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Wednesday, March 6, 2013

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 UC weekly benefit amount; and (3) the enactment into state law of two trigger options for the Extended Benefit (EB) program.

Over the last several years, some states have 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, Florida, Illinois, Michigan, Missouri, and South Carolina. In 2012, Georgia also passed legislation to decrease the maximum UC benefit duration. In 2013, North Carolina enacted similar legislation, which will be effective beginning July 1, 2013.

Changes in UC benefit duration have consequences for the duration of federal unemployment benefits that may be available to unemployed workers. Since state UC benefit duration is an underlying factor in the calculation of duration for additional federal unemployment benefits, reducing UC maximum duration also 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 subject to a “nonreduction” rule (under P.L. 111-205, as amended), which makes the availability of federally financed EUC08 benefits contingent on not actively changing the state’s method of calculation for UC benefits, if it would decrease weekly benefit amounts. Some states, however, make automatic adjustments to weekly benefit amounts under existing state law. Consequently, when 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 without violating the “nonreduction” rule. P.L. 112-96 provided a specific exception to the “nonreduction” rule in the case of state legislation enacted before March 1, 2012. More recently, North Carolina enacted legislation that does actively reduce UC weekly benefit amount calculations. Because this North Carolina law does not make this change effective until July 1, 2013, EUC08 benefits are currently available in that state. Any reduction to the UC weekly benefit amount also translates into reduced EUC08 and EB weekly benefit amounts.

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, as amended, 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-two states have adopted a three-year lookback for this optional TUR trigger under current state law (temporarily authorized under P.L. 111-312, as amended) to continue to meet the trigger criteria and continue to pay EB benefits. In general, only states that have enacted at least one of these EB trigger options (i.e., the TUR trigger or the three-year lookback) had been able to pay EB benefits in 2011 and 2012. As of the week of February 24, 2013, only one state (Alaska) meets the requirements to trigger onto EB.

Date of Report: February 28, 2013
Number of Pages: 22
Order Number: R41859
Price: $29.95

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