Govs Split Over Expanding Jobless Benefits
By Christine Vestal, Staff Writer
Out of a $787 billion economic recovery package successfully launched by the Obama administration this month, a $7 billion fund to expand unemployment benefits to a half-million more people has become a lightning rod for opposition by a group of Republican governors.
The program - known as the Unemployment Insurance Modernization Act - aims at inducing states to change some rules to provide benefits for a segment of mostly low-income workers who wouldn't otherwise qualify because their jobs are sporadic, part-time or interrupted for family-related reasons.
Republican Louisiana Gov. Bobby Jindal , who has blasted the fund, said offering more benefits to get his state's more than $90 million share of the program would be "irresponsible" because it "would ultimately increase taxes on the very businesses we are working to support during these tough economic times."
At least five other Republican governors - Haley Barbour of Mississippi, Mark Sanford of South Carolina, Sarah Palin of Alaska, Tim Pawlenty of Minnesota and Rick Perry of Texas - have said basically the same thing. They don't want to be locked into laws they say would result in higher taxes when the stimulus money runs out.
The unemployment insurance program gets its funds from federal and state employer payroll taxes, with states levying the biggest share. States administer the program, determining who is eligible and how much benefits will be.
To qualify for the program - which temporarily provides laid-off workers with a portion of their paychecks- workers must lose their jobs through no fault of their own and their past wages must be high enough to meet the state's eligibility requirements. The size of benefit checks depends on past wages and varies from state to state, with a national average of $299, according to the U.S. Department of Labor.
The biggest issue in the modernization act is that laws in more than half of all states base eligibility on a person's older work history rather than their most recent wages. This dates back to when unemployment insurance was created more than 70 years ago and states relied on businesses to hand-file reports verifying employment, a process that took months. The effect of these arcane laws is that many low-wage workers with sporadic or interrupted work histories are disqualified.
Supporters of the modernization act argue states should update their laws to reflect changes in the labor market. "Low-wage and part-time workers who contribute to the unemployment insurance system are a larger portion of the workforce than they used to be, yet they are half as likely to qualify for unemployment benefits as other workers," said U.S. Rep. Jim McDermott (D-Wash.), author of the bill.
Other suggested reforms in the act would provide benefits to part-time workers, those who leave jobs to take care of their families, and long-term workers who need retraining. The act also calls for higher benefits for workers with dependents.
Giving benefits checks to those with only recent job history would affect the largest number of workers, including women who return to work after raising children, young people who lose their first jobs and legions of laborers in industries like construction where work is sporadic.
To get at least one-third of their share of the $7 billion stimulus fund, states must count recent earnings in considering applicants. To get the rest, they have to adopt at least two of the other proposed reforms.
Maine, New Jersey and New York already qualify for 100 percent of the incentive money. Hawaii, Massachusetts , New Mexico, North Carolina, Rhode Island and Vermont qualify for two-thirds, and eight other states qualify for one-third of the money.
States that don't have qualifying laws have three years to enact them and still get all or part of their share of the stimulus. Existing and new laws are subject to approval by the U.S. Department of Labor before funds will be disbursed.
Since the early 1990s when a bipartisan panel appointed by then-President Bill Clinton asked states to update their aging unemployment laws, many states pioneered reforms.
But Republican governors' objections to the most recent enticements are no surprise. Changes to unemployment laws have always been contentious, pitting business interests against organized labor and advocates for the poor. In fact, the Congressional Budget Office projected only 38 percent of the modernization money would be spent because many states would be reluctant to make the changes.
"The idea has been around for years," said Doug Holmes, director of Strategic Services on Unemployment and Workers' Compensation , which represents business interests. "Nearly every state has hashed out the issue. Why would they want to reverse their own policies just to get a temporary windfall from the federal government?"
Still, proponents of the reforms say the governors' concerns about increased business taxes are unfounded. "Giving benefits to lower-income workers doesn't necessarily raise taxes. Recessions raise taxes," said Maurice Emsellem, policy director for the National Employment Law Project , which advocates for workers. "The stimulus money would come in a lump sum and actually postpone the need to hike taxes."
During recessions, unemployment trust funds typically run low and states replenish them by raising taxes either through legislation or automatic adjustments. If reserves decline too quickly, states can borrow money from the federal government and raise business taxes later to repay the loan. Already in this recession, nine states - California, Indiana, Kentucky, Michigan, New York, North Carolina, Ohio, South Carolina and Wisconsin - have taken out loans.
In addition, 29 states have hiked business taxes, according to the National Association of State Workforce Agencies . Among them are some of the objecting governors' states: Alaska, Minnesota, South Carolina and Texas - but not Louisiana.
According to an analysis by the Louisiana Workforce Commission , changing the state's unemployment laws to include those with only recent wage histories would expand coverage to about 4,000 more workers, increasing overall benefits by $12 million a year when the stimulus money runs out.
In addition to concerns about taxes, some opponents of the proposed reforms argue that unemployment insurance - created in response to the Great Depression - was never intended to be a safety-net program.
The unemployment insurance system is just that. It's insurance, not social welfare. It shouldn't be used as a backdoor way to help the needy," said James Sherk, a fellow at The Heritage Foundation , a conservative research group.
See Related Stories:
Jobless rates up in every state (1/29/2009)
States swamped by spike in jobless rates (1/9/2009)
Policy challenge - How to expand safety net (1/5/2009)
State jobless funds are running dry (10/7/2008)
States adopt bold anti-poverty measures (8/7/2008)
State jobless benefits reserves low (6/2/2008)