Adding Insult to Injury: States Cut Unemployment Benefits

 

In what seems to be a recurring theme these days, a number of states have decided that the best way to solve a financial crisis is to cut spending on those who need it the most. According to a report issued earlier this month by the National Employment Law Project (NELP), ten states cut unemployment benefits in their 2011 legislative sessions, despite continued high jobless rates nationwide. Here are some of the changes states have made (you can view the whole report, “Unraveling the Unemployment Insurance Lifeline,” at NELP’s website):

  • Six states (Arkansas, Florida, Illinois, Michigan, Missouri, and South Carolina) have cut the length of state benefits. Previously, all 50 states provided benefits for at least 26 weeks; a few states have now cut the maximum to 20 or 25 weeks. Florida has tied benefit cuts to the unemployment rate, with benefits lasting a maximum of 23 weeks when unemployment is highest, and only 12 weeks once unemployment falls to 5% or less. (The silver lining: There’s no danger of Florida reaching that number any time soon. Florida’s unemployment rate is more than 10.5%.) The federal government currently supplements state benefits, so that claimants in states with high unemployment rates are eligible for up to 99 total weeks. The additional federal benefits are calculated as a percentage of state benefits, however, so claimants in these six states will see significant changes. In a state that has cut benefits from 26 to 20 weeks, for example, the total state and federal benefit will be cut from 99 to 76 weeks.
  • A few states have also cut benefit amounts, by changing the formula for calculating benefits or capping the maximum benefit amount. In Indiana, for example, benefits will be based on the worker’s weekly earnings over an entire year, rather than in the highest paid quarter of that year. According to NELP’s report, this change will drop the average weekly benefit amount by $63.
  • Some states have adopted more restrictive eligibility and administrative requirements. Mostly, these have taken the form of making it more difficult for workers to qualify for benefits if they quit or are fired (rather than being laid off solely for economic reasons). A couple of states have also increased their earnings requirements (the minimum amount an employee must have earned during the base period) to qualify for benefits.

Insolvency is running high in state unemployment programs. According to NELP, the majority of states are borrowing from the federal government — to the tune of $40 billion — to continue paying benefits; interest payments on all of this debt will fall due next month. Continuing another nationwide fiscal trend, states have been generally unwilling to increase the unemployment tax rate on employers to close the gap. This might mean we can expect to see even more states getting even stingier with benefits as the cycle deepens.