Unless Congress acts to extend unemployment benefits, some 3.71 million more Americans are going to lose them during the next five months. These "99ers," so-called because they are eligible for 99 weeks of benefits under previous federal extensions of the unemployment compensation program, will suddenly be without any income right when the prospects of falling back into recession is a rising concern of economists and business analysts. Bank of America Merrill Lynch
puts the possibility of that at 35 percent.
Republicans, some of whom have openly said unemployment compensation makes workers lazy, have been reluctant to pass extended benefits in the past two years. Now, with deficit hysteria and GOP triumphalism over the debt-ceiling pact in full flow, chances of Congress extending them again are slim to none.
And states themselves, many of them deeply in debt to the federal government for loans keeping their unemployment benefit funds solvent, have been making their own cuts to recipients. According to a state-by-state analysis by the National Law Employment Project, cuts and restrictions on jobless benefits have been enacted in states with some of the worst unemployment and Republican administrations:
“It’s disconcerting that these lawmakers would expend so much energy making cuts to state unemployment insurance programs when more people are out of work for longer than any other period on record,” said Christine Owens, executive director of the National Employment Law Project. “Rather than adopting responsible financing practices and doing the hard work of fostering job creation, far too many state lawmakers have taken the easy out of cutting workers’ unemployment insurance benefits.” [...]
“Instead of enacting policies to create good jobs and restore their unemployment insurance systems to solvency by adequately financing them, these state lawmakers are choosing to make the unemployed jump through hoops of red tape,” said Owens. “These kinds of bureaucratic hurdles are offensive and make little sense. They buy into and perpetuate false and degrading assumptions about unemployed workers.
And they add unjustifiable and huge costs and burdens to already-challenged state programs.”
The chief impact of the cuts comes from reducing the maximum benefits out-of-work people can receive each each week and from reducing the number of weeks a recipient is eligible. For more than half a century, the standard nationwide has been 26 weeks.
Under the 76-year-old Federal-State Unemployment Compensation Program, the federal government covers administration costs, the states are obligated to cover regular jobless benefits, and the states and Feds split the cost of extended benefits (up to 20 weeks) 50-50. But since 2008, the federal government pays 100 percent of the cost of emergency extended benefits. Administrative costs, state unemployment checks and half extended benefit costs are paid for out of a payroll tax on employees.
When pinched, states can borrow money from the federal government to cover the cost of unemployment benefits, but they must pay the money back with interest. Because the effects of the recession on the job market have lasted so long, states now collectively owe the Feds nearly $40 billion on these loans, with interest payments of $1 billion coming due at the end of the fiscal year on September 30. By 2013, that figure is expected to rise to $65 billion. The problem is that most of them did not put aside enough money in healthier economic times to cover unemployment benefits during a severe downturn. Nor did they reform their systems by increasing the payroll tax that they charge employers.
Thus, as the NELP report shows, they're now taking it out on the very people these programs were designed to help, those needing assistance until they can find work, which has been exceedingly hard to find, especially in some of the states doing the cutting.
Three methods are being used for this purpose. Either the number of weeks of eligibility are cut, the maximum amount of benefits are lowered or the eligibility requirements, both monetary and non-monetary are tightened. Or some combination of these. NELP provides a rundown:
• Arkansas: A measure approved in late March cuts the number of weeks new claimants can receive benefits to 25, effective March 30, 2011. It also cuts the minimum and maximum weekly benefit amounts to $81 and $451, respectively, effective July 1, 2012, while eliminating indexing of the maximum weekly benefit amount to wage growth.
• Florida: Legislators here proposed among the deepest and most sweeping cuts to the UI program. Legislation signed in late June implemented the three-year EB look-back fix together with benefit cuts and eligibility restrictions. Effective January 2012, the number of benefit weeks will be based on a sliding scale. Florida’s unemployed workers may receive up to 23 weeks if the state’s unemployment rate is at least 10.5 percent (the current rate is 10.6 percent). As unemployment falls, so too will the number of weeks of benefits (i.e., when the rate is 5.0 percent or less, the maximum weeks of benefits will bottom out at 12 weeks; each 0.5 percentage point increase in the rate will tack on another week, up to 23).
• Illinois: As in Arkansas, workers here will be entitled to 25 weeks of UI benefits, beginning January 2012.
• Indiana: In February, Indiana adopted a more restrictive formula for calculating weekly benefits. Effective with new claims on or after July 1, 2012, weekly amounts will be based on all four quarters in the worker’s base period rather than on his or her highest quarter of earnings. Average weekly benefits are projected to drop from $283 to an estimated $220. The maximum benefit is still capped at $390.
• Michigan: Michigan was the first state to approve a reduction in the duration of benefits from 26 to 20 weeks, effective with new claims filed on or after January 15, 2012.
• Missouri: Missouri was the first state to propose a six-week reduction in the duration of benefits to 20 weeks, but the second (behind Michigan) to approve such a measure. The changes affect new claimants, as of April 13th, the date the Governor signed the legislation.
• Rhode Island: Legislation signed in late June freezes the maximum weekly rate and decreases the percentage used in calculating each year from 67 percent to 57.5 percent. Second, it adjusts the weekly benefit calculation over three years to replace 50 percent of lost wages instead of the current 60 percent. Third, it changes from one to the average of two high quarters in computing the weekly benefit amount. Collectively, these changes are projected to decrease the average weekly benefit amount from approximately $390 to $298. In addition, the cap on maximum benefits will be reduced from 36 percent to 33 percent of base period wages. All changes are effective July 1, 2012.
• South Carolina: As of June 14, 2011, new claimants are eligible for 20 weeks of benefits, down from 26. These cuts are part of a broader measure that limits benefits for employees in seasonal occupations and reduces UI taxes on employers.
• Wisconsin: This state’s governor approved a budget in late June implementing a waiting week, effective January 1, 2012. This means workers will have to wait one full week before receiving their first benefit check, despite meeting all of the eligibility requirements in this period, resulting in a loss of one week’s benefits for many claimants.