The Impact of Sequestration on
Unemployment Insurance Benefits:
Frequently Asked Questions
Katelin P. Isaacs
Analyst in Income Security
Julie M. Whittaker
Specialist in Income Security
July 2, 2013
Congressional Research Service
7-5700
www.crs.gov
R43133
CRS Report for Congress
Pr
epared for Members and Committees of Congress
The Impact of Sequestration on Unemployment Insurance Benefits
Summary
“Sequestration” refers to a process of automatic, largely across-the-board spending reductions
under which budgetary resources are permanently canceled to enforce certain budget policy
goals. Most recently, sequestration was triggered by the Budget Control Act of 2011 (BCA; P.L.
112-25) and implemented on March 1, 2013 (delayed by P.L. 112-240).
Some, but not all, types of unemployment insurance (UI) benefits are subject to reductions under
the BCA sequester. Regular Unemployment Compensation (UC), Unemployment Compensation
for Ex-Servicemembers (UCX), and Unemployment Compensation for Federal Employees
(UCFE) benefits are specifically exempt from the sequester reductions. UI payments from the
Extended Benefit (EB) and Emergency Unemployment Compensation (EUC08) programs,
however, are subject to the sequester reductions. States administer all types of UI benefits.
Therefore, states are responsible for carrying out the sequester reduction in UI benefit payments.
The amount and method by which a UI recipient’s benefit is reduced varies by the state and by
the date when the reduction begins.
This report provides brief answers to some frequently asked questions regarding sequestration
and unemployment insurance benefits.
Additional information on UI programs and benefits is available in CRS Report RL33362,
Unemployment Insurance: Programs and Benefits, by Julie M. Whittaker and Katelin P. Isaacs;
and CRS Report R42444, Emergency Unemployment Compensation (EUC08): Current Status of
Benefits, by Julie M. Whittaker and Katelin P. Isaacs.
Additional information on modifications to UI programs and benefits as a result of recent changes
to state laws is available in CRS Report R41859, Unemployment Insurance: Consequences of
Changes in State Unemployment Compensation Laws, by Katelin P. Isaacs.
More general information on the sequester is available in CRS Report R42050, Budget
“Sequestration” and Selected Program Exemptions and Special Rules, coordinated by Karen
Spar.
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The Impact of Sequestration on Unemployment Insurance Benefits
Contents
What Is the Sequester? ..................................................................................................................... 1
Which Types of Unemployment Insurance Benefits Are Affected by the Sequester? ..................... 1
What Are the Consequences of the Sequester for Non-Exempt UI Benefits in FY2013? ............... 2
How Are States Implementing the Sequester of UI Benefits in FY2013? ....................................... 2
Has There Been Any Legislation Proposed to End the UI Sequester? ............................................ 4
Do Federal Employees Furloughed by the Sequester Have Access to UI Benefits? ....................... 4
Tables
Table 1. Sequester-Based Reductions in Emergency Unemployment Compensation
(EUC08) and Extended Benefits (EB) for FY2013 ...................................................................... 2
Contacts
Author Contact Information............................................................................................................. 6
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The Impact of Sequestration on Unemployment Insurance Benefits
What Is the Sequester?
“Sequestration” is a process of automatic, largely across-the-board spending reductions under
which budgetary resources are permanently canceled to enforce certain budget policy goals.1 It
was first authorized by the Balanced Budget and Emergency Deficit Control Act of 1985
(BBEDCA, Title II of P.L. 99-177, commonly known as the Gramm-Rudman-Hollings Act).
Currently, sequestration is being used as an enforcement tool under the Budget Control Act of
2011 (BCA, P.L. 112-25). Because of the lack of congressional action by January 15, 2012, to
reduce the deficit by at least $1.2 trillion, a series of automatic spending reductions has been
triggered. The reductions take the form of the sequestration of mandatory spending in each of
FY2013-FY2021, a one-year sequestration of discretionary spending for FY2013, and lower
discretionary spending limits for each of FY2014-FY2021.
Certain federal programs are exempt from sequestration, and special rules govern the effects of
sequestration on other programs. Most of these provisions are found in Sections 255 and 256 of
BBEDCA, as amended.
Which Types of Unemployment Insurance Benefits
Are Affected by the Sequester?
Sequestration required by the BCA (P.L. 112-25) and implemented on March 1, 2013 (delayed by
P.L. 112-240), affects some but not all types of unemployment insurance (UI) benefits. Benefits
from the regular Unemployment Compensation (UC), Unemployment Compensation for Ex-
Servicemembers (UCX), and Unemployment Compensation for Federal Employees (UCFE)
programs are exempt and not subject to the sequester reductions.2 Extended Benefits (EB) and
Emergency Unemployment Compensation (EUC08)—as well as most forms of UI administrative
funding—are not exempt from the sequester, however; and, therefore, are subject to the sequester
reductions.
The U.S. Department of Labor (DOL) has released details on how the UI BCA sequester
reductions should occur.3 This DOL guidance outlines how states, which administer UI benefits,
must reduce all EB and EUC08 benefits, with the exact percentage dependent upon the start date
of the reductions.
1 For more information on the budget sequestration, see CRS Report R42050, Budget “Sequestration” and Selected
Program Exemptions and Special Rules, coordinated by Karen Spar.
2 Section 256(h) of P.L. 99-177.
3 Employment and Training Administration, U.S. Department of Labor, Unemployment Insurance Program Letter
(UIPL) 13-13, March 8, 2013, http://wdr.doleta.gov/directives/attach/UIPL/UIPL_13_013_Acc.pdf.
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The Impact of Sequestration on Unemployment Insurance Benefits
What Are the Consequences of the Sequester for
Non-Exempt UI Benefits in FY2013?
The sequestration percentage reductions in Table 1 apply to the budgetary resources provided for
all of FY2013 (October 1, 2012, through September 30, 2013). But the actual UI payment
reductions began to be implemented by states the week beginning March 31, 2013. No EB or
EUC08 benefits already paid to individuals will be recovered to satisfy the sequestration
reductions.
The Office of Management and Budget’s BCA sequester order requires a 5.1% reduction to be
applied on all nonexempt nondefense mandatory expenditures for FY2013.4 Thus, according to
DOL guidance, EUC08 and EB payments would be reduced by 10.7% for benefits paid for weeks
of unemployment beginning on March 31, 2013, in order to meet the 5.1% reduction target for
FY2013. Higher percentage reductions in EB and EUC08 benefits would be associated with later
dates of state implementation of the UI sequester.
Table 1 provides the schedule of benefit reductions for FY2013 if states implemented the
reductions later than March 31, 2013.
Table 1. Sequester-Based Reductions in Emergency Unemployment Compensation
(EUC08) and Extended Benefits (EB) for FY2013
For the week beginning on or after
Percent reduction
March 31, 2013
10.7%
April 30, 2013
12.8%
May 31, 2013
16.8%
June 30, 2013
22.2%
Source: Employment and Training Administration, U.S. Department of Labor, Unemployment Insurance
Program Letter (UIPL) 13-13, March 8, 2013, http://wdr.doleta.gov/directives/attach/UIPL/UIPL_13_013_Acc.pdf.
Note: These reductions assume that al EUC08 and EB payments would be reduced uniformly and at the same
time. If alternative methods for implementing the sequester are deployed, the reduction may be different.
How Are States Implementing the Sequester of UI
Benefits in FY2013?
As of the week of June 30, 2013, EB was not available in any state. The only state where EB
benefits were payable earlier in calendar year 2013 was Alaska, which ended its EB period at the
beginning of May 2013.5 Therefore, states are currently responsible for implementing the
4 Office of Management and Budget, OMB Report to the Congress on the Joint Committee Sequestration for Fiscal
Year 2013, Washington, DC, March 1, 2013, http://www.whitehouse.gov/sites/default/files/omb/assets/
legislative_reports/fy13ombjcsequestrationreport.pdf.
5 See Employment and Training Administration, U.S. Department of Labor, Unemployment Insurance Trigger Notice
No. 2013-24, State Extended Benefit (EB) Indicators Under P.L. 112-240, Washington, DC, June 30, 2013,
(continued...)
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sequester of EUC08 benefits only. Since March 31, 2013, nearly all states, including the District
of Columbia, have implemented cuts to EUC08 benefits.6 According to the National Association
of State Workforce Agencies (NASWA), of the 52 states and territories that responded to a recent
survey,7
• 19 states implemented cuts of 10.7% on March 31, 2013;
• 9 states implemented cuts by April 30, 2013;
• 14 states implemented cuts by May 31, 2013;
• 8 states plan to implement cuts by June 30, 2013; and
• 1 state plans to implement cuts by August 31, 2013.
Additionally, NASWA reports that North Carolina will not implement the sequester reduction
since the EUC08 program in that state will no longer meet the federal requirements to offer
EUC08 to its workers as of July 2013.8
Not all states have implemented the sequestration reductions uniformly across all EUC08
beneficiaries. Several states were unable to implement the preferred method of reduction as
outlined by the U.S. DOL. Among these states, there are three alternative methods being used: (1)
paused-week, (2) grandfathering, and (3) reduction of weeks within a tier.
1. Paused-Week: States schedule two to three weeks during which no EUC08
benefits are paid. The remaining weeks of EUC08 are still paid. For example,
South Carolina will not pay EUC08 benefits for the weeks ending on May 18,
July 13, and August 31, 2013.9
2. Grandfathering: The sequester cuts apply only to claimants entering a new
EUC08 tier. For example, in California the 17.69% cut will not impact anyone
collecting EUC08 on an existing tier filed with an effective date before April 28,
2013. Instead, the sequester reduction is implemented when an individual ends
that current tier and becomes eligible to receive benefits on the next EUC08 tier
filed with an effective date of April 28, 2013, or after.10
3. Reduction of Weeks in EUC08 Tiers: The state reduces the number of weeks
available in each tier of EUC08, but does not reduce the weekly benefit paid. For
(...continued)
http://www.workforcesecurity.doleta.gov/unemploy/trigger/2013/trig_063013.html.
6 The District of Columbia, Puerto Rico, and the Virgin Islands are considered to be “states” under UI law. Therefore,
there are 53 different states and territories that must administer the UI sequester.
7 National Association of State Workforce Agencies, NASWA Survey Shows Majority of States Have Implemented
EUC08 Sequestration Cuts, June 14, 2013, http://www.naswa.org/assets/utilities/serve.cfm?gid=073c1905-b9cf-4e89-
b09e-ed1ce21fb5ac.
8 For more details on the changes to NC state law that end EUC08 availability in that state, see CRS Report R41859,
Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws, by Katelin P.
Isaacs.
9 See the South Carolina notice at http://www.dew.sc.gov/claim-euc.asp.
10 See the California notice at http://www.edd.ca.gov/unemployment/Sequestration_Reduction_Calculator.htm.
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example, Maine has opted to stop paying the last eight weeks of tier III EUC08
benefits, leaving one remaining week available.11
For more specific information on state implementation of the UI sequester, links to state
workforce agency websites are available through the U.S. Department of Labor’s America’s
Service Locator at http://www.servicelocator.org/OWSLinks.asp.
Has There Been Any Legislation Proposed to End
the UI Sequester?
H.R. 2177, the Unemployment Restoration Act, would make both EB and EUC08 exempt from
sequestration. This exemption would be retroactive and would continue through FY2021. Any
reduction of UI payments made because of the sequester would be paid back retroactively.
Do Federal Employees Furloughed by the Sequester
Have Access to UI Benefits?
Due to the required reductions in agency spending under the sequester, federal agencies may
furlough some or all of their employees for a period of time. The Office of Personnel
Management (OPM) states:
An administrative furlough is a planned event by an agency which is designed to absorb
reductions necessitated by downsizing, reduced funding, lack of work, or any budget
situation other than a lapse in appropriations. Furloughs that would potentially result from
sequestration would generally be considered administrative furloughs.12
In the event of a furlough, federal employees may become eligible for UI benefits through the
Unemployment Compensation for Federal Employees (UCFE) program. Under federal law,
UCFE provides income support for laid-off or furloughed federal employees in the same way as
under the UC program for other types of workers. Eligibility—as well as benefit levels and the
waiting period for benefits—under UCFE are determined according to the state laws of the UC
program in the state where the federal employee’s official duty station was located.13 As with UC,
separated federal employees, including furloughed employees, must have earned a certain amount
of wages or have worked for a certain period of time (or both) within the previous 12-18 months
to be monetarily eligible to receive any UI benefits (although methods that states use to determine
this eligibility vary greatly).
Thus, whether or not a furloughed federal employee may be eligible for UCFE will depend on
relevant state UC laws. In particular, two key state law issues factor into this type of UCFE
11 See the Maine notice at http://www.maine.gov/tools/whatsnew/index.php?topic=Portal+News&id=520161&v=
article-2011.
12 Office of Personnel Management, Pay & Leave: Furlough Guidance, http://www.opm.gov/policy-data-oversight/
pay-leave/furlough-guidance/#url=Administrative-Furlough.
13 See 5 U.S.C. §§8502 and 8504.
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eligibility decision: (1) the state definition of “partial unemployment” and (2) whether or not
there is a “waiting week” required under state law.
First, because UI benefits are designed to provide temporary income support to the involuntarily
unemployed, a furloughed federal employee must meet the relevant state definition of
unemployment. The UI system permits benefit receipt in certain circumstance of reduced work
hours or short-term reemployment—primarily in order not to discourage work or reemployment.
Therefore, each state has its own laws regarding how much work may be performed without
making an individual ineligible for UI benefits, that is, partial unemployment. Under state laws,
an individual is generally considered to be partially unemployed in any week with less than full-
time work and with earnings of less than the weekly benefit amount, or the weekly benefit
amount plus an allowance.14 For instance, in the District of Columbia, an individual is considered
partially unemployed if he or she has earnings that are less than the individual’s weekly benefit
amount plus $20.15 Furloughed individuals must meet the state definition of partial
unemployment in order to be potentially eligible for UC or UCFE benefits.
Second, most states require that eligible individuals first serve a waiting week before receiving
any UI benefits. For instance, the District of Columbia and Virginia have a waiting week
requirement of one week. Maryland has no waiting week requirement.16 In states with a waiting
week requirement, an individual’s furlough days would need to be spread out across more than
one week of unemployment. That is, an individual would need to meet the state’s definition of
unemployment—including partial unemployment—in more than one week (i.e., the waiting week
plus an additional week) in order to be eligible for UI benefits.
For additional guidance on furloughed federal employees and UCFE, see:
• U.S. DOL, “Information for Furloughed Federal Workers,” available at
http://www.dol.gov/sequestration/ui-federalemployees.htm; and
• OPM, “Guidance for Administrative Furloughs,” June 10, 2013, p. 18 (H.1.),
available at http://www.opm.gov/policy-data-oversight/pay-leave/furlough-
guidance/guidance-for-administrative-furloughs.pdf.
14 The weekly benefit amount (WBA) is determined under state law and is generally based on wages for covered work
over a 12-month period. Most state benefit formulas replace half of a claimant’s average weekly wage up to a weekly
maximum. For additional details on the WBA, including average WBAs across states, see CRS Report RL33362,
Unemployment Insurance: Programs and Benefits.
15 For information on state definitions of partial unemployment, see Table 3-8 in U.S. Department of Labor,
Comparison of State Unemployment Insurance Laws, 2013, pp. 18-20, http://www.workforcesecurity.doleta.gov/
unemploy/pdf/uilawcompar/2013/monetary.pdf.
16 For information on state waiting week requirements, see Table 3-7 in U.S. Department of Labor, Comparison of
State Unemployment Insurance Laws, 2013, pp. 15-17, http://www.workforcesecurity.doleta.gov/unemploy/pdf/
uilawcompar/2013/monetary.pdf.
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Author Contact Information
Katelin P. Isaacs
Julie M. Whittaker
Analyst in Income Security
Specialist in Income Security
kisaacs@crs.loc.gov, 7-7355
jwhittaker@crs.loc.gov, 7-2587
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