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1 1 (March 17, 2022)

handle is hein.crs/govegmf0001 and id is 1 raw text is: Con r sWonal Fes ar h SerVc inknningfl Lg~ lati ~dbaL A914 0 Updated March 17, 2022 The Fundamentals of Unemployment Compensation A Joint Federa[-State Program The joint federal-state Unemployment Compensation (UC) program provides income support through UC benefit payments. Although there are broad requirements under federal law regarding UC benefits and financing, the specifics are set out under each state's laws. States administer UC benefits with U.S. Department of Labor (DOL) oversight, resulting in 53 different UC programs operated in the states, the District of Columbia, Puerto Rico, and the Virgin Islands. Total UC expenditures include benefits and administrative costs. During economic expansions, states fund approximately 85%-90% of all UC expenditures-as almost all of the benefits are state-financed by state unemployment taxes. In comparison, federal expenditures are relatively small during these expansions (approximately 10%-15%) in which federal expenditures are primarily administrative grants to the states financed by federal unemployment taxes. During FY2021, federal expenditures were 27% of total permanent-law, regular UC program outlays. Almost 88% of all FY2021 Unemployment Insurance (UI) benefit expenditures were federally financed once the temporary COVID-19 UI benefits outlays are included in the calculation. Objectives The UC program's two main objectives are to provide temporary partial wage replacement to involuntarily unemployed workers and to stabilize the economy during recessions. These objectives are reflected in the current UC program's funding and benefit structure. During economic expansions, UC program revenue rises through increased tax revenue whereas UC program spending falls as fewer workers are unemployed and receive benefits. The effect of collecting more taxes than are spent on benefits dampens demand in the economy. This also creates a surplus of funds or a cushion of available funds for the UC program to draw upon during a recession. In a recession, UC tax revenue falls and UC program spending rises as more workers lose their jobs and receive UC benefits. The increased amount of UC payments to unemployed workers dampens the economic effect of lost earnings by injecting additional funds into the economy. Authorization The underlying framework of the UC system is contained in the Social Security Act. Title III of the act authorizes state grants for administering state UC laws; Title IX authorizes the various components of the federal Unemployment Trust Fund (UTF); and Title XII authorizes advances or loans to insolvent state programs. UC is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under the State Unemployment Tax Acts (SUTA). UC in a Snapshot, FY202 I 4.4M $340 21.0 weeks 8.9 M Average Weekly Average Average New Claims Weekly Duration UC Benefit of Claim Beneficiaries Revenues: $52.7B Federal Unemployment Tax (FUTA): $6.3B State Unemployment Tax (SUTA): $46.4B Regular Outlays: $63.8B Administration (FUTA financed): $6.1 B Regular UC Benefit (SUTA financed): $46.5B UC Federal Employees (UCFE, Agency pays): $330M UC Ex-Servicemembers (UCX, Service pays): $240M Extended Benefits (temporarily 100% FUTA financed): $10.6B Temporary COVID-19 UI Benefit Outlays (General Fund financed): $317.9B PUA: $74.7B PEUC: $78.9B FPUC ($300/week): $164.2B MEUC ($100/week): $62.9M Source: U.S. Department of Labor (DOL), Employment and Training Administration, Office of Unemployment Insurance. Benefits The UC program pays benefits to workers who become involuntarily unemployed for economic reasons and meet state-established eligibility rules. The permanent-law UC program generally does not provide UC benefits to the self- employed, those who are unable to work, or those who do not have a recent earnings history. States usually disqualify claimants who lost their jobs because of inability to work, voluntarily quit without good cause, were discharged for job-related misconduct, or refused suitable work without good cause. To receive UC benefits, claimants must (1) have enough recent earnings (distributed over a specified period) to meet their state's earnings requirements; and (2) be able, available, and actively searching for work. Most states provide up to a maximum of 26 weeks of UC benefits. Under current state laws, the maximum duration of UC benefits ranges from up to 12 weeks (under certain economic conditions in Florida and North Carolina) to up to

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