States Grapple with Altering Unemployment
By Mary Branham Dusenberry, CSG Managing Editor
New Mexico Rep. Mimi Stewart knows her state is lucky.
The state’s unemployment trust fund, while down about $60 million, is still one of the most solvent in the country, Stewart said, citing statistics from the National Employment Law Project. And, because lawmakers made changes to the state’s unemployment laws two years ago, New Mexico is in line to receive about $39 million for the fund from the American Recovery and Reinvestment Act, commonly known as the stimulus package.
All states are eligible for a $25 weekly bump and extended eligibility period for those receiving unemployment benefits. But several states are resistant to changing laws to get incentive funding for their unemployment insurance trust funds. The $7 billion pot is based on a formula per state and is contingent on changes.
New Mexico is one of four states that can get that full funding from incentives offered in the stimulus package without doing anything, according to a summary from the National Employment Law Project. The other states are Maine, New Jersey and New York. Those states have already made changes to their unemployment compensation laws sought by the federal government.
States that adopt an alternative base period can access one-third of the incentive funds for which they are eligible. Eighteen states have already adopted such a practice.
To access the other two-thirds of the incentive funds, states must adopt two of the following provisions, according to the National Employment Law Project: Expand eligibility guidelines to part-time workers; extend unemployment insurance while a person is in training or returns to school; recognize a compelling family reason—such as being a domestic violence victim—for leaving a job; and setting a weekly dependent allowance. New Mexico’s law incorporates all four of those recommendations, Stewart said.
But those changes would remain long after the federal incentives are spent, and some state officials are opposed to ratcheting up payments or qualifications for that very reason—some argue against expanding their program.
“In order to qualify, we’d have to make a permanent law change, which would require an ongoing commitment from the state,” said Joel Sawyer, a spokesman for South Carolina Gov. Mark Sanford. “We already have an insolvent unemployment trust fund as it is, so the question for us is what do we do when the federal money runs out?
“We just don’t view those changes as being sustainable in the long run and as a result we’re not going to be seeking those funds,” he said.
South Carolina isn’t alone. Governors in Louisiana, Georgia and Indiana are among those who have said they’ll reject the pot of money tied to changing state law. And even though there’s support in other states to do what’s necessary for the influx of federal dollars, not everyone is convinced.
Take Missouri, where Gov. Jay Nixon has said he wants the state to take advantage of every stimulus dollar possible. Lt. Gov. Peter Kinder, Senate President Pro Tem Charlie Shields and House Speaker Ron Richard oppose changes to the state unemployment laws.
“We kind of see it as a federal bribe,” said Kristen Blanchard, spokesperson for Missouri Speaker Ron Richard.
Richard is concerned the state will have to raise business taxes to fund the program long-term, and that could hurt the Missouri business community, Blanchard said. “We see it as a temporary band-aid and when that band-aid is ripped of it’s going to hurt pretty badly,” she said.
It’s hard to tell at this point what the changes will mean to states, said Chris Whatley, director of The Council of State Governments’ Washington, D.C., office, “because right now none of us know what they mean by modernizing your unemployment eligibility requirements.”
The U.S. Department of Labor is required to issue rules regarding modernization provisions by April 18, according to the law. Until rulemaking is complete and states understand full implications, Whatley said, “it’s not necessarily in anyone’s interest to jump after this.”
But Stewart believes New Mexico is sitting pretty. That $39 million incentive package will be put into the state’s trust fund to be used for training, administration and improvements to the computer systems.
“Right now, because there are so many unemployed, we’ve had difficulties with our computer system,” she said. “It will help New Mexico upgrade our Department of Workforce Solutions so they can serve the unemployed better, expand training programs they offer and offer better online services.”
For more on what states are doing with regard to unemployment insurance incentives offered in the stimulus package, check out StateRecovery.org, a special service from The Council of State Governments. State News magazine will also feature a special in-depth look at the state of unemployment insurance trust funds, and what the stimulus could mean for states, in the April issue.