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1 1 (April 18, 2023)

handle is hein.crs/govelhw0001 and id is 1 raw text is: Con r ssional Research Sern/c infkrming the ieg iative debat sic. 1914 Updated April 18, 2023 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. In FY2022, there was still a significant share of federal expenditures in the UC system as a result of the COVID-19 response. Out of $28.7 billion in total expenditures on permanent-law unemployment benefits and administrative costs, 22.8% ($6.54 billion) was federally financed. Additionally, DOL reported $8.1 billion in federal expenditures related to the expired COVID-19 UI benefits (discussed below) as states continued to process and adjudicate benefit claims for weeks of unemployment that occurred while those programs were authorized. In FY2022, federal expenditures amounted to almost 40% of the $36.8 billion in total UC system expenditures, which includes both permanent-law and COVID-19 program outlays. 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 for goods and services 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, FY2022 4.4M $401 14.2 weeks 4.4 M Average Weekly Average Average New Claims Weekly Duration UC Benefit of Claim Beneficiaries Revenues: $66.2B Federal Unemployment Tax (FUTA): $6.9B State Unemployment Tax (SUTA): $59.3B Regular Outlays: $28.7B Administration (FUTA financed): $5.1 B Regular UC Benefit (SUTA financed): $22.2B Is Week of Regular UC (temporarily General Fund): $710M UCFE (Agency pays) and UCX (Service pays): $300M EB (temporarily 100% FUTA financed): $440M Temporary COVID-l 9 UI Benefit Outlays (General Fund financed): $8.1 B PUA: $2.8B PEUC: $1 OM FPUC ($300/week): $5.2B MEUC ($100/week): $0 Source: U.S. Department of Labor (DOL), Employment and Training Administration, Office of Unemployment Insurance. Notes: UCFE is UC for federal employees; UCX is UC for former servicemembers. EB was temporarily 100% federally financed during FY2020 and FY2021. Most EB payments in FY2022 were delayed payments based upon weeks of unemployment that occurred before FY2022. Alaska was the only state in an EB payable period in FY2022 (ended December 11, 2021). 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-

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