On February 17, President Obama signed what is commonly referred to as the “stimulus package.” It contains three provisions designed to increase unemployment compensation (UC) payments and provide incentives for states to expand the number of individuals eligible for these benefits. There has been a lot of discussion in the media about these provisions, and it is important to understand how they impact Louisiana.
The first provision allows claimants to continue to receive emergency unemployment compensation benefits in addition to the six months of benefits our law already provides. The funding comes from federal general revenues. Some 6,000 Louisiana claimants are receiving EUC benefits, which will expire at the end of this year.
A second provision creates a $25 weekly benefit that every Louisiana claimant will get through June 30, 2010. This additional benefit is also appropriated from federal general revenues. Louisiana is among a handful of states that have a minimum weekly benefit amount of $25 or less. The extra $25 per week will result in some low-wage workers receiving more in UC than they earned prior to becoming unemployed, which could discourage some individuals from actively seeking work.
The final provision, and the one that is generating most of the controversy, would transfer pro-rata shares of $7 billion to states from federal UC taxes paid exclusively by employers. States will receive this money in exchange for enacting or maintaining certain UC laws on their books.
To obtain its portion of this $7 billion, Louisiana must enact a more costly “alternative base period” calculation of benefits, which only 18 states–none in the South–have chosen to put in their laws voluntarily. Louisiana must also adopt at least two of the following provisions:
1) Individuals shall not be denied benefits because they refuse to accept or actively search for full-time work.
2) Individuals shall not be disqualified from benefits if they quit work for a “compelling family reason” over which the employer has no control.
3) Individuals will receive an additional six months of benefits if they enroll in state-approved or federal Workforce Investment Act training.
4) Individuals will receive dependents allowances of at least $15 per dependent.
It is important to note that, as the stimulus package was moving through Congress, an amendment was proposed to give states this money without the strings attached. The amendment was rejected, however, because the leadership in Congress insisted that these permanent benefit expansions had to be part of any additional distribution to the states.
The purpose of our federal and state UC system has always been to provide assistance to workers who lose their jobs because of what happens at the workplace and not at home, and who genuinely desire to rejoin the workforce. Adoption of the expensive expansions in the stimulus package would constitute a significant departure from this purpose.
One should also consider the impact of such changes on Louisiana’s unemployment trust fund. The business community has fought for decades to protect the fund’s solvency in order to provide benefits for deserving claimants. Enactment of the benefit expansions would jeopardize its future solvency. If the fund declines, lower benefits for all of Louisiana’s unemployed and higher state UC taxes for its employers will kick in. So, while a new group of individuals would get benefits, the unemployed already eligible might see their benefits reduced.
This is not free money. It comes at a price. Some say Louisiana should take it anyway. The fact is that the cost is too dear–for employers and the unemployed alike.
Jim Patterson, Vice President and Council Director for Louisiana Association of Business and Industry’s Employee Relations Council, contributed to this column.