The TUR is essentially a weekly version of the unemployment rate published by the Bureau of Labor Statistics and based on data from the BLS’ monthly Current Population Survey. 21 The Omnibus Budget Reconciliation Act of 1981 redefined the IUR to remove UC exhaustees and EB beneficiaries from the numerator. The Act also eliminated the national IUR trigger, and raised the states’ trigger to 5%. Congressional Research Service 19 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity The EB trigger is composed of two components, a level and a lookback. The EB is said to be triggered “on” in a state when both components have met or exceeded the thresholds. The level component of a trigger is a threshold rate, such as the IUR or the TUR. The lookback component compares the current period’s level (rate) to the level in the same period in some reference time such as the previous two years. A national trigger may seem appropriate because the definition of a recession is that it is national in scope, and the federal government’s interest in reversing an economic decline is national as well. On the other hand, recessions have variations in its regional impact. A national trigger could cause extended benefits to be paid to individuals in states that do not face unusually weak labor markets. Regional or sub-regional triggers have also been suggested as a means to improve the targeting of benefits, because labor markets can span state boundaries or be confined to rural or urban areas within a state (especially where a single industry is involved). It would be very difficult, however, to define appropriate regional or sub-state boundaries. There is also concern about data accuracy and availability at regional or sub-state levels. With the EUC08 program, Congress opted for a combination of national- and state-level triggers: EUC08 tiers I and II provide benefits to all unemployed workers, and EUC08 tiers III and IV provide additional weeks of benefits to unemployed workers in states that face high unemployment. The IUR and the TUR have been used as triggers for the EB and EUC08 programs, and each has merits as well as drawbacks. The calculation of the IUR is the ratio of the number of people claiming regular UC benefits to the number of insured workers. The IUR is arguably the more accurate indication of actual demand for EB. The IUR’s numerator can change with noneconomic factors such as state eligibility rules and administrative practices, however, and this in turn can affect whether the EB is activated in a particular state. The TUR is defined as the number of all unemployed individuals divided by the size of the civilian labor force (employed and unemployed). The TUR represents a larger population because it includes uninsured workers (such as the self-employed) and because it includes all unemployed workers, including those who failed to qualify for regular UC benefits or who have exhausted regular UC. Recent studies have suggested that whether an IUR or TUR trigger is used, the secular decline in unemployment over the past several decades has resulted in the current trigger levels being relatively difficult to attain. Lookbacks (e.g., the base EB requirement that the IUR requirement be at least 120% of the average of the rates for the same 13-week period in the each of the previous two years) are useful for measuring changes in unemployment relative to a baseline, but have also been controversial. The EB lookback has been criticized for forcing the trigger off too quickly, before the end of a recession. This can occur, for example, when high unemployment rates reach a—still high— plateau and the rate change from the reference period falls below 20% (in the case of a lookback requirement of 120%). Some have proposed that the trigger not include a lookback; others have suggested that the trigger refer to a fixed point in time at some date before the declaration of a recession. The Advisory Council on Unemployment Compensation recommended in 1994 that the EB program use a state TUR of 6.5%, and that the EB program not use a lookback. Other potential EB triggers could include the increase in the number of unemployed over a period such as the previous year; the increase in the number of long-term unemployed (unemployed for over 26 weeks); or changes in the number of UC exhaustees. Although the UC exhaustion rate is Congressional Research Service 20 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity intuitively appealing, a potential problem with this trigger includes a built-in delay of up to 26 weeks until benefit exhaustion that could prevent timely launch of the EB program. It would be important in any reform to build in a mechanism for reviewing and updating EB triggers. EB Eligibility Requirements Beyond Requirements for Regular UC The EB program imposes additional federal restrictions on individual eligibility for benefits beyond the state requirements for regular UC. The EB program requires that a worker make a “systematic and sustained” work search. Furthermore, the worker may not receive benefits if he or she refused an offer of “suitable” work, which is defined as “any work within such individual’s capabilities”. In addition, P.L. 97-35, among other items, amended the EUCA to require that claimants work at least 20 weeks of full-time insured employment or equivalent in insured wages during their base period. The 2009 stimulus package affects a further requirement for EB eligibility. As the EB program has operated in the past, a beneficiary had to be within their original “benefit year”22 when the EB program triggered “on” in their state in order to receive EB benefits. Thus, on the condition that the state triggered “on” during an individual’s benefit year, he or she could receive EB benefits during the benefit year, or even after the benefit year expired, that is, at the time he or she exhausted regular unemployment compensation or EUC08 benefits even if this occurred after the expiration of the benefit year. However, if the state’s most recent EB period triggered on after the individual’s benefit year ended, the beneficiary would not receive EB. As a result, in states that have recently triggered “on” to EB because of rising unemployment rates, many individuals may be ineligible for EB benefits. For example, if an individual’s benefit year expired in July 2008, this person would be ineligible for EB benefits if his or her state triggered “on” for EB in November 2008. Under the 2009 stimulus package (as amended), states have the option of ignoring the benefit year requirement and instead using EUC08 exhaustion as an eligibility requirement, as long as the state’s EB period falls between enactment of the stimulus package and June 2, 2010. This has the effect of allowing more individuals to be eligible for the EB program. In addition, states can opt to grandfather those who exhaust their EUC08 benefits after the EUC08 program expires.23 As described above, the EUC08 program contains a “reachback” clause under which EUC08 benefits were made available to individuals who had exhausted regular UC benefits with respect to a benefit year that expired during or after the week of May 6, 2007. Before the stimulus package, many individuals who had exhausted EUC08 benefits would have been ineligible for EB benefits if the state triggered “on” for EB after their benefit year expired. Under the stimulus 22 The benefit year is a one-year period during which a worker may receive benefits based on a previous period of unemployment. In all states, the beginning date of the benefit year depends on when a worker first files a valid claim, meaning the worker meets minimal wage and employment requirements. 23 States would once again be responsible for 50% of the cost of new entrants to the EB benefit program after June 2, 2010, however, as 100% federal financing of the EB plan ends. The federal government would continue to pay 100% of EB benefits for individuals who were receiving EB during the week ending before June 2, 2010, for the duration of their EB receipt. Congressional Research Service 21 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity package, however, all individuals who have exhausted EUC08 benefits would be eligible for EB benefits, regardless of the timing of their benefit years. Methods for Determining 20 Weeks of Full-Time Insured Employment States use one, two, or three different methods for determining an “equivalent” to 20 weeks of full-time insured employment. These methods are described in both law (Section 202(a)(5) of the EUCA) and regulation (20 CFR 615.4(b)). In practice, states that require any of these three methods for receipt of regular UC benefits and do not allow for exceptions to those requirements do not need to establish that the worker meets the 20 weeks full-time insured employment. The three methods are listed below: • earnings in the base period equal to at least 1.5 times the high-quarter wages; or • earnings in the base period of at least 40 times the most recent weekly benefit amount, and if this alternative is adopted, it shall use the weekly benefit amount (including dependents’ allowances) payable for a week of total unemployment (before any reduction because of earnings, pensions or other requirements) that applied to the most recent week of regular benefits; or • earnings in the base period equal to at least 20 weeks of full-time insured employment, and if this alternative is adopted, the term “full-time” shall have the meaning provided by the state law. The base period may be the regular base period or, if applicable in the state, the period may be the alternative base period or the extended base period if that determined the regular UC benefit. The underlying reasoning behind the requirements seems to be the following: • Because there are 13 weeks in a quarter, 1.5 times the high-quarter wage is roughly equivalent to 1.5 times 13 weeks of wages or about 20 weeks of wages. (Many states require high quarterly earnings of under $2,000, which works out to less than $4/hour under full-time assumptions. This is less than the federal minimum wage of $5.85/hour.) • Similarly, because the weekly benefit amount is roughly equivalent to half the average weekly wage, 40 times the weekly benefit amount is roughly equivalent to 20 weeks of wages. 2009 Stimulus Provisions Affecting EB Level and Duration The EB program provides for additional weeks of UC benefits,. As described earlier, all states must pay up to a maximum of 13 weeks during periods of high unemployment, and certain states that have chosen additional, optional triggers may pay and up to a maximum of 20 weeks in certain states with during periods of extremely high unemployment. The 2009 stimulus package provides a (as amended) provided a supplemental $25 weekly benefit through 2009June 2, 2010, for recipients of unemployment compensation, including EB recipients. EB benefits on interstate claims are limited to two extra weeks unless both the agent state (e.g., Texas) and liable state (e.g., Louisiana) are both in an EB period. Congressional Research Service 22 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity 2009 Stimulus Provisions Affecting EB Financing Under permanent law, EB benefits are funded half (50%) by the federal government through its account for that purpose in the UTF. States fund the other half (50%) through their state accounts in the UTF. The federal government pays 100% of EB administrative costs. The 2009 stimulus package, as amended, temporarily changes the federal-state funding arrangement. The federal government would financefinances 100% of EB benefits through the end of 2009, through the Extended Unemployment Compensation Account (EUCA) of the Unemployment Trust Fund (UTF)June 2, 2010, through the EUCA of the UTF, with the exception of former state and local employees’ EB benefits. As a result, some states may be reluctant to adopt benefits. 100% federal financing of the EB program has prompted some states to adopt the optional triggers to provide 20 weeks of extended benefits. The exception for former state and local employees’ EB benefits, however, has made some states reluctant to adopt the optional 20week EB triggers, or the stimulus provision that allows them to use EUC08 exhaustion rather than than benefit year as a requirement for EB eligibility. For individuals who were receiving EB payments payments during the last week of 2009week ending June 2, 2010, the federal government wouldwill continue to pay 100% of EB benefits Congressional Research Service 16 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity 100% of EB benefits for the duration of these individuals’ benefits (but not for new entrants to the EB program starting in January, 2010 after that date). The stimulus package also continues the temporary suspension of the waiting week requirement for federal funding until the week ending before May 30, 2010.16 Emergency Unemployment Compensation (EUC08) Program The Emergency Unemployment Compensation (EUC08) program was created by P.L. 110-252 on June 30, 2008. This temporary unemployment insurance program initially provided up to 13 additional weeks of unemployment benefits to workers who had exhausted regular UC benefits. On November 21, 2008, the President signed P.L. 110-449 into law, extending the EUC08 program through March 2009, and increasing the duration of EUC08 benefits from the original maximum of 13 weeks to a maximum of 20 weeks (referred to as EUC08 tier I benefits). P.L. 110-499 also created a second tier of EUC08 benefits that provides up to 13 additional weeks of unemployment benefits to workers in states with a total unemployment rate of at least 6% (or an IUR of at least 4%). The two tiers of EUC08 benefits provide up to a cumulative 33 weeks of EUC08 benefits. ARRA extends the termination date of the EUC08 program through December 26, 2009.17 EUC08 benefits have been financed from the Extended Unemployment Compensation Account (EUCA) in the Unemployment Trust fund. Starting from enactment of the 2009 stimulus package, however, EUC08 benefits will be financed from general revenues through the termination of the EUC08 program in December 2009. Previous Temporary Unemployment Compensation Extensions Previously, Congress acted seven times—in 1958, 1961, 1971, 1974, 1982, 1991, and 2002—to establish similar temporary programs of extended UC benefits. These programs extended the period an individual might claim UC benefits (ranging from an additional 6 to 33 weeks) and had expiration dates.18 Some extensions took into account state economic conditions; many temporary programs considered the state’s total TUR or the state’s IUR or both. EUC08 Benefits Tiers and Duration The amount of the EUC08 benefit is the equivalent of the eligible individual’s weekly regular UC benefit and includes any applicable dependents’ allowances. The 2009 stimulus package provides a federally-financed, supplemental $25 per week benefit for unemployment compensation, including EUC08 tier 1 and tier 2 benefits, through December, 2009. 16 States that do not require a one-week UC waiting period, or have an exception for any reason to the waiting period, pay 100% of the first week of EB. Twenty-five states, including Rhode Island and North Carolina, do not require a oneweek UC waiting period in all cases. P.L. 110-449 suspended this requirement until December 2009. 17 For details on the EUC08 program, see CRS Report RS22915, Temporary Extension of Unemployment Benefits: Emergency Unemployment Compensation (EUC08), by Julie M. Whittaker and Alison M. Shelton. 18 For more information on these programs, see CRS Report RL34340, Extending Unemployment Compensation Benefits During Recessions, by Julie M. Whittaker. Congressional Research Service 17 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Tier I The maximum number of weeks an individual may be eligible for tier I EUC08 benefits is capped at 20 weeks. Some individuals may be eligible for fewer weeks of the tier I EUC08 benefits if their regular UC benefit entitlement was less than 26 weeks. Tier II Once an individual has exhausted tier I benefits, a second tier of EUC08 benefits may be available if the individual worked in a state with high unemployment (a TUR of at least 6% or an IUR of at least 4%). The maximum number of weeks of tier II benefits is capped at 13 additional weeks (for a maximum of 33 weeks of EUC08 benefits). Began July 6, 2008 States were required to enter into an agreement with the U.S. Department of Labor (DOL) to provide the EUC08 benefit to unemployed individuals in the state. Once the agreement was signed, the EUC08 benefit began the following week. All states have signed agreements with DOL, and EUC08 benefits are now available beginning for weeks of qualifying unemployment on or after July 6, 2008. EUC08 benefits for that first week began to be disbursed the week of July 13, 2008. Terminates December 26, 2009 Both tiers of EUC08 benefits are temporary and expire on December 26, 2009.19 Those beneficiaries receiving tier I or tier II EUC08 benefits before December 26, 2009, are “grandfathered” for their remaining weeks of eligibility. There are no new entrants into either the tier I or tier II EUC08 program after December 26, 2009. That is, if an individual exhausts his or her regular unemployment compensation (UC) benefits (or EB benefits in a few states) after December 26, 2009, the individual would not be eligible for any EUC08 benefit. If eligible to continue to receive the tier I benefit after December 26, 2009, an individual would not be entitled to tier II benefits once those benefits were exhausted. Neither tier I nor tier II EUC08 benefits are payable for any week after June 6, 2010.20 Tier I EUC08 Eligibility Requirements First Claimed Regular UC Benefits On or After May 7, 2006 Applicants must have been eligible for regular UC benefits and have exhausted their rights to regular UC compensation with respect to a benefit year that expired during or after the week of May 6, 2007.21 For most states, this would apply to individuals who had filed UC claims with an 19 December 27, 2009 for New York state. June 7, 2010 for New York state. 21 Arkansas has a unique approach to calculating a benefit year. In Arkansas, the benefit year begins the first day of the quarter in which an individual files a valid UC claim. Thus, it is unlikely that many individuals in Arkansas who filed (continued...) 20 Congressional Research Service 18 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity effective date of May 7, 2006, or later. For the state of New York this would apply to original claims filed with an effective date of May 1, 2006, or later.22 Exhausted Regular UC Benefit The right to regular UC benefits for an individual must be exhausted to be eligible for EUC08 benefits. Although federal laws and regulations provide broad guidelines on regular UC benefit coverage and eligibility determination, the specifics of regular UC benefits are determined by each state. As noted earlier, this results in 53 different programs. 23 In particular, states determine UC benefit eligibility, amount, and duration through state laws and program regulations.24 “20 Weeks” of Full-Time Insured Employment or Equivalent In addition to all state requirements for regular UC eligibility, the EUC08 program requires claimants to have at least 20 weeks of full-time insured employment or the equivalent in insured wages in their base period. The definition of “20 weeks” is discussed in the Extended Benefit (EB) Program section of this report. Eligibility Special Case: Exhausted EUC08 Benefits Before November 23, 2008 If an individual had exhausted the EUC08 benefit before November 23, 2008, it is likely that the enactment of P.L. 110-449 would result in additional weeks of EUC08 benefits for this person. P.L. 110-449 extended the duration of EUC08 benefits to 20 weeks, from 13 weeks in the original law. Once the new full entitlement (of up to a total of 20 weeks) of tier I EUC08 benefits has been completed, the individual will then be considered to have exhausted the newly expanded tier I EUC08 benefit. There is no payment for the weeks of unemployment during the period when the individual had exhausted the earlier EUC08 benefit and November 23, 2008. Tier II EUC08 Eligibility Requirements Exhausted Tier I EUC08 Benefit Tier I EUC08 benefits must be exhausted as a condition of eligibility for the tier II EUC08 benefits. (...continued) UC claims before July 2006 would be eligible to receive EUC08 benefits. 22 Note that the effective date is not necessarily the actual date when an individual filed for UC. A claim filed on May 10, 2006, may have had an earlier effective date if a state allows retroactive claims. 23 The 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands provide UC benefits to their workers. 24 Individuals in the Massachusetts and Montana UC programs may have regular UC durations that exceed 26 weeks. Those additional weeks are not used to calculate EUC08 duration. Congressional Research Service 19 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity At or After the Period of Tier I EUC08 Exhaustion, the State Must Currently Have High Unemployment The individual must have worked in a state currently considered to have high unemployment (TUR of at least 6% or IUR of at least 4%) for the purposes of the EUC08 program. If at the time of tier I exhaustion the state does not meet the TUR or IUR thresholds, the individual would not be eligible for tier II benefits. However, tier II benefits do not need to be continuous with tier I benefits. Thus, if the state later has a TUR of at least 6% or IUR of at least 4%, a still unemployed tier I benefit exhaustee would be eligible for tier II benefits at that later time. Each Monday the Department of Labor issues its “Emergency Unemployment Compensation Trigger Notice” at http://atlas.doleta.gov/unemploy/claims_arch.asp. If the status column within the notice is “on” for a particular state’s row, that state is considered to be high unemployment for the purposes of EUC08. No retroactive tier II payments exist for the period during which the individual had exhausted tier I benefits but the state did not meet the high unemployment criteria. EUC08 Financing Until February 16, 2009, the EUC08 program was federally financed from the extended unemployment compensation account (EUCA) within the Unemployment Trust Fund (UTF). With the passage of the 2009 stimulus package (P.L. 111-5), however, EUC08 is now financed from general funds of the U.S. Treasury through the expiration of the EUC08 program in December 2009. States do not need to repay these funds. EUC08 and EB Interactions The EUC08 program should not be confused with the similarly named EB program. The EUC08 program is temporary and tier 1 of EUC08 applies to all states while tier II of EUC08 applies to states with high unemployment. The EB program is permanently authorized and applies only to certain states on the basis of state unemployment conditions specified in law. The EUC08 program allows states to determine which benefit is paid first. Thus, states may choose to pay EUC08 before EB or vice versa. States balance the decision of which benefit to pay first by comparing the potential cost savings to the state to the potential loss of unemployment benefits for unemployed individuals in the state. 25 Because EB benefits are conditioned on high unemployment in the state but the first tier of EUC08 is not, if the state opts to pay EUC08 first, individuals in the state might receive less in total unemployment benefits if the EB program triggers off before the individuals exhaust their EUC08 benefits. Most states have opted to pay EUC08 benefits before EB. Alaska has opted to pay EB before EUC08 benefits. 25 The EUC08 program is 100% federally financed for the duration of the program. For the EB program, 100% federal financing is available for 2009 only. Thus in 2008, and again in 2010, it may be less costly for the state to choose to offer the EUC08 benefit first. Also, some recipients may find jobs before becoming eligible for EB. In addition, the state may trigger off of the EB program before some recipients exhaust EUC. Congressional Research Service 20 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Disaster Unemployment Assistance (DUA)26 DUA benefits were created in 1970 by the Robert T. Stafford Disaster Relief and Emergency Relief Act (the Stafford Act, P.L. 91-606). The Stafford Act authorizes the President to issue a major disaster declaration after state and local government resources have been overwhelmed by a natural catastrophe or “regardless of cause, any fire, flood, or explosion in any part of the United States” (42 U.S.C. 5122(2)). On the basis of the request of the affected state’s governor, the President may declare that a major disaster exists. The declaration identifies the areas in the state eligible for assistance. The declaration of a major disaster provides the full range of disaster assistance available under the Stafford Act, including, but not limited to, the repair, replacement, or reconstruction of public and nonprofit facilities; cash grants for the personal needs of victims; housing; and unemployment assistance related to job loss from the disaster. DUA Eligibility DUA benefits are available to individuals who have become unemployed as a direct result of a declared major disaster. Workers who do not qualify for UC benefits may be eligible for DUA benefits for 26 weeks. Also, if a worker qualified for fewer than 26 weeks of UC benefits, the worker may qualify for DUA benefits for the remaining weeks if the worker is unemployed for reasons directly attributable to the disaster. A worker may not receive DUA and UC benefits at the same time. The DUA regulation defines eligible unemployed workers to include: • the self-employed; • workers who experience a “week of unemployment” following the date the major disaster began, when such unemployment is a direct result of the major disaster; • workers unable to reach the place of employment as a direct result of the major disaster and workers who were to begin employment and who do not have a job or are unable to reach the job as a direct result of the major disaster; • individuals who have become the breadwinner or major support for a household because the head of the household has died as a direct result of the major disaster; and • workers who cannot work because of injuries caused as a direct result of the disaster. DUA Benefit Determination and Duration When a reasonable comparative earnings history can be constructed, DUA benefits are determined in a similar manner to regular state UC benefit rules. For example, self-employed persons would be expected to bring in their tax records to prove a level of earnings for the 26 See CRS Report RS22022, Disaster Unemployment Assistance (DUA), by Julie M. Whittaker and Alison M. Shelton. Congressional Research Service 21 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity previous two years. These records would take the place of the employer-reported wage data that are used in UC benefit determination. Likewise, workers who would otherwise be eligible for UC benefits except for injuries directly resulting from the disaster that make them unavailable for work would receive DUA benefits in an amount equivalent to what they would have received under the UC system if they were not injured and available to work. In all cases, workers will receive a DUA benefit that is at least half of the average UC benefit for that state and cannot receive more than the maximum UC benefit available in that state. The 2009 stimulus package provides for an additional $25 per week benefit through December 2009 that is federally funded and is available to recipients of unemployment benefits, including DUA benefits. DUA Financing DUA benefits are federally funded through the Federal Emergency Management Agency (FEMA) and administered by DOL through each state’s UC agency. The states report the amount of DUA benefits that were attributable to the disaster. DOL then transfers funds to the states from the Federal Unemployment Benefit and Allowance (FUBA) account. DOL is reimbursed for these funds by FEMA. Legislative Issues 111th Congress 2010 Budget The President’s 2010 budget outline suggests that legislation is needed to make the UC system more responsive to changing economic conditions, both as an automatic stabilizer and as an effective social safety net. In a letter transmitting the Views and Estimates of the House Committee on Ways and Means concerning 2010 budget issues within its purview, the Committee states that it will continue to monitor the effectiveness of the 2009 stimulus package (ARRA), including unemployment provisions in the package. An ongoing question concerns whether the EB program can be altered so that it makes benefits available more quickly to long-term unemployed workers, thereby avoiding the delays associated with legislation to create special, temporary extended unemployment programs. Although specifics are not yet available, reforms may center around the EB program and its trigger mechanism. Potential issues may include the appropriateness of national versus state or regional triggers, the use of the IUR versus the TUR, the trigger level, and the use of “lookbacks” to unemployment in a reference period. (These issues are discussed in more detail in the EB section of this report.) American Recovery and Reinvestment Act of 2009 The American Recovery and Reinvestment Act of 2009 (P.L. 111-5, the 2009 stimulus package) contains a number of important provisions that affect unemployment benefits. These provisions include extension of the EUC08 program through December 2009; temporary 100% federal Congressional Research Service 22 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity financing of the EB program; up to $7 billion for modernization of state unemployment programs; a temporary $25 per week supplemental benefit for regular UC, EB, EUC08, TAA and DUA benefits; temporary tax relief for unemployment benefits; and a temporary suspension of interest accrual on loans to insolvent state UTF funds.27 Unemployment Compensation Modernization The 2009 stimulus package provides for a special transfer of up to $7 billion in federal monies to state unemployment programs as “incentive payments” for changing certain state UC laws. The funds would be transferred from the federal unemployment account (FUA) in the UTF to the state accounts within the UTF. The maximum incentive payment allowable for a state would be calculated using the methods used in Reed Act distributions. For a state to receive one-third of its potential distribution it must enact an alternative base period, which ensures the last completed quarter of a worker’s employment is counted when determining eligibility for unemployment benefits. The remaining two-thirds of the $7 billion would be distributed to states contingent on their qualifying for the first one-third, plus state law containing at least two of the following four provisions: (1) permit former part-time workers to seek part-time work; (2) permit voluntary separations from employment for compelling family reasons; (3) provide extended compensation to UC recipients in training programs for high demand occupations; or (4) provide dependents allowances to UC recipients with dependents. In addition to the $7 billion in conditional transfers, the package immediately transfers a total of $500 million to the states for the administration of UC programs, without conditions. These funds may be used to pay for: (1) administration of the new provisions, if any, enacted in order to receive shares of the $7 billion in special incentive payments; (2) improved outreach to individuals who might be eligible for regular unemployment compensation by virtue of the expansion provisions; (3) improvement of unemployment benefit and tax operations, including responding to increased demand for unemployment compensation; and (4) staff-assisted reemployment services for unemployment compensation claimants. Supplemental Unemployment Benefit The 2009 stimulus package will increase benefits by $25 per week through December 2009. This supplemental benefit will be available to all individuals receiving regular unemployment (UC), Extended Benefits (EB), Emergency Unemployment Compensation (EUC08), Disaster Unemployment Assistance (DUA) and Trade Adjustment Act (TAA) benefits. This supplemental benefit will be grandfathered for individuals who have not exhausted the right to unemployment compensation as of January 1, 2010; however, no additional compensation would be payable for any week beginning after June 30, 2010. The supplemental benefit would be financed by the federal government from general revenues and would not need to be repaid. 27 For additional information on unemployment provisions in the 2009 stimulus package, please see CRS Report R40368, Unemployment Insurance Provisions in the American Recovery and Reinvestment Act of 2009, by Alison M. Shelton, Kathleen Romig, and Julie M. Whittaker Congressional Research Service 23 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity H.R. 291 (McDermott), Unemployment Supplemental Assistance Act contained a similar additional (albeit more generous) $50 weekly benefit. Extension of EUC08 Program The 2009 stimulus package also extends the temporary EUC08 program through December 26, 2009. The program would be grandfathered for those receiving EUC08 benefits on December 26, 2009; however, no benefits would be payable after June 6, 2010. Following enactment of the stimulus package, the extension of EUC08 benefits will be paid from the general funds of the U.S. Treasury and will not need to be repaid. Temporary Waiver of Interest Payments and the Accrual of Interest on Advances to State Unemployment Funds The stimulus package provides temporary relief to states that borrow from the Federal Unemployment Account of the Unemployment Trust Fund. The interest payments due from enactment of the stimulus package (February 17, 2009) until December 31, 2010, would be deemed to have been made by the state. In addition, no interest on advances would accrue during the period. Temporary 100% EB Financing and Changes to EB Eligibility The 2009 stimulus package temporarily changes the federal-state funding arrangement for the EB program. The federal government will finance 100% of EB benefits through the end of 2009, with the exception of state and local government employees’ EB benefits. The federal financing of EB benefits in 2009 would be through the Extended Unemployment Compensation Account (EUCA) in the Unemployment Trust Fund (UTF). In January 2010, EB financing would revert to 50% state financing and 50% federal financing, unless the individual had been receiving EB when financing was at 100% federal financing. Consistent with this change in financing requirements, the stimulus package also continues the temporary suspension of the waiting week requirement for federal funding until the week ending before May 30, 2010. Under the waiting week requirement, now temporarily suspended, states that do not require a one-week UC waiting period, or have an exception for any reason to the waiting period, pay 100% of the first week of EB. The 2009 stimulus package also temporarily allows states the option of expanding EB eligibility, by ignoring the benefit year requirement and instead using EUC08 exhaustion as an eligibility requirement for EB (as long as the state is triggered “on” for EB) during 2009. As the EB program has operated in the past, a beneficiary had to be within his or her original “benefit year” when the EB program triggered “on” in the state in order to receive EB benefits. Even though a number of states triggered “on” for EB in the second half of 2008, the benefit year requirement cause numerous individuals to be ineligible for EB because their benefit years had expired before the state triggered “on.” Allowing states to use EUC08 exhaustion as an eligibility requirement instead will cause more individuals to be eligible for the EB program. In addition, states can opt to grandfather those who exhaust their EUC08 benefits after December 31, 2009 (although as 100% federal financing of the EB plan also ends with the end of 2009, states would be responsible for 50% of the cost of these grandfathered EB payments). Congressional Research Service 24 Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Temporary Suspension of Federal Income Tax on Unemployment Benefits Tax relief would be provided to the unemployed through the exemption of the first $2,400 of benefits from income taxation in tax year 2009. S. 155 and H.R. 155 proposed all unemployment benefits be exempt. Author Contact Information Alison M. Shelton Analyst in Income Security ashelton@crs.loc.gov, 7-9558 Congressional Research Service Julie M. Whittaker Specialist in Income Security jwhittaker@crs.loc.gov, 7-2587 25 November 6, 2010.24 Short-time Compensation (Work Sharing) Short-time compensation (STC) is a program within the federal-state unemployment compensation system. Seventeen states operate STC programs. STC is a regular unemployment benefit, pro-rated for a partial work reduction, that is offered within the context of a temporary work sharing arrangement. Under a work sharing arrangement, a firm that is faced with a need to downsize temporarily reduces work hours for many or all workers instead of laying off a smaller number of workers. For example, an employer might reduce the work hours of the entire workforce by 20%, from five to four days a week, in lieu of laying off 20% of the workforce. States with STC programs require employers who seek STC for their workers to submit a formal work sharing plan for approval. Once the state has approved an employer’s plan, the worksharing employees receive pro-rated unemployment compensation, or STC. In the above example, the amount of STC provided to each worker would be 20% of the unemployment benefit that a worker would have received had he or she been laid off. Employers have used STC combined with work sharing arrangements to reduce labor costs while retaining highly skilled workers. Work sharing can also reduce employers’ recruitment and training costs by making it unnecessary to recruit new employees when business improves. On the employee’s side, work sharing arrangements combined with STC can spread more moderate earnings reductions across more employees—as opposed to imposing significant hardship on a 24 States that do not require a one-week UC waiting period, or have an exception for any reason to the waiting period, pay 100% of the first week of EB. Twenty-five states, including Rhode Island and North Carolina, do not require a oneweek UC waiting period in all cases. P.L. 110-449 (as amended by P.L. 111-5, P.L. 111-118, P.L. 111-144, and P.L. 111-157) suspended this requirement until November 6, 2010. Congressional Research Service 23 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity few. Work sharing and STC cannot, however, avert layoffs or plant closings if a company’s financial situation is dire. In addition, some employers may choose not to adopt work sharing because laying off workers may be a less expensive alternative. STC benefits are charged to employers according to the experience rating rules of a state’s regular unemployment program. Therefore, a firm generally incurs no more in UI tax costs by using STC than it would through layoffs. Seven states also impose additional tax provisions on work sharing employers, in order to ensure that employers who already pay the maximum state unemployment tax rate share in the burden. Currently, only 17 states operate STC programs to support work sharing arrangements. Through the end of 2008, the STC program has never constituted more than about 1% of unemployment benefits paid annually across the U.S, although very preliminary data for the first three quarters of 2009 indicate that this ratio may recently have risen to as high as 2%. The reasons for low state and employer take-up of the STC program are not completely clear, but a key cause would appear to be ambiguity in the 1992 federal law that authorizes STC. Because of this ambiguity, the U.S. Department of Labor (DOL) has not provided guidance or technical assistance on STC to the states since 1992. A more active public policy would require either DOL reinterpretation of the 1992 law or congressional action to either clarify federal law or give the Secretary of Labor authority to determine needed additional provisions.25 Legislative Issues 111th Congress 2010 Budget The President’s 2010 budget highlighted the need for legislation to make the UC system more responsive to changing economic conditions, both as an automatic stabilizer and as an effective social safety net. In a letter transmitting the Views and Estimates of the House Committee on Ways and Means concerning 2010 budget issues within its purview, the Committee states that it will continue to monitor the effectiveness of the 2009 stimulus package (ARRA), including unemployment provisions in the package. An ongoing question concerns whether the EB program can be altered so that it makes benefits available more quickly to long-term unemployed workers, thereby avoiding the delays associated with legislation to create special, temporary extended unemployment programs. Although specifics are not yet available, reforms may center around the EB program and its trigger mechanism. Potential issues may include the appropriateness of national versus state or regional triggers, the use of the IUR versus the TUR, the trigger level, and the use of “lookbacks” to unemployment in a reference period. (These issues are discussed in more detail in the “Extended Benefit Program” section of this report.) 25 For more information on short-time compensation, see CRS Report R40689, Compensated Work Sharing Arrangements (Short-Time Compensation) as an Alternative to Layoffs, by Alison M. Shelton. Congressional Research Service 24 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity P.L. 111-5, The American Recovery and Reinvestment Act of 2009 ARRA (P.L. 111-5, the 2009 stimulus package) contained a number of important provisions that affect unemployment benefits. These provisions included extension of the EUC08 program through December 2009; temporary 100% federal financing of the EB program; up to $7 billion for modernization of state unemployment programs; a temporary $25 per week supplemental benefit for regular UC, EB, EUC08, TAA and DUA benefits; temporary tax relief for unemployment benefits; and a temporary suspension of interest accrual on loans to insolvent state UTF funds.26 Unemployment Compensation Modernization The 2009 stimulus package provided for a special transfer of up to $7 billion in federal monies to state unemployment programs as “incentive payments” for changing certain state UC laws. The funds are transferred from the federal unemployment account (FUA) in the UTF to qualifying states’ UTF accounts. The maximum incentive payment allowable for a state is calculated using the methods used in Reed Act distributions. For a state to receive one-third of its potential distribution it must enact an alternative base period, which ensures the last completed quarter of a worker’s employment is counted when determining eligibility for unemployment benefits. The remaining two-thirds of the $7 billion are distributed to states contingent on their qualifying for the first one-third, plus state law containing at least two of the following four provisions: (1) permit former part-time workers to seek part-time work; (2) permit voluntary separations from employment for compelling family reasons; (3) provide extended compensation to UC recipients in training programs for high-demand occupations; or (4) provide dependents allowances to UC recipients with dependents. In addition to the $7 billion in conditional transfers, the package immediately transferred a total of $500 million to the states for the administration of UC programs, without conditions. These funds could be used to pay for (1) administration of the new provisions, if any, enacted in order to receive shares of the $7 billion in special incentive payments; (2) improvement of outreach to individuals who might be eligible for regular unemployment compensation by virtue of the expansion provisions; (3) improvement of unemployment benefit and tax operations, including responding to increased demand for unemployment compensation; and (4) staff-assisted reemployment services for unemployment compensation claimants. Federal Additional Compensation(FAC) The 2009 stimulus package, as amended, temporarily increases benefits by $25 per week. This supplemental benefit is available to all individuals receiving regular UC, EB, EUC08, DUA, and TAA benefits. This supplemental benefit will be grandfathered for individuals who have not exhausted the right to unemployment compensation as of June 2, 2010; however, no federal additional compensation is payable for any week beginning after October 5, 2010. The 26 For additional information on unemployment provisions in the 2009 stimulus package, please see CRS Report R40368, Unemployment Insurance Provisions in the American Recovery and Reinvestment Act of 2009, by Alison M. Shelton and Julie M. Whittaker. Congressional Research Service 25 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity supplemental benefit is financed by the federal government from general revenues and would not need to be repaid. ARRA Provisions Affecting the EUC08 Program The 2009 stimulus package, as amended, also extended the temporary EUC08 program through April 5, 2010. Following enactment of the stimulus package, the extension of EUC08 benefits began to be paid from the general funds of the U.S. Treasury and do not need to be repaid. Temporary Waiver of Interest Payments and the Accrual of Interest on Advances to State Unemployment Funds The stimulus package provides temporary relief to states that borrow from the Federal Unemployment Account of the Unemployment Trust Fund. The interest payments due between enactment of the stimulus package (February 17, 2009) through December 31, 2010, would be deemed to have been made by the state. In addition, no interest on advances accrue during the period. Temporary 100% EB Financing and Changes to EB Eligibility The 2009 stimulus package (as amended) temporarily changes the federal-state funding arrangement for the EB program. The federal government will finance 100% of EB benefits through April 5, 2010, with the exception of state and local government employees’ EB benefits. The 100% federal financing of EB benefits takes place through the EUCA in the UTF. After the 100% federal financing authorization ends, EB financing would revert to 50% state financing and 50% federal financing, although 100% financing would be grandfathered for individuals who were receiving EB during the week that the authorization of 100% federal financing was terminated. Consistent with this change in financing requirements, the stimulus package also continues the temporary suspension of the waiting week requirement for federal funding until the week ending before September 4, 2010. Under the waiting week requirement, now temporarily suspended, states that do not require a one-week UC waiting period, or have an exception for any reason to the waiting period, paid 100% of the first week of EB. The 2009 stimulus package also temporarily allows states the option of expanding EB eligibility, by ignoring the benefit year requirement and instead using EUC08 exhaustion as an eligibility requirement for EB (as long as the state is triggered “on” for EB) until the expiration of the EUC08 program. As the EB program has operated in the past, a beneficiary had to be within his or her original “benefit year” when the EB program triggered “on” in the state in order to receive EB benefits. Even though a number of states triggered “on” for EB in the second half of 2008, the benefit year requirement cause numerous individuals to be ineligible for EB because their benefit years had expired before the state triggered “on.” Allowing states to use EUC08 exhaustion as an eligibility requirement instead will cause more individuals to be eligible for the EB program. Temporary Suspension of Federal Income Tax on Unemployment Benefits ARRA (P.L. 111-5) provided tax relief to the unemployed through the exemption of the first $2,400 of benefits from income taxation in tax year 2009. S. 155 and H.R. 155 proposed all unemployment benefits be exempt. Congressional Research Service 26 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity P.L. 111-92, The Worker, Homeownership and Business Assistance Act of 2009 The President signed P.L. 111-92, the Worker, Homeownership and Business Assistance Act of 2009, into law on November 6, 2009. The law created an additional (new second) tier of up to 14 weeks of benefits, without regard to state unemployment rates. The law also created a fourth tier of up to an additional six weeks of EUC08 benefits in states with unemployment rates of at least 8.5%. Other measures included in the proposal concerned eligibility for food stamp payments (benefit eligibility and determination would not consider the $25 additional federal unemployment benefit established in ARRA legislation); railroad workers (who have their own unemployment insurance system) would receive approximately the same increase in potential benefits; and the authorization of the 0.2% FUTA surtax is extended through 2010 and the first six months of calendar year 2011. P.L. 111-118, The Department of Defense Appropriations Act On December 19, 2009, the President signed P.L. 111-118, the Department of Defense Appropriations Act of 2010, into law. P.L. 111-118 extended the EUC08 program through the end of February 2010. The law also extended the 100% federal financing of the EB program and the $25 supplemental weekly benefit through end-February 2010. P.L. 111-144, The Temporary Extension Act of 2010 On March 2, 2010, the President signed P.L. 111-144, the Temporary Extension Act of 2010. P.L. 111-144 extended three temporary provisions through April 5, 2010: EUC08, the $25 supplemental weekly benefit, and 100% federal EB financing. The Senate passed H.R. 4691 without amendment on March 2, 2010, and the President signed the bill that day. P.L. 111-157, The Continuing Extension Act of 2010 On April 15, 2010, the President signed P.L. 111-157, the Continuing Extension Act of 2010 into law. P.L. 111-157 extends the availability of EUC08, 100% federal financing of EB, and the $25 FAC benefits, until the week ending on or before June 2, 2010. Current Legislation On March 10, 2010, the Senate passed H.R. 4213, the Tax Extenders Act of 2010. H.R. 4213 would extend the availability of EUC08, 100% federal financing of EB, and the $25 FAC benefits, through the end of December 2010. Because the original bill was amended by the Senate in the nature of a substitute (S.Amdt. 3336), the Senate-passed version must now go back to the House for consideration. H.R. 4183 would have extended the authorization of the EUC08 program through March 2011. It also would have extended the FAC benefit as well as the 100% federal financing for EB through March 2011. Additionally, it would have provided 100% federal financing for short-time compensation benefits through March 2011.27 27 For information on short-time compensation programs see CRS Report R40689, Compensated Work Sharing (continued...) Congressional Research Service 27 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity S. 2831 would extend the authorization of the EUC08 program through December 2010. It would extend the FAC benefit as well as the 100% federal financing for EB through December 2010. The bill would allow the unemployed to opt to continue to receive their remaining EUC08 entitlements rather than reapply for UC at the end of their benefit year. It would suspend the federal taxation of the first $2400 of unemployment benefits through 2010. The bill would also require the U.S. Department of Labor to conduct a study on the implementation of the EUC08 program. Additionally, S. 2831 provides 100% federal financing for short-time compensation benefits through 2011. Senator Reed introduced S. 1646, the Keep Americans Working Act, to provide federal financing to states for 100% of benefits paid to workers who participate in an STC program, contingent on employer certification that health and retirement benefits are not affected by participation in the STC program. The bill would also provide start-up grants to states and would allow the DOL to reimburse states for administrative expenses. Representative DeLauro has introduced a companion bill, H.R. 4135, in the House of Representatives. Senator Reed included substantially the same STC provisions from S. 1646 in S. 2831, the Helping Unemployed Workers Act. Representative McDermott introduced H.R. 4183, the Helping Unemployment Workers Act, which would require the Secretary of Labor to pay 100% of STC benefits to the unemployment trust fund accounts of states whose STC programs have been certified by the Secretary of Labor. (...continued) Arrangements (Short-Time Compensation) as an Alternative to Layoffs, by Alison M. Shelton. Congressional Research Service 28 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Appendix A. Unemployment Insurance Benefits Figure A-1. Unemployment Insurance: Available Unemployment Benefits Source: CRS. Congressional Research Service 29 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Appendix B. Summary of EUC08 Program Table B-1. Emergency Unemployment Compensation Program: Public Law, Benefits, Effective Dates, and Financing Public Law Benefit Tiers and Availability Supplemental Appropriations Act of 2008, Title IV Emergency Unemployment Compensation (P.L. 110-252), signed June 30, 2008 13 weeks (all states) Unemployment Compensation Extension Act of 2008 (P.L. 110-449), signed November 21, 2008. Tier I: 20 weeks (all states) American Recovery and Reinvestment Act of 2009 (P.L. 111-5), signed February 17, 2009. Same as above. Worker, Homeowner, and Business Assistance Act of 2009 (P.L. 111-92), signed November 6, 2009. Tier I: 20 weeks (all states) Dates in Effect and Financing 7/6/2008-3/29/2009 (No benefits past 7/4/2009) Funded by federal EUCA funds within UTF. Tier II: 13 additional weeks (33 weeks total) if state TUR is 6% or higher or IUR is 4% or higher [Note this included several other interventions that augmented UC benefits. The Federal Additional Compensation (FAC) benefit of $25/week for those receiving UC, EUC08, EB, DUA, or TAA. At state option, EB benefit year could be calculated based upon exhausting EUC08 benefits. 100% federal financing of EB program. First $2400 of unemployment benefits were excluded from income tax in 2009.] Tier II: 14 additional weeks (34 weeks total, all states) Tier III: 13 additional weeks if state TUR is 6% or higher or IUR is 4% or higher (47 weeks total) 11/23/2008-3/29/2009 (No benefits past 8/29/2009) Funded by federal EUCA funds within UTF. 2/22/2009-12/26/2009 (No benefits past 6/6/2010) Funded by general fund of the Treasury. (Additionally, the FAC program is funded by the general fund of the Treasury. The 100% financing of the EB program is funded by the EUCA funds within the UTF.) 11/8/2009-12/26/2009 (No benefits past 6/6/2010) Funded by general fund of the Treasury. Tier IV: 6 additional weeks if state TUR is 8.5% or higher or IUR is 6% or higher (53 weeks total) Department of Defense Appropriations Act, 2010 (P.L. 111-118), signed December 19, 2009. Same as above. Temporary Extension Act of 2010 (P.L. 111-144), signed March 2, 2010. Same as above. 12/27/2009-2/27/2010 (No benefits past 7/31/2010) Funded by general fund of the Treasury. 2/28/2010-4/3/2010 (No benefits past 9/4/2010) Funded by general fund of the Treasury. Congressional Research Service 30 . Unemployment Insurance: Available Unemployment Benefits and Legislative Activity Public Law The Continuing Extension Act of 2010 (P.L. 111-157), signed April 15, 2010 Benefit Tiers and Availability Same as above. Dates in Effect and Financing 4/3/2010-5/29/2010 (No benefits past 11/ 6/ 2010) Funded by general fund of the Treasury. Source: CRS. Author Contact Information Julie M. Whittaker Specialist in Income Security jwhittaker@crs.loc.gov, 7-2587 Katelin P. Isaacs Analyst in Income Security kisaacs@crs.loc.gov, 7-7355 Alison M. Shelton Analyst in Income Security ashelton@crs.loc.gov, 7-9558 Congressional Research Service 31