For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34460 ------------------------------------------------------------------------------ Order Code RL34460 Current Law and Selected Proposals Extending Unemployment Compensation Updated July 21, 2008 Julie M. Whittaker Specialist in Income Security Domestic Social Policy Division Current Law and Selected Proposals Extending Unemployment Compensation Summary This report examines recent proposals to create a new temporary extension of unemployment compensation. The recent proposals to temporarily extend the duration of Unemployment Compensation (UC) include the proposal in the Senate Committee on Finance Report of the Economic Stimulus Act of 2008 dated January 30, 2008, H.R. 4934, S. 2544, H.R. 5688, H.R. 5749, and H.R. 2642. H.R. 2642 was signed into law on June 30, 2008. Only sections in the proposals that relate to the extension of unemployment benefits are detailed. Thus, only portions of H.R. 4934 (Title I-Emergency Unemployment Compensation, Title II-Increased Unemployment Benefits) and the Senate Committee on Finance proposal (Title I-Temporary Extended Unemployment Compensation), and H.R. 2642 (Title IV- Emergency Unemployment Compensation) that directly relate to extending the duration of unemployment benefits are included. Matters concerning fraud and overpayments are not discussed. On June 30, 2008, the President signed H.R. 2642 into law (P.L. 110-252). The provisions concerning unemployment compensation were substantially changed from previous versions of the bill. The law extends unemployment benefits for 13 weeks and does not contain additional weeks of benefits for high-unemployment states. This report will not be updated. Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Current Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Extended Benefit (EB) Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Methods for Determining 20 Weeks of Full-Time Insured Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Financing Unemployment Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Extending Unemployment Compensation Proposals . . . . . . . . . . . . . . . . . . . . . . . 4 Temporary Extension of Unemployment Benefits . . . . . . . . . . . . . . . . . . . . . 4 How the Benefit Triggers On . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 List of Tables Table 1. Current Law and Selected Comparisons of Proposals Temporarily Extending Unemployment Benefits . . . . . . . . . . . . . . . . . . . . . 5 Current Law and Selected Proposals Extending Unemployment Compensation Introduction This report examines recent proposals that would create a new temporary extension of unemployment compensation. The recent proposals to temporarily extend the duration of Unemployment Compensation (UC) include the proposal in the Senate Committee on Finance Report of the Economic Stimulus Act of 2008 dated January 30, 2008,1 H.R. 4934, S. 2544, H.R. 5688, H.R. 57492, and H.R. 2642.3 Only sections in the proposals that relate to the extension of unemployment benefits are detailed. Thus, only portions of H.R. 4934 (Title I- Emergency Unemployment Compensation and Title II-Increased Unemployment Benefits), the Senate Committee on Finance proposal (Title I-Temporary Extended Unemployment Compensation), and H.R. 2642 (Title IV- Emergency Unemployment Compensation) that directly relate to extending the duration of unemployment benefits are included. Matters concerning fraud and overpayments are not discussed. On June 30, 2008, the President signed H.R. 2642 into law (P.L. 110-252). The provisions concerning unemployment compensation were substantially changed from previous versions of the bill. The law creates the temporary Emergency Unemployment Compensation (EUC08) program and temporarily extends unemployment benefits for 13 weeks. The law does not contain additional weeks of benefits for high-unemployment states.4 Current Law The Unemployment Compensation (UC) program, funded by both federal and state payroll taxes, pays benefits to covered workers who become involuntarily unemployed for economic reasons and meet state-established eligibility rules. Federal 1 This proposal was downloaded on April 8, 2008, from [http://www.senate.gov/~finance/ sitepages/leg/LEG%202008/FINAL%20Original%20Bill.pdf]. 2 As reported out by the House Committee on Rules on June 11, 2008, downloaded from [http://www.rules.house.gov/110/rept/110_hr5749rpt.pdf]. 3 For a detailed summary on how Congress has acted to extend unemployment benefits during economic recessions, see CRS Report RL34340, Extending Unemployment Compensation Benefits During Recessions, by Julie M. Whittaker. 4 For a complete explanation of the new program and benefits, see CRS Report RS22915, Emergency Unemployment Compensation (EUC08), by Julie M. Whittaker. CRS-2 administration of UC is under the purview of the U.S. Department of Labor (DOL). Federal law sets broad rules that the 53 state programs must follow.5 The Extended Benefit (EB) Program The EB program, established by P.L. 91-373 (26 U.S.C. 3304), may extend UC benefits at the state level if certain economic conditions exist within the state. Although the EB program is not currently active in any state, it -- like the UC program -- is permanently authorized. The EB program is triggered when a state's insured unemployment rate (IUR) or total unemployment rate (TUR) reaches certain levels.6 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 rate for the same 13-week period in each of the previous 2 years. There are two other thresholds that states may choose. (States may choose one, both, or neither option.) Under these options, the state 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; or an additional 20 weeks of benefits if the state's 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. The EB program imposes additional restrictions on individual eligibility for benefits. It requires that a worker be actively searching and available for work. Furthermore, the worker may not receive benefits if the worker refused an offer of suitable work. Finally, claimants must have recorded least 20 weeks of full-time insured employment or the equivalent in insured wages during their base period. 5 For details on the Unemployment Compensation (UC) program and other unemployment benefits see CRS Report RL33362, Unemployment Insurance: Available Unemployment Benefits and Legislative Activity, by Julie M. Whittaker. 6 The TUR is essentially a version of the seasonally adjusted unemployment rate published by the Bureau of Labor Statistics. That is, the ratio of the total number of unemployed persons divided by the total number of employed and unemployed persons. The IUR is the ratio of all workers currently receiving regular UC benefits to the total UC-covered workforce. The IUR is based on UC program data collected by the states and compiled by the Employment and Training Administration. The IUR is substantially different from the TUR because it excludes several important groups: self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several categories of workers. In addition to those unemployed workers whose last jobs were in excluded employment, the IUR excludes the following: those who have exhausted their UC benefits, new entrants or reentrants to the labor force, disqualified workers whose unemployment resulted from their own actions rather than from economic conditions, and eligible unemployed persons who do not file for benefits. CRS-3 Methods for Determining 20 Weeks of Full-Time Insured Employment. States use one, two, or three different methods for determining an "equivalent" to 20 weeks of full-time insured employment. These methods are described in both law (Section 202(a)(5) of the EUCA) and regulation (20 CFR 615.4(b)). In practice, states that require any of these three requirements for receipt of regular UC benefits and do not allow for exceptions to those requirements do not need to establish that the worker met the 20 weeks full-time insured employment. The three methods are listed below. ! earnings in the base period equal to at least 1.5 times the high- quarter wages; or ! earnings in the base period of at least 40 times the most recent weekly benefit amount, and if this alternative is adopted, it shall use the weekly benefit amount (including dependents' allowances) payable for a week of total unemployment (before any reduction because of earnings, pensions or other requirements) that applied to the most recent week of regular benefits; or ! earnings in the base period equal to at least 20 weeks of full-time insured employment, and if this alternative is adopted, the term "full-time" shall have the meaning provided by the state law. The base period may be the regular base period or, if applicable in the state, the period may be the alternative base period or the extended base period if that determined the regular UC benefit. The underlying reasoning behind the requirements seems to be the following. ! Because there are 13 weeks in a quarter, 1.5 times the high-quarter wage is roughly equivalent to 1.5 times 13 weeks of wages or about 20 weeks of wages. (Many states require high quarterly earnings of under $2,000, which is equivalent to less than $4/hour under full- time assumptions. This is less than the federal minimum wage of $5.85/hour.) ! Similarly, because the weekly benefit amount is roughly equivalent to half the average weekly wage, 40 times the weekly benefit amount is roughly equivalent to 20 weeks of wages. Financing Unemployment Benefits UC benefits are financed through employer taxes. The federal taxes on employers are under the authority of the Federal Unemployment Tax Act (FUTA), and the state taxes are under the authority given by the State Unemployment Tax Acts (SUTA). These taxes are deposited in the appropriate accounts within the U.S. Treasury's Unemployment Trust Fund (UTF). The federal tax pays for both federal and state administrative costs, the federal share of the extended benefit (EB) program (50%), loans to insolvent state UC accounts, and state employment services. The state tax pays for the regular UC benefit and the state share of the EB program (50%). CRS-4 Extending Unemployment Compensation Proposals Temporary Extension of Unemployment Benefits In general, these proposals would entitle certain unemployed individuals to temporary extended unemployment benefits that are not available under current law and would expire in approximately one year. Table 1 provides a summary of each of these proposals. All proposals would require that workers had exhausted all rights to regular UC benefits. All proposals have some type of "look-back" provision where workers who had exhausted UC benefits (generally around one year previous to the proposal) may be eligible for the temporary benefit. At the program's termination, all workers who were currently receiving the extended benefit would receive their full weeks of entitlement; those workers who exhausted UC benefits after the termination would not be eligible for the temporary extension. The base level of benefit ranges from 13 weeks (the Senate Committee on Finance proposal, H.R. 4934, H.R. 5749, P.L. 110-252/H.R. 2642) to 20 weeks (S. 2544). An exception is H.R. 5688, which requires states to select various state-level triggers and then meet certain economic conditions. All proposals, with the exception of H.R. 4934 and the final version of H.R. 2642, have some type of mechanism to declare certain states to be in a period of high unemployment based on certain unemployment statistics. Workers in those high unemployment states would then be eligible for an additional extension of unemployment benefits. How the Benefit Triggers On The Senate Committee on Finance proposal, S. 2544, H.R. 5749, and H.R. 2642 would all create a national entitlement of additional unemployment benefits upon enactment. H.R. 4934 would trigger a new national entitlement on the first day of the first month where the change in unemployed persons as compared to the previous year exceeds one million. H.R. 5688 would trigger solely on a state basis as determined by certain unemployment statistics detailed in Table 1. Financing Most proposals would finance the temporary extension of unemployment benefits through the federal accounts within the UTF (100% federally funded). H.R. 5688 would fund 50% up to 100% of the additional benefits through the federal accounts within the UTF. Table 1 details the conditions H.R. 5688 requires for its funding level. CRS-5 Table 1. Current Law and Selected Comparisons of Proposals Temporarily Extending Unemployment Benefits Senate Finance Committee Report, H.R. 4934, S. 2544, H.R. 5749, Current Law: January 30, 2008, Emergency Emergency Emergency P.L. 110-252 P.L. 91-373 Title II Temporary Unemployment Unemployment H.R. 5688, Targeted Extended (H.R. 2642), (26 U.S.C. 3304, note) Extended Compensation Compensation Assistance to Restore Unemployment Supplemental Program Extended Benefit (EB) Unemployment Act of 2008, Title Act of 2008, Growth in Employment Compensation Act Appropriations Feature Program Compensation I Title II Throughout 2008 Act of 2008 Act, 2008, Title IV How proposal The EB program may Creates a new Creates a new Creates a new Creates a new temporary Creates a new Creates a new extends extend unemployment (UC) temporary extended temporary temporary extended unemployment temporary extended temporary extended unemployment benefits at the state level if unemployment extended extended benefit if state economic unemployment unemployment benefits certain economic conditions benefit. unemployment unemployment trigger is met. benefit. benefit. exist within the state. The Begins with benefit if federal benefit. Begins the week on or after Begins with Begins with EB program is permanently enactment. economic trigger Begins with April 1, 2008. enactment. enactment. authorized. Ends the week is met. enactment. Ends the week beginning Ends the week Ends the week ending on or before Begins with Ends one year before March 31, 2009. ending on or before ending on or before December 31, 2008. enactment. later. March 31, 2009. March 31, 2009 No benefits after the Ends the week No benefits past No benefits past the No benefits past the week of March 31, ending on or 18 months of week of June 30, week of June 30, 2009. before December enactment. 2009. 2009. No additional 31, 2008. unemployment benefits to those not already receiving the benefits on December 31, 2008. CRS-6 Senate Finance Committee Report, H.R. 4934, S. 2544, H.R. 5749, Current Law: January 30, 2008, Emergency Emergency Emergency P.L. 110-252 P.L. 91-373 Title II Temporary Unemployment Unemployment H.R. 5688, Targeted Extended (H.R. 2642), (26 U.S.C. 3304, note) Extended Compensation Compensation Assistance to Restore Unemployment Supplemental Program Extended Benefit (EB) Unemployment Act of 2008, Title Act of 2008, Growth in Employment Compensation Act Appropriations Feature Program Compensation I Title II Throughout 2008 Act of 2008 Act, 2008, Title IV Eligibility Exhausted regular UC Exhausted regular Exhausted regular Exhausted Exhausted regular UC Exhausted regular Exhausted regular benefits. Benefit year must UC benefits. UC benefits. regular UC benefits. UC benefits. UC benefits. have ended on or after EB benefits. program is triggered. Benefit year ended Benefit year ended Benefit year ended on or Benefit year ended Benefit year ended (Unemployed workers who on or after February on or after March The bill would after July 1, 2007. on or after May 1, on or after May 1, had filed for UC benefits up 1, 2007. 1, 2007. reach back to 2007. 2007. to one year before the EB (Unemployed those workers program "triggered on" in workers who had who had filed an the state and had exhausted filed for benefits initial regular regular UC benefits may be after February 1, UC claim on or eligible for EB.) 2006 and had after the exhausted benefits 12-month period may be eligible for before temporary extended enactment. UC.) Beyond requirements for Beyond requirements No 20 week No 20 week No 20 week requirement. No 20 week Beyond regular UC benefits, the for regular UC requirement. requirement. requirement. requirements for beneficiary must have 20 benefits, the regular UC benefits, weeks of full-time insured beneficiary must the beneficiary must employment or its have 20 weeks of have 20 weeks of equivalent. full-time insured full-time insured employment or its employment or its equivalent. equivalent. CRS-7 Senate Finance Committee Report, H.R. 4934, S. 2544, H.R. 5749, Current Law: January 30, 2008, Emergency Emergency Emergency P.L. 110-252 P.L. 91-373 Title II Temporary Unemployment Unemployment H.R. 5688, Targeted Extended (H.R. 2642), (26 U.S.C. 3304, note) Extended Compensation Compensation Assistance to Restore Unemployment Supplemental Program Extended Benefit (EB) Unemployment Act of 2008, Title Act of 2008, Growth in Employment Compensation Act Appropriations Feature Program Compensation I Title II Throughout 2008 Act of 2008 Act, 2008, Title IV Potential Up to 20 weeks for certain Up to 26 weeks for Up to 26 weeks if Up to 33 weeks Up to 26 weeks for certain Up to 26 weeks for Up to 13 weeks. duration high unemployment states, certain high national trigger for certain high high unemployment states certain high or unemployment has been met. unemployment that have opted for all three unemployment Up to 13 weeks for other states, or states, or triggers, or states, or states meeting other Up to 13 weeks Up to 20 weeks Up to 21 weeks for those Up to 13 weeks definitions of high otherwise. otherwise. high unemployment states otherwise. unemployment, or that have opted for both Tier 0 weeks otherwise. II and Tier III triggers, or Up to 13 weeks for those high unemployment states that have opted for solely Tier III triggers, or Up to 8 weeks for those states meeting different definitions of high unemployment and have opted for the Tier II trigger, or Up to 5 weeks for other states meeting different definitions of high unemployment and have opted for Tier I trigger, or 0 weeks otherwise. (Triggers are explained in detail in the cell on the following page.) CRS-8 Senate Finance Committee Report, H.R. 4934, S. 2544, H.R. 5749, Current Law: January 30, 2008, Emergency Emergency Emergency P.L. 110-252 P.L. 91-373 Title II Temporary Unemployment Unemployment H.R. 5688, Targeted Extended (H.R. 2642), (26 U.S.C. 3304, note) Extended Compensation Compensation Assistance to Restore Unemployment Supplemental Program Extended Benefit (EB) Unemployment Act of 2008, Title Act of 2008, Growth in Employment Compensation Act Appropriations Feature Program Compensation I Title II Throughout 2008 Act of 2008 Act, 2008, Title IV Federal and The EB program is triggered All states have at The first day of All states have at In order to be eligible for All states have at All states have up to state triggers to when a state's insured least 13 weeks. the first month least 20 weeks. benefits states must change least 13 weeks. 13 weeks. begin program unemployment rate (IUR) or following any state law to elect one, two, total unemployment rate If the state is in an month in which If the state is in or three (or none) of the If the state is in an (TUR) reaches certain EB period or if the the number of an EB period or options. If a state chooses EB period or if the levels. state's TUR >=6.5% unemployed if the state's all three options, up to 26 state's TUR >=6% All states pay up to 13 or if the state's IUR persons age 16 or TUR >=6.5% weeks of benefits may be or the state's IUR weeks of EB if the state's >=4% and is 120% older as compared then the duration available. >=4% then the IUR for the previous 13 of the average of the to the same month is increased by Tier I: Up to 5 weeks, if duration is weeks is at least 5% and is rates for the same of the previous 13 weeks. state TUR >=6.0% and is at increased by 13 120% of the average of the 13-week period in year exceeds one least 110% of the state's weeks. rates for the same 13-week each of the 2 million. average TUR for the same period in each of the 2 previous years, then 13-weeks in either of the previous years. Two other the duration is previous 2 years; or, the optional thresholds exist. increased by 13 IUR >=4% and is 120% of (States may choose one, weeks. the average of the rates for both, or neither). If chosen, the same 13-week period in the state would provide: each of the 2 previous years; Option 1: An or additional 13 weeks of Tier II: Up to 8 weeks, if benefits if the state's IUR is state TUR >=6.3% and is at at least 6%, regardless of least 110% of the state's previous years' averages. average TUR for the same Option 2: An 13-weeks in either of the additional 13 weeks of previous 2 years; or, the benefits if the state's TUR is IUR >=5% and is 120% of at least 6.5% and is at least the average of the rates for 110% of the state's average the same 13-week period in TUR for the same 13-weeks each of the 2 previous years; in either of the previous 2 or years; or, in a "high Tier III: Up to 13 weeks, if unemployment period," an state's TUR >=6.5% and is additional 20 weeks of at least 110% of the state's benefits if the TUR is at average TUR for the same least 8% and is at least 13-weeks in either of the 110% of the state's average previous 2 years; or, the TUR for the same 13 weeks IUR is 5% and is 120% of CRS-9 Senate Finance Committee Report, H.R. 4934, S. 2544, H.R. 5749, Current Law: January 30, 2008, Emergency Emergency Emergency P.L. 110-252 P.L. 91-373 Title II Temporary Unemployment Unemployment H.R. 5688, Targeted Extended (H.R. 2642), (26 U.S.C. 3304, note) Extended Compensation Compensation Assistance to Restore Unemployment Supplemental Program Extended Benefit (EB) Unemployment Act of 2008, Title Act of 2008, Growth in Employment Compensation Act Appropriations Feature Program Compensation I Title II Throughout 2008 Act of 2008 Act, 2008, Title IV Other additions Not Applicable. EB None. Section 201. S. 2544 would None. None. None. to basic benefit payments are identical to Federal-State supplement or extended regular UC benefit levels. Agreements for regular and benefit Increased emergency UC Unemployment with an Benefits would additional supplement $50/week. regular and emergency UC with an additional $50/week. Other sections of the bill would have incentives for states to expand UC benefit eligibility. Incentive payments would be up to $7 billion. CRS-10 Senate Finance Committee Report, H.R. 4934, S. 2544, H.R. 5749, Current Law: January 30, 2008, Emergency Emergency Emergency P.L. 110-252 P.L. 91-373 Title II Temporary Unemployment Unemployment H.R. 5688, Targeted Extended (H.R. 2642), (26 U.S.C. 3304, note) Extended Compensation Compensation Assistance to Restore Unemployment Supplemental Program Extended Benefit (EB) Unemployment Act of 2008, Title Act of 2008, Growth in Employment Compensation Act Appropriations Feature Program Compensation I Title II Throughout 2008 Act of 2008 Act, 2008, Title IV Financing The federal unemployment 100% federally 100% federally 100% federally If a state has opted for 100% federally 100% federally structure tax on employers, among financed. financed (both the financed (both solely the Tier III trigger: financed. financed. other things, pays the emergency UC the emergency 13-weeks 100% federally federal share (50%) of the Appropriates federal and the additional UC and the financed. Appropriates Appropriates extended benefit (EB) UTF funds as may be $50/week). additional federal UTF funds federal UTF funds program. State necessary for states $50/week). If a state has opted for the as may be necessary as may be necessary unemployment taxes on in the administration Appropriates Tier II and Tier III triggers: for states in the for states in the employers pay for 100% of of benefit. federal UTF funds Appropriates First 8-weeks: 75% administration of administration of the regular UC benefit and as may be federal UTF federally financed. benefit. benefit. 50% of the EB benefit. necessary for funds as may be Final 13-weeks: 100% states in the necessary for federally financed. UC benefits are financed administration of states in the through employer taxes. The benefit. administration of If a state has opted for all federal taxes on employers benefit. three triggers: are under the authority of First 5 weeks: 50% federally the Federal Unemployment financed. Tax Act (FUTA), and the Following 8 weeks: 75% state taxes are under the federally financed. authority given by the State Final 13 weeks: 100% Unemployment Tax Acts federally financed. (SUTA). These taxes are deposited in the appropriate Appropriates federal UTF accounts within the U.S. funds as may be necessary Treasury's Unemployment for states in the Trust Fund (UTF). administration of benefit. CRS-11 Senate Finance Committee Report, H.R. 4934, S. 2544, H.R. 5749, Current Law: January 30, 2008, Emergency Emergency Emergency P.L. 110-252 P.L. 91-373 Title II Temporary Unemployment Unemployment H.R. 5688, Targeted Extended (H.R. 2642), (26 U.S.C. 3304, note) Extended Compensation Compensation Assistance to Restore Unemployment Supplemental Program Extended Benefit (EB) Unemployment Act of 2008, Title Act of 2008, Growth in Employment Compensation Act Appropriations Feature Program Compensation I Title II Throughout 2008 Act of 2008 Act, 2008, Title IV Cost estimates DOL actuarial estimates for The Congressional No published No published No published CBO estimate. CBO estimates that No published CBO the federal share of EB Budget Office CBO estimate. CBO estimate. the net effect of estimate. payments in FY2008 are (CBO) estimates that unemployment less than $5 million. the UC provisions in provisions on direct the Senate Finance spending would bill would have a net total $13.7 billion cost of $13.9 billion from 2008-2013. from 2008 through 2013. Source: UI Outlook FY2009 Source: Source: President's Budget, Congressional Congressional Department of Labor, Office Budget Office Cost Budget Office Cost of Workforce Security, Estimate, Economic Estimate of Division of Fiscal and Stimulus Act of 2008, Substitute Actuarial Services, February February 6, 2008. Amendment to H.R. 2008. 5749, Emergency Extended Unemployment Compensation Act of 2008, June 12, 2008. ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34460