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Monday, October 31, 2011

Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws

Katelin P. Isaacs
Analyst in Income Security

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, several states enacted legislation to decrease the maximum number of weeks of 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 2012.

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 methods of calculation for UC benefits if it would decrease weekly benefit amounts (under P.L. 111-205, as amended). Some states, however, make automatic adjustments to weekly benefit amounts under existing state law. Consequently, if 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.

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 and P.L. 111-5, as amended)—that states may opt to enact under their state UC laws. Currently, 11 states have adopted an optional trigger for the EB program, based on a state’s total unemployment rate (TUR), into permanent state law. An additional 28 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-four states have adopted a three-year lookback for this optional TUR trigger (temporarily authorized under P.L. 111-312) to continue to meet the trigger criteria and continue to pay EB benefits. In general, only states who 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 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.

Date of Report: October 20, 2011
Number of Pages:
Order Number: R41
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