The Recovery Act allocates funds to increase the benefit amount for those receiving unemployment compensation, provide benefit extensions for those who have already exhausted their state UI benefits, and provide up to $7 billion in federal financial incentives for states to "modernize" their Unemployment Insurance (UI) laws, including providing coverage for unemployed workers who are escaping domestic violence.
More Money for Unemployed Workers
Some federal help for unemployed workers is automatic under the Recovery Act and has already begun taking effect:
- All states are currently implementing benefit increases funded by the Recovery Act that provide an extra $25 per week in unemployment compensation. This additional money will be distributed to individuals receiving unemployment compensation beginning with the week for which a state enters into agreement with the U.S. Secretary of Labor until individuals exhaust their benefits, but no later than June 30, 2010. This extra $25 a week, which is fully paid with federal funds, will impact unemployed workers on regular state Unemployment Insurance (UI) benefits as well as those getting benefit extensions. Workers will receive the increased amounts automatically, either as an increase in the amount of their weekly benefits or in a separate check (or direct deposit or debit card, depending upon each state's payment methods).
- The first $2400 of UI benefits in 2009 will not be subject to federal income taxation. In some cases where state income tax laws are linked to federal taxation rules, this will also mean that state income taxes also will not apply to a portion of UI benefits. This temporary exemption from taxation (for 2009 only) will provide partial relief to unemployed workers' families tax bills next year.
Help for Long-term Unemployed Workers
The Recovery Act contains provisions to assist unemployed workers who have already exhausted state UI benefits:
- The Emergency Unemployment Compensation (EUC) program that provides federally funded benefits to workers who exhaust regular state benefits is extended through the end of December 2009. Benefits will then phase out, unless Congress acts to extend EUC. Under EUC, workers in most states (those with unemployment levels above 6 percent) are getting up to 33 weeks of benefit extensions. Those in states with lower unemployment levels receive 20 added weeks of benefits.
- The Recovery Act makes the permanently authorized Extended Benefits (EB) program a 100 percent federally-funded program until December 31, 2009. Normally, EB is paid 50 percent by federal funds and 50 percent from state UI trust funds.
Unemployment Modernization Incentives
The Recovery Act contains federal financial incentives for states to 'modernize' their Unemployment Insurance (UI) laws. According to the National Employment Law Project, in the U.S. only 37 out of 100 jobless workers received regular state UI benefits in 2008. This level of UI benefit receipt is among the lowest levels found among countries with highly developed economies. Under UI modernization, the Recovery Act provides up to $7 billion in federal incentive funding for states that already have or subsequently enact positive UI law provisions that make more jobless workers eligible for benefits.
- In order to access these funds, states must first have an alternative base period, which means that they use recent wages to determine UI eligibility. States that already use the alternative base period or enact this change in their UI laws will be eligible to receive one-third of their overall UI modernization funding.
- To access the remaining two thirds of their potential Recovery Act incentive payments, states must have two of four remaining modernization elements in their state UI laws: (1) eligibility for part time workers who have a history of part time work, (2) permitting individuals to leave work without disqualification when they have compelling family reasons for quitting, (3) providing at least 26 weeks of additional UI benefits for individuals participating in approved training, and (4) paying dependents' allowances of at least $15 a week per dependent. Under this second optional portion of UI modernization, states can apply for their incentive payments once they have at least 2 of the 4 modernization elements in place. It is important to note that compelling family reasons includes caring for ill or disabled family members, relocating with a spouse whose job has moved to another area, or escaping domestic violence in which the abuser follows the woman to her workplace. The specific options that states will take will be determined by Governors and Legislatures. And, the last date by which states can act is August 2011.