Fixing Broken State Unemployment Insurance Systems

February 9, 2011 at 5:22 pm

The systems for financing unemployment insurance (UI) in many states are broken, and without major reforms, will remain broken for many years, requiring years of high federal taxes on employers and threatening UI’s role as a key economic stabilizer during recessions.

The President reportedly will include in his budget a proposal to address this urgent crisis in UI trust funds.  It reportedly contains two major features:

  • Saving employers from tax increases that will otherwise hit them this year and next year, when the economy is still weak.
  • Taking concrete steps to restore the long term solvency of state UI trust funds, which would ensure that the program works well in future recessions — both helping families when someone loses a job while also giving the economy a boost.

Along with the National Employment Law Project, we released our own plan today for restoring the health of the nation’s UI system. It rests on the same core principles as the President’s reported plan. Without increasing the federal deficit, the plan would:

  • Avoid tax increases that will hit employers over the next two years under current law.
  • Provide immediate rewards and new incentives to states with solvent UI trust funds.
  • Prevent damaging cuts in UI eligibility and benefits for jobless workers.
  • Enable states to restore the long-term health of their UI systems.

If federal policymakers use our plan to address this crisis, employers could save as much as $50 billion in taxes and states would maintain the critical benefits they provide to people who lose their jobs.

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More About Michael Leachman

Michael Leachman

Michael Leachman joined the Center in July 2009. He is the Director of State Fiscal Research with the State Fiscal Project.

Full bio | Blog Archive | Research archive at CBPP.org

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