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Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws

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Unemployment Insurance: Consequences of Changes in State Unemployment Unemployment Compensation Laws Katelin P. Isaacs Analyst in Income Security August 5, 201115, 2012 The House Ways and Means Committee is making available this version of this Congressional Research Service (CRS) report, with the cover date shown above, for inclusion in its 20112012 Green Book website. CRS works exclusively exclusively for the United States Congress, providing policy and legal analysis to Committees and Members of both the House and Senate, regardless of party affiliation. Congressional Research Service R41859 CRS Report for Congress Prepared for Members and Committees of Congress UI: Consequences of Changes in State Unemployment Compensation Laws Summary This report analyzes several types of recent changes to state Unemployment Compensation (UC) programs. Three categories of UC state law issues are considered: (1) changes in the duration of state UC unemployment benefits; (2) changes in the maximum UC weekly benefit amount; and (3) the enactment into state law of two trigger options for the Extended Benefit (EB) program. In 2011 and 2012, several states enacted legislation to decrease the maximum number of weeks of regular regular state UC benefits. Until recently, all states paid at least up to 26 weeks of UC benefits to eligible, unemployed individuals. In 2011, however, six states passed legislation to decrease their maximum UC benefit durations.: Arkansas, Missouri, and South Carolina have made state UC law changes that are already in effect. Michigan, Illinois, and Florida legislated state law changes that will be effective in January 2012Florida, Illinois, Michigan, Missouri, and South Carolina. In 2012, Georgia also passed legislation to decrease the maximum UC benefit duration. Changes in UC benefit duration have consequences for the duration of federal unemployment benefits that may be available to unemployed workers. State UC benefit duration is an underlying factor in the calculation of duration for additional federal unemployment benefits. Thus, the reduction of the maximum duration of regular UC benefits reduces the number of weeks available to unemployed workers in the federal extended unemployment programs (including the Emergency Unemployment Compensation [EUC08] and EB). States are temporarily prohibited from actively changing their methodsmethod of calculation for UC benefits if it would decrease weekly benefit amounts (under P.L. 111-205, as amended), that is, the “nonreduction” rule. Some . Some states, however, make automatic adjustments to weekly benefit amounts under existing state law. Consequently, ifwhen these states experience certain conditions, such as a decrease in the average weekly wage used in the automatic adjustment calculation, their maximum weekly UC benefit amount may be decreased. Two states—New Jersey and Oklahoma—have recently experienced this type of reduction in their weekly UC benefit amounts. Such a benefit reduction also translates into reduced EUC08 and EB weekly benefit amounts as they are based upon the weekly benefit amount calculated by the regular state UC benefits amount may be decreased. More recently, P.L. 112-96 provides an exception to this “nonreduction” rule in the case of state legislation enacted before March 1, 2012. Any reduction to the UC weekly benefit amount also translates into reduced EUC08 and EB weekly benefit amounts. Finally, there are various optional EB trigger components—authorized under permanent federal law (P.L. 91-373, as amended) and temporary federal law (P.L. 111-312, as amended, and P.L. 111-5, as amended)—that states may opt to enact under their state UC laws. Currently, 1211 states have have adopted an optional trigger for the EB program, based on a state’s total unemployment rate (TUR), into permanent state law. An additional 2628 states have enacted this EB TUR trigger temporarily, linking its expiration to the expiration of the temporary 100% federal financing of the EB program under federal law (P.L. 111-5, as amended). Thirty-three states have adopted a three-year lookback for this optional TUR trigger under current state law (temporarily authorized under P.L. 111-312, as amended) to ) to continue to meet the trigger criteria and continue to pay EB benefits. In general, only states who that have enacted at least one of these EB trigger options (i.e., the TUR trigger or the three-year lookback) are currently able to pay EB benefits. Overall, these three had been able to pay EB benefits in 2011 and 2012. As of the week of August 12, 2012, no state meets the requirements to trigger onto EB using these EB state law options. Overall, these three types of changes to state UC laws and programs have consequences for the availability, duration, and amount of unemployment benefits. This report describes these changes and analyzes their consequences for UC, EUC08, and EB benefits. It will be updated, as needed, to reflect any additional state UC changes. Congressional Research Service UI: Consequences of Changes in State Unemployment Compensation Laws Congressional Research Service UI: Consequences of Changes in State Unemployment Compensation Laws Contents Introduction...................................................................................................................................... 1 Overview of Current Unemployment Benefits................................................................................ 1 Unemployment Compensation Program ................................................................................... 2 Maximum UC Benefit Duration.......................................................................................... 2 Emergency Unemployment Compensation Program ................................................................ 2 Extended Benefit Program ........................................................................................................ 34 State Law Changes to UC Benefit Duration .................................................................................... 4 States with UC Benefit Duration Changes Currently in Effect ................................................. 6 States with UC Benefit Duration Changes in Effect in January 2012 ....................................... 6 Consequences of Reduced UC Benefit Duration for Federal Unemployment Programs.......... 7 Calculation of Benefit Duration for EUC08 Tiers............................................................... 7 Calculation of Benefit Duration for EB Payable Periods.................................................... 89 States with Reduced Maximum Weekly Benefit Amounts ............................................................................ 12.. 13 State Law Enactment of EB Trigger Options ................................................................................ 1314 Tables Table 1. States with Unemployment Compensation (UC) Law Changes in 2011 That Decrease Benefit DurationThat Decrease Benefit Duration ..................................................................................................................... 5...... 6 Table 2. Adjusted Maximum EUC08 and EB Benefit Duration Resulting from Changes to State Maximum UC Benefit Duration ......................................................................................... 9 10 Table 3. Extended Benefit (EB) Trigger Components Enacted by States...................................... 1415 Congressional Research Service UI: Consequences of Changes in State Unemployment Compensation Laws Introduction As a result of continued, high unemployment in the aftermath of the recent recession (December 2007-June 2009), many states have enacted changes to their Unemployment Compensation (UC) programs. These state UC changes seek to accomplish two goals. First, several states are attempting to reduce the state costs of UC benefits, which are financed through state taxes on employers. This reduction in state UC benefit spending may be achieved through two types of state UC changes: (1) a reduction in the duration of state UC employment benefits and (2) a reduction in the state maximum UC weekly benefit amount. AcrossSecond, across several states, another major goal is to take advantage of additional, federal unemployment benefits available through the permanent-law Extended Benefit (EB) program because these benefits are temporarily 100% federally financed (through January 4, 2012, under December 31, 2012, under current law). In support of this second major goal, many states have enacted permanent or temporary state laws to ensure that EB benefits are payable to eligible individuals. This report first provides a brief overview of the unemployment compensation programs and benefits that may currently be available to eligible, unemployed individuals. Next, the three categories of UC state law issues are analyzed: (1)1. changes in the duration of state UC unemployment benefits; (2)2. changes in the maximum UC weekly benefit amount; and (3)3. the enactment into state law of two trigger options for the EB program. Overview of Current Unemployment Benefits Several unemployment insurance (UI) programs may currently provide benefits to unemployed workers. When eligible workers lose their jobs, the UC program may provide up to 26 weeks of income support through the payment of regular state UC benefits.1 These UC benefits may be extended in two ways: (1) for up to 53 weeks by the temporarily authorized Emergency Unemployment Compensation (EUC08) program;2 and (2) for up to 13 or 20 weeks by the EB program if certain economic situations exist within the state.3 Provided below is a brief description of the benefits available through these three UI programs: UC, EUC08, and EB. For detailed information on each of these programs, including more details on the financing of each type of unemployment benefit, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits, by Katelin P. Isaacs and Julie M. Whittaker. 1 Or, in the case of the six (EUC08) program provides up to four tiers of additional weeks of unemployment benefits to certain workers who have exhausted their rights to UC benefits in states with high unemployment;2 and (2) the EB program provides up to 13 or 20 weeks of additional unemployment benefits if certain economic situations exist within the state.3 1 Or, in the case of the seven states described in the report section on “State Law Changes to UC Benefit Duration,” UC pays fewer than up to 26 weeks—either currently or beginning in January 2012. 2 See report section on “Calculation of Benefit Duration for EUC08 Tiers” for the calculation of EUC08 benefit durations in states that have reduced regular UC benefit duration. In states without UC duration reductions up to 63 weeks of total EUC08 benefits may be available in certain states during the period of February 19, 2012-May 26, 2012; up to 53 weeks of total EUC08 benefits may be available in certain states during the period of May 27, 2012-September 1, 2012; and up to 47 weeks of total EUC08 benefits may be available in certain states during the period of September 2, 2012-December 29, 2012. For more details on the structure and availability of EUC08 benefits at later dates, see CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by Julie M. Whittaker and Katelin P. Isaacs. 3 See report section on “Calculation of Benefit Duration for EB Payable Periods” for the calculation of EB benefit durations in states that have reduced regular UC benefit duration. Congressional Research Service 1 UI: Consequences of Changes in State Unemployment Compensation Laws Unemployment Compensation Program UC, authorized by the Social Security Act of 1935 (SSA; P.L. 74-271), Provided below is a brief description of the benefits available through these three UI programs: UC, EUC08, and EB. For detailed information on each of these programs, including more details on the financing of each type of unemployment benefit, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits, by Julie M. Whittaker and Katelin P. Isaacs. Unemployment Compensation Program Authorized by the Social Security Act of 1935 (SSA; P.L. 74-271), UC is a joint federal-state program that provides unemployment benefits to eligible individuals. Although federal laws and regulations provide broad guidelines on UC benefit coverage, eligibility, and benefit determination, the specifics regarding UC benefits are determined by each state. This results in essentially 53 different programs.4 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. 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 states use to determine monetary eligibility vary greatly. Most state benefit formulas replace approximately half of a claimant’s average weekly wage up to a weekly maximum. State taxes paid by employers on UC-covered wages finance UC benefits. Maximum UC Benefit Duration Until the recent state law changes described in this report, UC programs in states had been paying unemployment benefits for up to a maximum duration of at least 26 weeks. There is nothing in a maximum duration of 26 weeks. The only exceptions to the 26 week UC benefit maximum prior to these recent state law changes were states that provided more than 26 weeks of UC benefits (Montana: up to 28 weeks; Massachusetts: up to 30 weeks). There is nothing in federal law, however, that requires states to set their UC benefit duration maximum at 26 weeks. States have the discretion to set their own UC benefit durations via their state UC laws. In the early decades of the UC program, there was more variation in the maximum duration of UC UC benefits across states, which also tended to be lower than 26 weeks. Yet since the 1960s—and until the 2011 state law changes—states have chosen to provide up to at least 26 weeks of UC benefits to eligible individuals.5 In 2010, the only exceptions to the 26 week UC benefit maximum were states that provided more than 26 weeks of UC benefits (Montana: up to 28 weeks; Massachusetts: up to 30 weeks). Emergency Unemployment Compensation Program On June 30, 2008, the Supplemental Appropriations Act of 2008 (P.L. 110-252) created a new temporary, federally financed unemployment insurance program, the EUC08 program. This was the eighth time Congress had created a federal temporary programEUC08 is the eighth, federal temporary program that Congress has created to extend the number of potential weeks of unemployment compensation potential weeks of UC available to eligible, unemployed individuals during an economic slowdown.6 State UC agencies administer the EUC08 benefit along with regular UC benefits. The authorization for this program continues until January 3, 2012.7 EUC08 benefits are currently financed through general revenue from the U.S. Treasury. during an economic slowdown.6 State 4 The District of Columbia, Puerto Rico, and the Virgin Islands are considered to be states in UC law. Puerto Rico is an exception to this pattern of state convergence on 26 weeks as the maximum UC benefit duration in the 1960s. When it originally entered the federal-state UC system in 1961, Puerto Rico provided a lower maximum UC benefit duration (i.e., up to 16 weeks in 1961 and then up to 20 weeks for most of the 1970-1990 period). Puerto Rico did not provide up to 26 weeks of UC benefits until 1991. For more information on state UC benefit duration, including changes over time, see DOL’s “Significant Provisions of State UI Laws,” available at http://www.workforcesecurity.doleta.gov/unemploy/statelaws.asp#sigprouilaws. 6 The other programs became effective in 1958, 1961, 1972, 1975, 1982, 1991, and 2002. See CRS Report RL34340, Extending Unemployment Compensation Benefits During Recessions, by Julie M. Whittaker and Katelin P. Isaacs. 7 The EUC08 program has been amended eight times ( P.L. 110-449, P.L. 111-5, P.L. 111-92, P.L. 111-118, P.L. 111144, P.L. 111-157, P.L. 111-205, and P.L. 111-312). For more details on EUC08, including its legislative history, see CRS Report RS22915, Temporary Extension of Unemployment Benefits: Emergency Unemployment Compensation (EUC08), by Katelin P. Isaacs and Julie M. Whittaker. 5 Congressional Research Service 2 Consequences of Changes in State Unemployment Compensation Laws The EUC08 benefit amount is equal to the eligible individual’s weekly regular UC benefits. There are four tiers of EUC08 benefits, which are all temporary and scheduled to expire the week ending on or before January 3, 2012. There will be no new entrants into the EUC08 program after December 31, 2011.8 Those unemployed individuals who had qualified for a tier I, II, III, or IV EUC08 benefit by December 31, 2011, may be “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 within that tier. No EUC08 benefits—regardless of tier—are payable for any week after June 9, 2012. EUC08 benefits are paid out through four different tiers. The duration of EUC08 benefits from each tier is based on the duration of regular UC benefits. The consequences of recent state law changes to UC duration is discussed below. But, currently, for most states (i.e., those states with a UC maximum duration of up to 26 weeks), the duration of EUC08 benefit tiers is as follows: • Tier I of the EUC08 program provides up to 20 additional weeks of unemployment benefits to certain workers who have exhausted their rights to regular UC benefits. • Tier II provides up to an additional 14 weeks of benefits (for a total of 34 weeks of EUC08 benefits for all unemployed workers). • Tier III is available in states with a total unemployment rate (TUR)9 of at least 6% and provides up to an additional 13 weeks of EUC08 benefits (for a total of 47 weeks of EUC08 benefits in these states). • Tier IV is available in states with a TUR of at least 8.5% and provides up to an additional six weeks of EUC08 benefits (for a total of 53 weeks of EUC08 benefits in theses states).10 Extended Benefit Program The Federal-State Extended Unemployment Compensation Act of 1970, P.L. 91-373, established the EB program. The EB program provides extended unemployment benefits in states that meet certain economic criteria. In all states, EB is available when a state’s insured unemployment rate (IUR)11 or TUR12 reaches certain levels.13 For full details on state triggers for the EB program, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits, by Katelin P. Isaacs and Julie M. Whittaker. The EB program imposes additional federal restrictions on individual eligibility for benefits beyond the state requirements for regular UC. In addition to all state requirements for regular UC 8 January 1, 2012, for New York state. The TUR (the total unemployment rate) is the ratio of unemployed workers to all workers (employed and unemployed) in the labor market. 10 Each week the U.S. Department of Labor (DOL) posts trigger notices for tiers III and IV of the EUC08 program, which are available online, at http://www.workforcesecurity.doleta.gov/unemploy/claims_arch.asp. 11 The IUR (the insured unemployment rate) is the ratio of UC claimants divided by individuals in UC-covered jobs. 12 The TUR (the total unemployment rate) is the ratio of unemployed workers to all workers (employed and unemployed) in the labor market. 13 DOL’s weekly trigger notices for the EB program are available online at http://www.workforcesecurity.doleta.gov/ unemploy/claims_arch.asp. 9 Congressional Research Service 3 Consequences of Changes in State Unemployment Compensation Laws eligibility, the EB program requires claimants to have at least 20 weeks of full-time insured employment or the equivalent in their base period, and to conduct a systematic and sustained work search. P.L. 110-252 allows states to determine which extended unemployment benefit— EUC08 or EB—is paid first. States balance the decision of which benefit to pay first by weighing the potential cost savings to the state against the potential loss of unemployment benefits for unemployed individuals in the state. Currently, all states except Alaska are paying EUC08 benefits before EB (although states have the discretion to adjust this arrangement). Under permanent law, EB benefits are funded half (50%) by the federal government and half (50%) by states. The 2009 stimulus package (P.L. 111-5), as amended, temporarily changes the financing of EB benefits to be 100% federal funding through January 4, 2012.14 The EB benefit amount is equal to the eligible individual’s weekly regular UC benefits. There are two types of payable periods for EB benefits. First, if it meets certain state economic criteria and has certain state law trigger options in place15,5 Congressional Research Service 2 UI: Consequences of Changes in State Unemployment Compensation Laws UC agencies administer the EUC08 benefit along with regular UC benefits. EUC08 benefits are currently financed with general revenue from the U.S. Treasury. The authorization for this program continues until the week ending on or before January 2, 2013.7 There is no grandfathering of any EUC08 benefit after that date. Therefore, EUC08 benefits are currently available through December 29, 2012 (December 30, 2012 for New York). The EUC08 benefit amount is equal to the eligible individual’s weekly regular UC benefits. There are four tiers of EUC08 benefits. As authorized under P.L. 112-96, the potential duration of EUC08 benefits available to eligible individuals varies by calendar date and state unemployment rate:8 • Tier I is available in all states, up to 20 weeks until September 1, 2012, when the maximum number of weeks of available benefits decreases to 14 weeks. • Tier II is available in all states, up to 14 weeks until May 26, 2012. Beginning May 27, 2012, the state’s total unemployment rate (TUR) must be at least 6% to have tier II benefits available in the state.9 • Tier III is available in states with a TUR of at least 6% (or an IUR of at least 4%) for up to 13 weeks until May 29, 2012. Beginning May 27, 2012, the state’s TUR must be at least 7% (or an insured unemployment rate [IUR]10 of at least 4%) to have tier III benefits available in the state. Beginning September 2, 2012, the maximum number of weeks of UI benefits available in tier III decreases from 13 to 9 weeks. • Tier IV is available in states with an active EB program and a TUR of at least 8.5% or an IUR of at least 5% until May 26, 2012, for up to 6 weeks. However, in states that do not have an active EB program and have a TUR of at least 8.5% (or an IUR of at least 5%), the maximum potential duration is up to 16 weeks. The 16-week provision for states without an active EB program terminates in June 2012. • Beginning May 27, 2012, tier IV benefits are available in a state if that the state’s TUR is at least 9% (rather than 8.5%) or the IUR is 5% (unchanged). Thus, for all states meeting the unemployment rate criteria, the maximum potential duration is up to 6 weeks. • Beginning September 2, 2012, the maximum potential duration of tier IV increases to 10 weeks. 7 The EUC08 program has been amended 10 times (P.L. 110-449, P.L. 111-5, P.L. 111-92, P.L. 111-118, P.L. 111-144, P.L. 111-157, P.L. 111-205, P.L. 111-312, P.L. 112-78, and P.L. 112-96). For more details on EUC08, including its legislative history, CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by Julie M. Whittaker and Katelin P. Isaacs. 8 For additional details and special considerations regarding maximum potential weeks of EUC08 benefits available in state, see CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by Julie M. Whittaker and Katelin P. Isaacs. 9 The TUR (the total unemployment rate) is the seasonally-adjusted, three-month average of the ratio of unemployed workers to all workers (employed and unemployed) in the labor market. 10 The IUR (the insured unemployment rate) is the ratio of UC claimants divided by individuals in UC-covered jobs. Congressional Research Service 3 UI: Consequences of Changes in State Unemployment Compensation Laws Extended Benefit Program The Federal-State Extended Unemployment Compensation Act of 1970, P.L. 91-373, established the EB program. The EB program provides extended unemployment benefits in states that meet certain economic criteria. In all states, EB is available when a state’s IUR or TUR reaches certain levels.11 For additional details on state triggers for the EB program, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits, by Julie M. Whittaker and Katelin P. Isaacs. The EB program imposes additional federal restrictions on individual eligibility for benefits beyond the state requirements for regular UC. In addition to all state requirements for regular UC eligibility, the EB program requires claimants to have at least 20 weeks of full-time insured employment or the equivalent in their base period and to conduct a systematic and sustained work search. Prior to the enactment of P.L. 112-96, states were permitted to determine which benefit, EB or EUC08, was paid first.12 P.L. 112-96 now requires that states pay EUC08 benefits before EB benefits. Under permanent law, EB benefits are funded half (50%) by the federal government and half (50%) by states. The 2009 stimulus package (P.L. 111-5), as amended, temporarily changes the financing of EB benefits to be 100% federal funding through December 31, 2012.13 The EB benefit amount is equal to the eligible individual’s weekly regular UC benefits. There are two types of payable periods for EB benefits. First, if it meets certain state economic criteria and has certain state law trigger options in place,14 a state may pay EB benefits through an EB Unemployment Period. As discussed below, the duration of an EB Unemployment Period is based on the duration of regular UC benefits. For most states (i.e., those states with a UC maximum duration of up to 26 weeks), the EB Unemployment Period may provide up to 13 additional weeks of unemployment benefits to eligible individuals. Second, a state may pay benefits through an EB High Unemployment Period if that state meets certain state economic criteria and has certain state law trigger options in place.1615 Because the duration of an EB High Unemployment Period is based on the duration of regular UC benefits in most states (i.e., those states with a UC maximum duration of up to 26 weeks), up to 20 additional weeks of EB benefits may be available to eligible individuals. State Law Changes to UC Benefit Duration Regular state UC benefits are financed through state payroll taxes on employers. The state unemployment tax rate on employers in all states is “experience rated,” that is, the state tax 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. As a result of the most recent recession and its accompanying prolonged and high unemployment, states have paid out large amounts of UC benefits ($75.0 billion in FY2009 and $63.0 billion in FY2010 versus $30.2 billion in FY2006 and $31.4 billion in FY2007).17 This increase in state expenditures on UC benefits has also led to large outstanding federal loans in many states18 as well as increased employer tax rates in most states. 14 11 DOL’s weekly trigger notices for the EB program are available online at http://www.workforcesecurity.doleta.gov/ unemploy/claims_arch.asp. 12 Alaska was the only state to pay EB benefits first when this option was available under P.L. 110-252, as amended. 13 This temporary 100% federal financing of EB benefits does not include “non-sharable” benefits (generally, these are former state and local employees’ EB benefits). 1514 For details on these EB triggers, see report section on “State Law Enactment of EB Trigger Options.” 16 Ibid. 17 For more details on revenues and expenditures associated with UC benefits, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits, by Katelin P. Isaacs and Julie M. Whittaker. 18 For more details on federal loans to states to pay UC benefits, see CRS Report RS22954, The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States, by Julie M. Whittaker. Congressional Research Service 4 Consequences of Changes in State Unemployment Compensation Laws 15 Ibid. Congressional Research Service 4 UI: Consequences of Changes in State Unemployment Compensation Laws former employees, the higher the tax rate of the employer, up to a maximum established by state law. As a result of the most recent recession and its accompanying prolonged and high unemployment, states have paid out large amounts of UC benefits ($75.3 billion in FY2009 and $63.0 billion in FY2010 versus $30.2 billion in FY2006 and $31.4 billion in FY2007).16 This increase in state expenditures on UC benefits has also led to large outstanding federal loans in many states17 as well as increased employer tax rates in most states. In response to similar state UC financial stress following prior recessions, states have typically reduced the amount of UC benefits paid to individuals through reductions in the maximum benefit amount or through changes in the underlying benefit calculations. Under current federal law, however, most states are temporarily prohibited from reducing UC benefit amounts through changes to benefit calculation19calculation18 and, therefore, have acted to reduce UC benefit duration as an alternative means to decrease total UC benefit payments. Therefore, these state UC benefit duration reductions are, in part, a response to UC financial crises facing states. At the same time, however, the duration for current federal unemployment benefits—each tier of the EUC08 program and any EB periods—are calculated based on state UC benefit duration. Thus, states that have enacted laws to reduce the duration of regular UC benefits have also reduced the duration of EUC08 and EB benefits. Currently, six states have acted to decrease their maximum UC benefit durations. As elaborated below, three of these states—Arkansas, Missouri, and South Carolina—adopted UC benefit duration reductions that are currently in effect. The three other states—Michigan, Illinois, and Florida—have effective dates for their UC benefit duration reductions in January 2012.20 Table 1 provides full details on these state changes to UC benefit duration. Table 1. States with Unemployment Compensation (UC) Law Changes in 2011 That Decrease Benefit Duration Effective Date of New Maximum UC Duration State Bill or Act Number Prior Maximum UC Duration New Maximum UC Duration Arkansas Act 861, 88th General Assembly 26 weeks 25 weeks Currently effective [Effective upon enactment (March 30, 2011)] Missouri House Bill No. 163, 96th General Assembly 26 weeks 20 weeks Currently effective [Effective upon enactment (April 13, 2011)] Michigan Act No. 14, Public Acts of 2011 26 weeks 20 weeks Effective for individuals filing an initial claim for UC benefits on or after January 15, 2012 Public Act 097-0001, 97th General Assembly 26 weeks 25 weeks Effective January 1, 2012 State Illinois 19 seven states have acted to decrease their maximum UC benefit durations: • Arkansas decreased its state UC maximum duration from 26 weeks to 25 weeks, effective March 30, 2011. • Florida decreased the maximum UC duration from 26 weeks to a variable maximum duration, depending on the state unemployment rate and ranging from 12 weeks up to 23 weeks. Up to 12 weeks will be available if the state unemployment rate is 5% or less. Each 0.5% increase in the state unemployment rate above 5% will add an additional week of UC benefit duration. Finally, up to 23 weeks of regular UC benefits will be available if the state unemployment rate is at least 10.5%.19 This benefit reduction was effective January 1, 2012. • Georgia decreased its UC maximum duration from 26 weeks to a variable maximum duration that ranges between 14 weeks and 20 weeks, depending on the unemployment rate in the state. A maximum UC duration of 14 weeks will be available if the state unemployment rate is 6.5% or less. Each 0.5% increase in the state unemployment rate above 6.5% will add additional weeks of UC benefit 16 For more details on revenues and expenditures associated with UC benefits, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits, by Julie M. Whittaker and Katelin P. Isaacs. 17 For more details on federal loans to states to pay UC benefits, see CRS Report RS22954, The Unemployment Trust Fund (UTF): State Insolvency and Federal Loans to States, by Julie M. Whittaker. 18 For a fuller discussion of this issue, including details on two states that have been able to reduce weekly UC benefit amounts, see the report section on “States with Reduced Maximum Weekly Benefit Amounts.” 20 At least part of the significance of a January 2012 effective date is the expiration of two key federal unemployment insurance program expirations: (1) the expiration of the authorization of the EUC08 program (week ending on or before January 3, 2012) and (2) the expiration of the 100% federal financing of the EB program, which is authorized through January 4, 2012. Congressional Research Service 5 Consequences of Changes in State Unemployment Compensation Laws State Florida State Bill or Act Number Prior Maximum UC Duration New Maximum UC Duration Chapter 2011-235, Laws of Florida 26 weeks Variable duration based on state unemployment rate: Effective Date of New Maximum UC Duration Effective Weekly Benefit Amounts.” 19 The three-month average, seasonally adjusted unemployment rate for Florida in June 2012 is 8.6%, as determined by the U.S. Department of Labor. Congressional Research Service 5 UI: Consequences of Changes in State Unemployment Compensation Laws duration up to a maximum of 20 weeks of UC benefits if the state unemployment rate is at least 9%.20 This benefit reduction was effective May 2, 2012. • Illinois decreased its UC maximum duration from 26 weeks to 25 weeks, effective January 1, 2012. • Michigan decreased its UC maximum duration from 26 weeks to 20 weeks. This change was effective for individuals filing an initial claim for UC benefits on or after January 15, 2012. • Missouri decreased its UC maximum duration from 26 weeks to 20 weeks, effective April 13, 2011. • South Carolina also decreased its UC maximum duration from 26 weeks to 20 weeks, effective June 14, 2011. Table 1 also provides details on these state changes to UC benefit duration. Table 1. States with Unemployment Compensation (UC) Law Changes That Decrease Benefit Duration State State Bill or Act Number Prior Maximum UC Duration New Maximum UC Duration Effective Date of New Maximum UC Duration Arkansas Act 861, 88th General Assembly 26 weeks 25 weeks Effective upon enactment (March 30, 2011) Florida Chapter 2011-235, Laws of Florida 26 weeks Variable duration based on state unemployment rate: Effective January 1, 2012 (1) 12 weeks if state unemployment rate is 5% or below (2) additional week added to 12 weeks for each 0.5% increase in state unemployment rate above 5% (3) 23 weeks if state unemployment rate is at least 10.5% South Carolina Act No. 63, South Carolina General Assembly, 119th Session 26 weeks 20 weeks Currently effective [Effective upon enactment (June 14, 2011)] Source: Compiled by the Congressional Research Service. States with UC Benefit Duration Changes Currently in Effect • Arkansas decreased its state UC maximum duration from 26 weeks to 25 weeks. This state UC law change is currently effective. • Missouri decreased its UC maximum duration from 26 weeks to 20, effective currently. • South Carolina also decreased its UC maximum duration from 26 weeks to 20, effective currently. States with UC Benefit Duration Changes in Effect in January 2012 • Florida decreased the maximum UC duration from 26 weeks to a variable maximum duration, depending on the state unemployment rate and ranging from 12 weeks up to 23 weeks. Up to 12 weeks will be available if the state unemployment rate is 5% or less. Each 0.5% increase in the state unemployment rate above 5% will add an additional week of UC benefit duration. Finally, up to 23 weeks of regular UC benefits will be available if the state unemployment rate is at least 10.5%.21 This benefit reduction is effective January 1, 2012. • Illinois decreased its UC maximum duration from 26 weeks to 25 weeks, effective January 1, 2012. 21 The three-month average, seasonally adjusted unemployment rate for Florida in May 2011 is 11.1%, as determined by the U.S. Department of Labor. Congressional Research Service 6 Consequences of Changes in State Unemployment Compensation Laws • Michigan decreased its UC maximum duration from 26 weeks to 20 weeks. This change is effective for individuals filing an initial claim for UC benefits on or after January 15, 2012 20 The three-month average, seasonally adjusted unemployment rate for Georgia in June 2012 is 9.0%, as determined by the U.S. Department of Labor. Congressional Research Service 6 UI: Consequences of Changes in State Unemployment Compensation Laws State Georgia State Bill or Act Number Act 710 (House Bill 347), Georgia General Assembly, 2011-2012 Regular Session Prior Maximum UC Duration New Maximum UC Duration 26 weeks Variable duration based on state unemployment rate: Effective Date of New Maximum UC Duration Effective May 2, 2012 (1) 14 weeks if state unemployment rate is 6.5% or below (2) additional amount added to 14 weeks for each 0.5% increase in state unemployment rate above 6.5% (3) 20 weeks if state unemployment rate is at least 9.0% Illinois Public Act 097-0001, 97th General Assembly 26 weeks 25 weeks Effective January 1, 2012 Michigan Act No. 14, Public Acts of 2011 26 weeks 20 weeks Effective for individuals filing an initial claim for UC benefits on or after January 15, 2012 Missouri House Bill No. 163, 96th General Assembly 26 weeks 20 weeks Effective upon enactment (April 13, 2011) South Carolina Act No. 63, South Carolina General Assembly, 119th Session 26 weeks 20 weeks Effective upon enactment (June 14, 2011) Source: Compiled by the Congressional Research Service. Consequences of Reduced UC Benefit Duration for Federal Unemployment Programs Calculation of Benefit Duration for EUC08 Tiers The duration of each tier of benefits in the EUC08 program is calculated through a formula based on state UC benefit duration.2221 Therefore, states that have enacted laws to reduce the duration of regular UC benefits will also experience a reduction in the duration of EUC08 benefits. 21 Under current law, the duration of benefits for each tier of EUC08 (as well as any EB payable period) is set through calculations based on the lesser of (1) the state benefit criteria, which is a set percentage of the duration of regular UC benefits (e.g., 80% of the individual’s total regular UC duration in a benefit year for Tier I of EUC08 for the February 19, 2012-September 1, 2012 period) or (2) the maximum weekly amount criteria, which is the multiple of an individual’s average weekly benefit amount under the UC program (e.g., 20 times an individual’s average weekly benefit amount in a benefit year for Tier I of EUC08 for the February 19, 2012-September 1, 2012 period). In the event (continued...) Congressional Research Service 7 UI: Consequences of Changes in State Unemployment Compensation Laws Specific formulas for the duration of each tier of EUC08 are presented below.22Specific formulas for the duration of each tier of EUC08 are presented below. Examples of adjusted EUC08 benefit durations—based on a weekly benefit amount of $300 and a new maximum UC duration of 20 weeks—are also provided:23 • Tier I of EUC08 • Duration formula: 80% of the duration of an individual’s total regular UC benefits in benefit year • Illustration of adjusted duration (formerly, up to 20 weeks atthe unreduced EUC08 tier I duration would have been up to 20 weeks—based on up to 26 weeks of unreduced state UC benefits—at a weekly benefit amount of $300) • • Tier II of EUC08 • Duration formula: 54% of the duration of an individual’s total regular UC benefits in benefit year • Illustration of adjusted duration (formerly, up to 14 weeks at $300) • • 80% of 20 weeks of UC=16 weeks; up to 16 weeks at weekly benefit amount of $300 54% of 20 weeks of UC=10.8 weeks; up to 10 weeks at weekly benefit amount of $300 and the last week prorated at $240 ($300/0.8=$240) Tier III of EUC08 • Duration formula: 50% of the duration of an individual’s total regular UC benefits in benefit year 22 Under current law, the duration of benefits for each tier of EUC08 (as well as any EB payable period) is set through calculations based on the lesser of (1) the state benefit criteria, which is a set percentage of the duration of regular UC benefits (e.g., 80% of the individual’s total regular UC duration in a benefit year for Tier I of EUC08) or (2) the maximum weekly amount criteria, which is the multiple of an individual’s average weekly benefit amount under the UC program (e.g., 20 times an individual’s average weekly benefit amount in a benefit year for Tier I of EUC08). In the event of state reduction in UC benefit durations, the former calculation—the state benefit criteria—will be lower and, thus, applicable. Therefore, this report’s discussion of the benefit duration calculation for all tiers of EUC08 and all payable periods of EB focuses on this state benefit criteria formula in its explanations and illustrations of duration calculations. 23 The average weekly benefit amount is roughly $300 across all states for April 2011• Illustration of adjusted duration (formerly, up to 13 weeks at $300) • 50% of 20 weeks of UC=10 weeks; up to 10 weeks at weekly benefit amount of $300 (...continued) of state reduction in UC benefit durations, the former calculation—the state benefit criteria—will be lower and, thus, applicable. Therefore, this report’s discussion of the benefit duration calculation for all tiers of EUC08 and all payable periods of EB focuses on this state benefit criteria formula in its explanations and illustrations of duration calculations. 22 These EUC08 benefit duration formulas are effective for EUC08 tiers authorized under P.L. 112-96 for February 19, 2012-September 1, 2012 (February 20, 2012-September 2, 2012, for New York). Beginning September 2, 2012 (September 3, 2012, for New York), the duration of EUC08 tiers I, III, and IV are scheduled to change. For more details, see CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by Julie M. Whittaker and Katelin P. Isaacs. 23 The average weekly benefit amount is roughly $300 across all states for June 2012 (DOL). Michigan, Missouri, and South Carolina have enacted state laws to reduce their maximum UC benefit duration to 20 weeks. Congressional Research Service 7 8 UI: Consequences of Changes in State Unemployment Compensation Laws • Illustration of adjusted duration (formerly, up to 13 weeks at $300) • • 50% of 20 weeks of UC=10 weeks; up to 10 weeks at weekly benefit amount of $300 Tier IV of EUC08 • Duration formula: 24% of the duration of an individual’s total regular UC benefits in benefit yearyear24 • Illustration of adjusted duration (formerly, up to 6 weeks at $300) • 24% of 20 weeks of UC=4.8 weeks; up to 4 weeks at weekly benefit amount of $300 and the last week prorated at $240 ($300/0.8=$240) EUC08 tier duration calculations for each state that has enacted a reduction in regular UC benefit duration are provided in Table 2. Calculation of Benefit Duration for EB Payable Periods The duration of benefits for the two types of EB payable periods are set through calculations similar in structure to the calculations for EUC08 tier durations.2425 As is the case with the EUC08 program, state reductions in UC benefit durations lead to proportional reductions in the duration of the EB payable periods. The EB payable period duration calculations and illustration of adjusted EB durations (using $300 as the weekly benefit amount and a new UC maximum duration of 20 weeks)2526 are below: • EB Unemployment Period • Duration formula: 50% of the duration of individual’s total regular UC benefits in benefit year • Illustration of adjusted duration (formerly up to 13 weeks at $300) • • 50% of 20 weeks of UC=10 weeks); up to 10 weeks at weekly benefit amount of $300 EB High Unemployment Period • Duration formula: 80% of the duration individual’s total regular UC benefits in benefit year • Illustration of adjusted duration (formerly up to 20 weeks at $300) • 80% of 20 weeks of UC=16 weeks; up to 16 weeks at weekly benefit amount of $300 Table 2 displays EB payable period duration calculations for each state that has enacted reduction in regular UC benefit duration. 24 25 See footnote 22 for more technical details. a reduction in regular UC benefit duration. 24 The duration of tier IV of EUC08 in states that do not have an active EB program and have a TUR of at least 8.5% (or an IUR of at least 5%) is up to 16 weeks for the period of February 19, 2012-May 26, 2012 (February 20, 2012-May 27, 2012 for New York). For such states during this period, the duration formula for tier IV of EUC08 is 62% of an individual’s total regular UC benefits in benefit year. 25 See footnote 21 for more technical details. 26 See footnote 23 for rationale behind these data points. Congressional Research Service 8 9 UI: Consequences of Changes in State Unemployment Compensation Laws Table 2. Adjusted Maximum EUC08 and EB Benefit Duration Resulting from Changes to State Maximum UC Benefit Duration State Adjusted Maximum UC Duration Adjusted Maximum EUC08 Tier I Duration Adjusted Maximum EUC08 Tier II Duration Adjusted Maximum EUC08 Tier III Duration Adjusted Maximum EUC08 Tier IV Duration Adjusted Maximum EB Unemployment Period Duration Adjusted Maximum EB High Unemployment Period Duration Effective Date for Adjusted UC Durations Adjusted Benefit Duration Maximum from All Programs Arkansas 25 weeks 20 weeks 13 weeks and 1 week at 0.5xWBA 12 weeks and 1 week at 0.5xWBA 6 weeks 12 weeks and 1 week at 0.5xWBA 20 weeks Currently effective 97 weeks Missouri 20 weeks 16 weeks 10 weeks and 1 week at 0.8xWBA 10 weeks 4 weeks and 1 week at 0.8xWBA 10 weeks 16 weeks Currently effective 77 weeks and 1 week at 0.6xWBA Michigan 20 weeks 16 weeks 10 weeks and 1 week at 0.8xWBA 10 weeks 4 weeks and 1 week at 0.8xWBA 10 weeks 16 weeks Effective for individuals filing initial claims for UC benefits on or after 1/15/12 77 weeks and 1 week at 0.6xWBA Illinois 25 weeks 20 weeks 13 weeks and 1 week at 0.5xWBA 12 weeks and 1 week at 0.5xWBA 6 weeks 12 weeks and 1 week at 0.5xWBA 20 weeks Effective 1/1/12 97 weeks CRS-9 Consequences of Changes in State Unemployment Compensation Laws State Florida Adjusted Maximum UC Duration Adjusted Maximum EB High Unemployment Period Duration Adjusted Maximum EUC08 Tier I Duration Adjusted Maximum EUC08 Tier II Duration Adjusted Maximum EUC08 Tier III Duration Adjusted Maximum EUC08 Tier IV Duration With 12 week UC duration: 9 weeks and 1 week at 0.6xWBA With 12 week UC duration: 6 weeks and 1 week at 0.48xWBA With 12 week UC duration: 6 weeks With 12 week UC duration: 2 weeks and 1 week at 0.88xWBA With 12 week UC duration: 6 weeks at WBA With 12 week UC duration: 9 weeks at WBA and 1 week at 0.6xWBA (3) 23 weeks if state unemployment rate is at least 10.5% With 23 week UC duration: 18 weeks and 1 week at 0.4xWBA With 23 week UC duration: 12 weeks and 1 week at 0.42xWBA With 23 week UC duration: 11 weeks and 1 week at 0.5xWBA With 23 week UC duration: 5 weeks and 1 week at 0.52xWBA With 23 week UC duration: 11 weeks at WBA and 1 week at 0.5xWBA With 23 week UC duration: 18 weeks at WBA and 1 week at 0.4xWBA 20 weeks 16 weeks 10 weeks and 1 week at 0.8xWBA 10 weeks 4 weeks and 1 week at 0.8xWBA 10 weeks 16 weeks Variable duration based on state unemployment rate: (1) 12 weeks if state unemployment rate is 5% or below (2) additional week added to 12 weeks for each 0.5% increase in state unemployment rate above 5% South Carolina Adjusted Maximum EB Unemployment Period Duration Effective Date for Adjusted UC Durations Effective 1/1/12 Adjusted Benefit Duration Maximum from All Programs With 12 week UC duration: 46 weeks and 1 week at WBAx0.56 With 23 week UC duration: 89 weeks and I week at WBAx.0.24 Currently effectiveArkansas 25 weeks Florida Variable duration based on state unemployment rate: (1) 12 weeks if state unemployment rate is 5% or below (2) additional week added to 12 weeks for each 0.5% increase in state unemployment rate above 5% (3) 23 weeks if state unemployment rate is at least 10.5% CRS-10 Adjusted Maximum EUC08 Tier I Duration Adjusted Maximum EUC08 Tier II Duration Adjusted Maximum EUC08 Tier III Duration Adjusted Maximum EUC08 Tier IV Duration 20 weeks 13 weeks and 1 week at 0.5xWBA 12 weeks and 1 week at 0.5xWBA 6 weeks Adjusted Maximum EB Unemployment Period Duration 12 weeks and 1 week at 0.5xWBA Adjusted Maximum EB High Unemployment Period Duration 20 weeks Effective Date for Adjusted UC Durations Effective 3/31/11 Adjusted Benefit Duration Maximum from All Programs 97 weeks Effective 1/1/12 With 12 week UC duration: 9 weeks and 1 week at 0.6xWBA With 12 week UC duration: 6 weeks and 1 week at 0.48xWBA With 12 week UC duration: 6 weeks With 12 week UC duration: 2 weeks and 1 week at 0.88xWBA With 12 week UC duration: 6 weeks at WBA With 12 week UC duration: 9 weeks at WBA and 1 week at 0.6xWBA With 12 week UC duration: 46 weeks and 1 week at WBAx0.56 With 23 week UC duration: 18 weeks and 1 week at 0.4xWBA With 23 week UC duration: 12 weeks and 1 week at 0.42xWBA With 23 week UC duration: 11 weeks and 1 week at 0.5xWBA With 23 week UC duration: 5 weeks and 1 week at 0.52xWBA With 23 week UC duration: 11 weeks at WBA and 1 week at 0.5xWBA With 23 week UC duration: 18 weeks at WBA and 1 week at 0.4xWBA With 23 week UC duration: 89 weeks and I week at WBAx.0.24 UI: Consequences of Changes in State Unemployment Compensation Laws State Georgia Adjusted Maximum UC Duration Adjusted Maximum EUC08 Tier I Duration Adjusted Maximum EUC08 Tier II Duration Adjusted Maximum EUC08 Tier III Duration Adjusted Maximum EUC08 Tier IV Duration Adjusted Maximum EB Unemployment Period Duration Adjusted Maximum EB High Unemployment Period Duration Variable duration based on state unemployment rate: (1) 14 weeks if state unemployment rate is 6.5% or below Effective Date for Adjusted UC Durations Adjusted Benefit Duration Maximum from All Programs Effective 5/2/2012 With 14 week UC duration: 11 weeks and 1 week at 0.2xWBA With 14 week UC duration: 7 weeks and 1 week at 0.56xWBA With 14 week UC duration: 7 weeks With 14 week UC duration: 3 weeks and 1 week at 0.36xWBA With 14 week UC duration: 7 weeks at WBA With 14 week UC duration: 11 weeks at WBA and 1 week at 0.2xWBA With 14 week UC duration: 54 weeks and 1 week at WBAx0.32 (3) 20 weeks if state unemployment rate is at least 9.0% With 20 week UC duration: 16 weeks With 20 week UC duration: 10 weeks and 1 week at 0.8xWBA With 20 week UC duration: 10 weeks With 20 week UC duration: 4 weeks and 1 week at 0.8xWBA With 20 week UC duration: 10 weeks With 20 week UC duration: 16 weeks With 20 week UC duration: 77 weeks and I week at WBAx.0.6 25 weeks 20 weeks 13 weeks and 1 week at 0.5xWBA 12 weeks and 1 week at 0.5xWBA 6 weeks 12 weeks and 1 week at 0.5xWBA 20 weeks (2) additional amount added to 14 weeks for each 0.5% increase in state unemployment rate above 6.5% Illinois CRS-11 Effective 1/1/12 97 weeks UI: Consequences of Changes in State Unemployment Compensation Laws State Adjusted Maximum UC Duration Adjusted Maximum EUC08 Tier I Duration Adjusted Maximum EUC08 Tier II Duration Adjusted Maximum EUC08 Tier III Duration Adjusted Maximum EUC08 Tier IV Duration Adjusted Maximum EB Unemployment Period Duration Adjusted Maximum EB High Unemployment Period Duration Effective Date for Adjusted UC Durations Adjusted Benefit Duration Maximum from All Programs Michigan 20 weeks 16 weeks 10 weeks and 1 week at 0.8xWBA 10 weeks 4 weeks and 1 week at 0.8xWBA 10 weeks 16 weeks Effective for individuals filing initial claims for UC benefits on or after 1/15/12 77 weeks and 1 week at 0.6xWBA Missouri 20 weeks 16 weeks 10 weeks and 1 week at 0.8xWBA 10 weeks 4 weeks and 1 week at 0.8xWBA 10 weeks 16 weeks Effective 4/13/11 77 weeks and 1 week at 0.6xWBA South Carolina 20 weeks 16 weeks 10 weeks and 1 week at 0.8xWBA 10 weeks 4 weeks and 1 week at 0.8xWBA 10 weeks 16 weeks Effective 6/14/11 77 weeks and 1 week at 0.6xWBA Source: Compiled by Congressional Research Service. Notes: WBA: weekly benefit amount. All weeks of benefits are paid out in terms of full WBA unless a pro-rated WBA calculation is provided. The adjusted maximum benefit durations listed in the table for EUC08 and EB (and the maximum duration from all programs, which had previously been 99 weeks) apply to beneficiaries who file an initial claim for UC benefits after the effective date for adjusted UC durations. Individuals who received or are receiving UC benefits prior to the effective date for the state reduction in maximum UC benefits maintain the previous, unreduced UC, EUC08, and EB benefit durations. CRS-10 Consequences of Changes in State Unemployment Compensation Laws Under current law, the authorization for the EUC08 program expires the week ending on or before January 3, 2012. Consequently, there will be no new entrants into any tier of EUC08 after December 31, 2011 (January 1, 2012, in New York state). Individuals receiving EUC08 benefits prior to the program’s expiration may finish out their current tier of EUC08 benefit only and may not enter another tier. CRS-11 Consequences of Changes in State Unemployment Compensation Laws States with Reduced Maximum Weekly Benefit Amounts The Unemployment Compensation Extension Act of 2010 (P.L. 111-205), as amended, temporarily prevents states from actively changing the method of calculation of the UC weekly benefit amount in such a way as to decrease this average weekly benefit amount. This “nonreduction” rule is a condition of the Emergency Unemployment Compensation (EUC08) federal-state agreement, as amended by P.L. 111-205. States are not permitted to pay an average weekly UC benefit amount that is less than what would have been paid under state law prior to what was in effect as of June 2, 2010.26 However, states may reduce weekly benefits if that reduction happens automatically in certain circumstances as required by a state law that was in place before the enactment of P.L. 111-5. Thus, despite the “nonreduction” rule, two states—New Jersey and Oklahoma—have reduced the maximum amount of their UC weekly benefits since the rule became law. The weekly benefit reductions in these states do not violate the current federal prohibition as New Jersey and Oklahoma are two of 36 states with prior state laws that calculate the maximum weekly UC benefit via automatic adjustments based on the average weekly wage in a state.27 Because (1) the average weekly wage declined in both New Jersey and Oklahoma since the “nonreduction” rule provision of P.L. 111-205 was enacted and (2) this UC benefit calculation was already in state law, New Jersey and Oklahoma experienced the following UC benefit decreases: • New Jersey—decline in maximum weekly UC benefit from $600 as of July 1, 2010, to $598 as of January 1, 2011 • Oklahoma—decline in maximum weekly UC benefit from $430 as of July 1, 2010, to $358 as of January 1, 2011 These state UC benefit reductions also reduce weekly amounts for EUC08 and EB benefits, which are paid out in the same amount. 26 There was a similar, but programmatically distinct “nonreduction” rule in P.L. 111-5, as amended, which prevented states from actively changing the method of calculation of the UC weekly benefit amount to pay UC benefit amounts less than what would have been paid under state law prior to December 31, 2008. No states acted to decrease UC benefit amounts between December 31, 2008, and June 2, 2010, when the federal authorization for this earlier “nonreduction” rule expired. 27 The other 34 The EUC08 benefit duration formulas provided in this table are effective for EUC08 tiers authorized under P.L. 112-96 for February 19, 2012-September 1, 2012 (February 20, 2012-September 2, 2012 for New York). Beginning September 2, 2012 (September 3, 2012, for New York), the duration of EUC08 tiers I, III, and IV are scheduled to change. The duration of tier IV of EUC08 in states that do not have an active EB program and have a TUR of at least 8.5% (or an IUR of at least 5%) is up to 16 weeks for the period of February 19, 2012-May 26, 2012 (February 20, 2012-May 27, 2012 for New York). For such states during this period, the duration formula for tier IV of EUC08 is 62% of an individual’s total regular UC benefits in benefit year. For more details, see CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of Benefits, by Julie M. Whittaker and Katelin P. Isaacs. Under current law, the authorization for the EUC08 program expires the week ending on or before January 2, 2013. Consequently, EUC08 benefits are available through December 29, 2012 (December 30, 2012 for New York). CRS-12 UI: Consequences of Changes in State Unemployment Compensation Laws States with Reduced Weekly Benefit Amounts P.L. 110-252, as amended, temporarily prevents states from actively changing the method of calculation of the UC weekly benefit amount in such a way as to decrease this average weekly benefit amount. This “nonreduction” rule is a condition of the EUC08 federal-state agreement. In general, states are not permitted to pay an average weekly UC benefit amount that is less than what would have been paid under state law prior to what was in effect as of June 2, 2010.27 However, states may reduce weekly benefits if that reduction happens automatically in certain circumstances as required by a state law that was in place before the enactment of P.L. 111-5. In addition, P.L. 112-96 provides an exception to this UC “nonreduction” rule in the case of state legislation that was enacted before March 1, 2012. States that made changes to the regular UC benefit amount prior to March 1, 2012, are not subject to the “nonreduction” rule. Prior to P.L. 110-252, 36 states had enacted state laws that calculate the maximum weekly UC benefit via automatic adjustments based on the average weekly wage in a state.28 Therefore, if the average weekly wage declines in these states, they may experience automatic reductions in UC average weekly benefit amount, which are permitted under the “nonreduction” rule. For instance, in 2011, New Jersey and Oklahoma appear to have met these conditions and to have experienced automatic reductions in their state UC weekly benefit amount. Similarly, in 2012, Hawaii also seems to have met the necessary conditions to automatically reduce the state UC weekly benefit amount.29 These state UC benefit reductions also reduce weekly amounts for EUC08 and EB benefits, which are paid out in the same amount. Only individuals filing new state UC claims after the effective date for reduced UC durations, however, would experience reductions in UC, EUC08, or EB benefits. 27 The current “nonreduction” rule was put into place when P.L. 111-205 amended P.L. 110-252. There was a similar, but programmatically distinct “nonreduction” rule in P.L. 111-5, as amended, which prevented states from actively changing the method of calculation of the UC weekly benefit amount to pay UC benefit amounts less than what would have been paid under state law prior to December 31, 2008. No states acted to decrease UC benefit amounts between December 31, 2008, and June 2, 2010, when the federal authorization for this earlier “nonreduction” rule expired. 28 The 36 states that calculate benefit amounts using automatic adjustments under prior state law are Arkansas, Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Minnesota, Montana, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virgin Island, Islands, Washington, West Virginia, Wisconsin, and Wyoming. It is possible that these 34These 36 states could also experience reductions in UC weekly benefit amounts similar to New Jersey and Oklahomaunder the “nonreduction” rule if (1) the average weekly wages in states declined and the corresponding methods of calculation formula resulted in a benefit decrease (for specific information regarding these state-specific methods of benefit calculation, see DOL’s “Comparison of State Unemployment Laws,” Chapter 3: Monetary Eligibility, Table 3.6, pp. 13-1415, available at http://www.workforcesecurity.doleta.gov/unemploy/pdf/uilawcompar/20102011/monetary.pdf) and (2) the state did not otherwise prevent this benefit amount reduction through enactment of new state legislation. 29 See DOL’s “Significant Provisions of State UI Laws,” available at http://www.workforcesecurity.doleta.gov/ unemploy/statelaws.asp. Congressional Research Service 12 13 UI: Consequences of Changes in State Unemployment Compensation Laws State Law Enactment of EB Trigger Options The EB program is triggeredactive (“triggered on”) and pays unemployment benefits when a state’s insured insured unemployment rate (IUR)2830 or total unemployment rate (TUR)2931 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 two2 previous years (a two 2-year lookback). There are two other optional thresholds that states may choose. (States may choose 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. In addition to the optional EB triggers themselves, P.L. 111-312 (signed December 17, 2010) made technical changes to certain triggers in the EB program. P.L. 111-312, as amended, allows states to temporarily use lookback calculations based on three years of unemployment rate data (rather than the current lookback of two years of data) as part of their mandatory IUR and optional TUR triggers if states would otherwise trigger off or not be on a period of EB benefits. Using a twoyeartwo-year versus a three-year EB trigger lookback is an important adjustment because some states are likely to trigger off their EB periods in the near future despite high, sustained— but not increasing—unemployment rates. For states to implement EB trigger lookback changes, each state had to individually opt to amend its state UC laws. These state law changes must be written in such a way that if the two-year lookback has the effect that the state would have an active EB program, no action would be taken. But if a two-year lookback is not effective as part of an EB trigger and the state is not triggered on to an EB period, then the state would be able to use a three-year lookback. This temporary option to use three-year EB trigger lookbacks expires the week on or before December 31, 2011. With few exceptions, only states who have enacted the TUR trigger of these EB trigger options (in either permanent or temporary law) and also have enacted the temporary three-year lookback have an active EB program paying benefits. 282012. Currently, 11 states have adopted the optional TUR EB trigger (i.e., Option 2 above) into permanent state law: • Alaska, Connecticut, Kansas, Minnesota, New Hampshire, New Jersey, North Carolina, Oregon, Rhode Island, Vermont, and Washington 30 The IUR is the ratio of UC claimants divided by individuals in UC-covered jobs. The IUR 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. 2931 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 13 14 UI: Consequences of Changes in State Unemployment Compensation Laws Currently, 11 states have adopted the optional TUR EB trigger (i.e., Option 2 above) into permanent state law: • Alaska, Connecticut, Kansas, Minnesota, New Hampshire, New Jersey, North Carolina, Oregon, Rhode Island, Vermont, and Washington In addition, 27In addition, 28 states have temporarily adopted the TUR trigger into state law, linking the expiration of this optional EB trigger to the expiration of the 100% federal financing of EB, which is currently authorized through January 4December 31, 2012 (under P.L. 111-312):30112-96):32, • Alabama, Arizona, California, Colorado, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Mexico, New York, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Wisconsin As of August 7, 2011April 1, 2012, there are 33 states that have enacted a three-year EB trigger lookback option option (as temporarily authorized until the week ending on or before December 31, 2012, under P.L. 111-312, as amended most recently by P.L. 112-96):under P.L. 111-312):31 • Alabama, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New Mexico, New York, York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Washington, West Virginia, and Wisconsin Tennessee, Texas, Washington, West Virginia, and Wisconsin With few exceptions, only states that enacted the TUR trigger (in either permanent or temporary law) and also enacted the temporary three-year lookback had an active EB program paying benefits throughout 2011 and 2012. As of the week of August 12, 2012, however, no state meets the EB trigger criteria under “Option 2”—TUR trigger and three-year lookback—to be able to pay EB benefits. Future increases in state unemployment rates and/or a reversal of the current trend of decreasing unemployment rates would be required in order to trigger on EB based on the TUR trigger and lookback requirement. Table 3 compiles enactment information for all three EB trigger options described above by state. Table 3. Extended Benefit (EB) Trigger Components Enacted by States State Permanent TUR Trigger Alabama Alaska Temporary TUR Trigger Three-Year Lookback X X X Arizona X Arkansas California X X Colorado X X Connecticut X X Delaware X X District of Columbia X X Florida X X 3032 Under permanent law (P.L. 91-373), EB benefits are funded half (50%) by the federal government and half (50%) by states. The 2009 stimulus package (P.L. 111-5), as amended, temporarily changes the financing of EB benefits to be 100% federal funding until January 4, 2012. Maryland has a temporary TUR trigger authorized under current state law, but it does not go into effect until October 1, 2011. Therefore, Maryland is not counted in the list of 27 states with effective, temporary TUR triggers. 31 Maryland also adopted a three-year lookback option, effective October 1, 2011. Since this three-year lookback is not yet in effect, Maryland is not counted in the list of 33 states with active three-year lookback options.December 31, 2012. Congressional Research Service 14 15 UI: Consequences of Changes in State Unemployment Compensation Laws Temporary TUR Trigger Three-Year Lookback Florida X X Georgia X X Idaho X X Illinois X X Indiana X X State Permanent TUR Trigger Georgia Hawaii Iowa Kansas X Kentucky X X X Maine X X Maryland X XX X X (effective 10/1/11) X (effective 10/1/11) Massachusetts X X Michigan X X Louisiana Maine Maryland Minnesota X X Mississippi Missouri X X X X Montana Nebraska Nevada New Hampshire X New Jersey X X New Mexico X X New York XNew Mexico X X New York X X Montana Nebraska Nevada New Hampshire X New Jersey X North Carolina X X North Dakota Ohio X X Oklahoma Oregon X Pennsylvania X X X Puerto Rico Rhode Island South Carolina X X X X Tennessee X X Texas X X South Dakota Utah Congressional Research Service 15 16 UI: Consequences of Changes in State Unemployment Compensation Laws State Permanent TUR Trigger Vermont Temporary TUR Trigger Three-Year Lookback Utah Vermont X Virgin Islands Virginia Washington X X X West Virginia X X Wisconsin X X 2728 33 Wyoming Total Number of States with EB Trigger Component 11 Source: Compiled by Congressional Research Service based on U.S. Department of Labor, Extended Benefit Trigger Notice No. 2011-302012-11, effective August 7, 2011April 1, 2012 (available at http://www.workforcesecurity.doleta.gov/ unemploy/trigger/2011/trig_080711.html). Notes: Maryland has both a temporary TUR trigger and a three-year lookback option authorized under current state law, but they do not go into effect until October 1, 2011. Therefore, Maryland is not counted in the list of 27 states with effective, temporary TUR triggers or in the list of 33 states with effective, three-year lookback options.2012/trig_040112.html). Congressional Research Service 1617