FOR RELEASE: Tuesday, March 12, 2002

Economic Policy Institute Nancy Coleman 202-775-8810

Center on Budget &  Policy Priorities Henry Griggs 202-408-1080

National Employment Law Project Sarah Massey 212-285-3025

PRESS RELEASE

UNEMPLOYMENT INSURANCE FALLING FAR SHORT
48 States Fail Eligibility Standards, 23 States Fail Overall on New National Report Card

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America’s state-by-state patchwork of unemployment benefits systems fails to meet the needs of out-of-work Americans and is in urgent need of repair, especially with the unemployment rate remaining high and expected to rise above 6% and stay there through much of the year. This is the conclusion drawn by researchers from the Economic Policy Institute, the Center on Budget and Policy Priorities, and the National Employment Law Project in a new national report released today.

The report, Failing the Unemployed: A State-by-State Examination of Unemployment Insurance Systems, takes a detailed look at unemployment benefits in all 50 states and the District of Columbia, evaluating how each measures up in five critical areas: eligibility requirements; benefit levels; revenue; trust fund adequacy; and recession preparedness. States are graded "pass" or "fail," and an overall failing grade goes to those that do not meet minimum standards in three or more of these areas.

The researchers found that almost half the states failed outright (see state-by-state report card, attached), while many additional states escaped a failing grade by the slimmest of margins – in effect, passing with a "D." Overall, these results point to a system that is to some degree failing many of the people it was created to serve.

Overall failing grades went to 23 states: Alabama (failed 5 of 5), Arizona (4/5), Arkansas (3/5), California (3/5), Colorado (3/5), Florida (3/5), Georgia (3/5), Illinois (3/5), Indiana (3/5), Louisiana (3/5), Maryland (4/5), Minnesota (3/5), Mississippi (4/5), Missouri (5/5), Nebraska (3/5), North Carolina (3/5), North Dakota (3/5), Ohio (4/5), South Carolina (3/5), South Dakota (4/5), Tennessee (4/5), Texas (4/5), and Virginia (3/5).

Among the areas reviewed, the report’s authors identified eligibility limitations as the most serious shortcoming of the state systems. The report gives failing grades to the District of Columbia and every state but Rhode Island and Vermont in this one area. In 14 jurisdictions (AL, AZ, DC, FL, LA, MD, NH, NM, OK, SD, TX, UT, VA and WY) eligibility requirements are so narrowly drawn that two-thirds or more of unemployed workers do not qualify to receive any benefits at all.

Badly structured eligibility requirements often end up denying benefits to the workers who are likely to need them most: low-wage and part-time workers. For example, Florida, New Mexico, North Dakota, and Utah not only disqualify those who work 20 hours per week at the minimum wage, they also fail to count a worker’s most recent earnings in calculating benefits, thus making it more likely that minimum wage workers will be excluded. Disqualifying part-time workers also has a greater impact on women, who make up about 70% of that group.

"In most states, unemployment insurance isn’t a true safety net but a series of gaping holes loosely strung together," said the Economic Policy Institute’s Jeffrey Wenger, a co-author of the new report. "For most people in most states, the help they get from unemployment benefits is not nearly enough to get them through the crisis – and many people are slipping through the holes entirely, with nothing to break their fall."

"The stimulus bill passed by Congress last week will provide very significant resources to the states to repair and improve their unemployment systems. The funding comes at a crucial time, because high unemployment rates have historically persisted even after economic recovery is underway," said Wendell Primus, director of income security at the Center on Budget and Policy Priorities and a co-author of the report.

Federal Reserve Board Chairman Alan Greenspan has projected that unemployment will rise above 6% this year, Primus noted, adding, "Taken together, the specific recommendations we offer in this report and the federal funding now available to implement reform create a rare opportunity to really fix what’s broken in state unemployment systems."

For those who qualify for benefits, the amount an unemployed worker can receive is far too low in many states. In eight states (AL, AZ, LA, MS, MO, NE, SC and SD) even maximum weekly benefits are too low to keep a family out of poverty. In six more states (FL, GA, MD, NM, TN and WY) maximum benefits put a family of three just $10 per week above the poverty line.

Finally, the report calls attention to the disturbing inequity between the treatment of workers seeking to collect unemployment benefits and state policies benefiting employers and funding of the unemployment insurance system. In eight states (AL, AZ, DC, FL, MD, NH, SD and TX) employers have benefited significantly from low tax rates, while two-thirds of workers still failed to collect unemployment. Another 12 states (AZ, DE, HI, IN, IA, LA, MT, NM, OR, SC, VA and WY) have especially flush trust funds, even while they deny benefits to more than two-thirds of the unemployed.

If there is any good news in the report, it comes in the final criterion examined by the researchers: trust fund solvency. The report finds that, nine months into the recession, most of the state UI trust funds have nine months or more of benefits available to pay workers, even at peak recession levels.

"The bad news is the states are not doing enough to provide enough help to the unemployed," said Maurice Emsellem of the National Employment Law Project, "but the good news is they have the resources to do much better – especially with the $8 billion in new unemployment funds just passed by Congress. It should now be a priority to get real help to more of the people who need it by creating far more equity between the UI system’s treatment of workers and employers."

The report recommends several policy changes to address the most urgent needs:

• With the new federal funds available, benefit amounts should be restructured in order to provide a stronger safety net, especially for low-wage and part-time workers and especially in the many states where the UI funding is clearly available to support immediate benefit expansions.

• States should do more to ensure that UI tax policies are more balanced so that trust funds are adequately funded and more of the unemployed workers are able to collect unemployment benefits.

• States should modify their programs to make them better prepared for future recessions without having to wait for congressional action in the middle of a downturn.

Such reforms are a priority for the AFL-CIO and state- and local-level groups, which have been pushing for changes around the country. With the publication of this report, unions and local activists are renewing their call to state legislators to repair the system.

"Unemployment insurance should be a strong, sure lifeline that provides real economic security when workers can’t find jobs," said AFL-CIO President John Sweeney. "Too many states don’t have strong enough programs to make a difference for struggling families. That’s why we’re urging the states and the Congress to see all these criteria as crucial and act now to fix where their states fail."

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