NASWA Unemployment Insurance (UI) Administration Funding and Reemployment Reform Proposals Richard A. Hobbie, Ph.D. Executive Director National Association of State Workforce Agencies (NASWA) 1
NASWA Has Made Two Proposals 1. Reform federal funding of state grants for administration of UI to guarantee states a total amount of at least 60 percent of revenue collected in the prior calendar year under the Federal Unemployment Tax Act (FUTA). 2. Authorize mandatory spending of $700 million of FUTA revenue on reemployment services to be provided from the beginning of a UI Claim. 2
NASWA Understands There Are Budget Process Challenges The two proposals would cost about $1 billion per year, but NASWA has proposed no offsets to meet the budget process pay-as-you go standard. The UI Administration Funding proposal could cost about $300 million per year. The mandatory Reemployment Services grant is proposed at $700 million per year. 3
States Believe There Would Be Budget Savings in the Long Run The additional UI administrative funds could help reduce improper payments and accelerate reemployment through reemployment and eligibility assessments, investments in modern information technology, and data cross matches to reduce fraud. Reemployment Services could have a savings to cost ratio of as much as 4 to 1 by helping claimants return to work several weeks earlier, thereby reducing benefit payments and possibly employer taxes. 4
State UI Administrative Funding Overview Once the total federal grants to states for administration of UI is determined by the federal government, it is then allocated by USDOL to the states in the UI Base Budget. States may earn Above Base funds if their UI workload exceeds the level estimated for their Base Budget. If workload exceeds budget estimates, additional Contingency funding is made available automatically through mandatory appropriations provisions. ($28.6 million per each 100,000 additional average weekly insured unemployment above estimates.) USDOL also may allocate any unused funds to states through Supplemental Budget Requests near the end of the year. 5
Trend in UI Administration Base Funding Real, relative base funding has been declining since the mid-1990s. 6
UI Administration Funding History 7
NASWA UI Administrative Financing Reform Proposal NASWA proposal: each year, states shall receive the higher of (a) 60 percent of FUTA revenue collected in the prior year, or (b) the amount necessary for proper and efficient administration. The NASWA proposal would: Maintain current base, above-base and contingency funding; and Provide for a mandatory distribution of the amount (if any) by which 60 percent of FUTA revenue collected in the previous year exceeds the total of the current base, abovebase and contingency funding. 8
State Distribution of Additional UI Administration Funding Distribute the additional funds to states via a formula: 50 percent based on state shares of funds in the current base, above-base and contingency funding, and 50 percent based on the state shares of estimated FUTA revenue paid by employers in their states in the prior year. 9
NASWA $700 Million Per Year Mandatory Reemployment Services Proposal NASWA supports a permanent, mandatory spending program to speed reemployment of UI claimants and shorten UI durations at the beginning of a claim. The program would ensure a balanced approach providing both accountability and opportunity: Claimant verification of work search efforts and of UI eligibility (known as reemployment and eligibility assessments, or REA), and Reemployment services (job search assistance and referrals to training if needed, known as RES). 10
The Rationale for Reemployment Services Rigorous evaluation studies show intervening early with a balanced approach of enforcement of eligibility and job search requirements and job search assistance: shortens UI durations, gets claimants back to work more quickly, reduces long-term unemployment, improves trust fund solvency, and yields a 4:1 return on investment to government. 11
Thank You. 12