Dems blast GOP bill to give states flexibility on unemployment funds

House Ways and Means ranking member Sandy Levin (D-Mich.) and Subcommittee on Human Resources ranking member Lloyd Doggett (D-Texas) called the legislation “a hatchet job” on the unemployment insurance program and a “surprise assault on the jobless.”

“With this legislation, Republicans are proposing to end this year’s guaranteed benefit for the long-term unemployed, just like they’ve proposed ending the guaranteed benefit for Medicare recipients,” Levin said in a statement. “At stake are extended benefits for more than 4 million unemployed Americans.”

The Democratic lawmakers argue that the measure takes money out of the pockets of the long-term unemployed and could encourage states to shift assistance from the jobless to help employers reduce their tax burden as interest payments on federal assistance come due in September. 

Democrats expressed concern that states might opt to reduce the number of weeks of unemployment benefits.

“Their timing couldn’t be worse, given today’s news that applications for jobless benefits jumped to the highest levels in eight months,” Levin said. 

The Republican lawmakers say that a majority of federal unemployment benefits are poorly targeted, about 70 percent, and could be used for other purposes.

A House Republican aide further explained that the bill would forward-fund money for benefits instead of paying states as they request reimbursement. States, including those that haven’t received federal loans, could use their allocation to expand their job-creation initiatives, the aide said.

Senate Finance Committee ranking member Orrin Hatch (R-Utah), who introduced identical legislation in the Senate, said, “hitting our nation’s job creators with significant tax hikes as a means of replenishing state unemployment programs is bad policy that undermines the ultimate goal: a robust economic recovery.”

“This legislation is a fiscally smart way of empowering states by giving them the flexibility they need to strengthen programs for the unemployed, while promoting a pro-growth environment to spur job creation,” Hatch said. 

The measure also includes changes to strengthen work-search requirements by requiring states to set minimum standards, it also will require those most likely to exhaust unemployment benefits without finding a job, such as those without a high school diploma, to work toward completing their education while they’re unemployed. The bill also allows states to test “innovative strategies” to help the unemployed find work.

State unemployment taxes have risen by 44 percent in the past two years, with more tax hikes ahead. In addition, 33 states have borrowed $48 billion in federal funds, a fact that may require them to raise taxes further on business to repay those loans, according to House Republican aides.

States got a break in the past two years on interest payments on loans used to shore up their trust funds, but that deferment ends this year, meaning 32 states will have an interest payment due in September unless Congress acts. 

Historically, when these interest payments have been due, states have levied a special assessment against employers to raise the money, said Judy Conti, federal advocacy coordinator with the National Employment Law Project (NELP). 

Conti called the Republican measure a “misguided attempt” that could lead states to make bad decisions on behalf of long-term unemployed workers in their states that might be left without benefits. 

She expressed support for legislation offered by Sen. Dick Durbin (D-Ill.) that would provide states with a two-year deferment of interest, which could save about 30 states between $3 billion and $4 billion. The measure also postpones employer tax hikes to repay the principal on states’ federal loans until 2014. 

The measure also allows states to enter into voluntary agreements with the Labor Department to incrementally reduce up to 60 percent of the federal loan balances in return for assurances of state actions leading to trust fund solvency.

A state’s decision to enter into an abatement agreement is voluntary and, based on participation levels, could provide loan forgiveness between $24 billion and $37 billion, NELP estimates.