Unemployment Insurance Funds Should Go for Unemployment Insurance

January 17, 2012 at 5:47 pm

As the House returns from its holiday break today, a key early task for it and the Senate is to agree on extending the payroll tax cut and federal unemployment insurance (UI) through the end of 2012.  House negotiators may seek to include a provision the House passed in December, which would allow the federal government to authorize up to ten states each year to use UI funds for purposes other than paying benefits.

As we explain in a brief new paper, that would undermine UI’s fundamental purpose since its creation in the 1930s:  providing “temporary, partial wage replacement as a matter of right to involuntarily unemployed individuals who have demonstrated a prior attachment to the labor force,” as a bipartisan, blue-ribbon commission put it more than a decade ago.

States already have considerable flexibility over the design of their UI programs.  Federal law just lays out a few basic requirements, principally that states use UI funds only to pay UI benefits and not impose excessively burdensome “methods of administration” that block access for otherwise eligible individuals.

These requirements ensure that all states maintain programs that offer a basic level of protection to workers with a sufficient employment record who lose their jobs through no fault of their own.  States are free to choose and adjust employer tax rates, benefit levels and duration, and eligibility criteria.

The House proposal goes well beyond giving states “flexibility” — it alters the fundamental nature and purposes of the UI program itself.

Letting states divert UI funds for other purposes would start the UI system down a slippery slope, even if those other purposes might benefit some unemployed workers, such as providing additional job training.  Among other things, states could replace state or local funds now used for job training or other such purposes with diverted UI funds and then shift the withdrawn funds to other uses, including tax cuts.  The net result could be a reduction in unemployment benefits with little or no offsetting increase in employment services.

Similarly, waiving the prohibition against excessively burdensome administrative obstacles would enable states to reduce UI benefit costs and tax rates by making it harder for eligible people to participate in the program — a less overt way to cut costs than shrinking benefit levels or the number of weeks of benefits.

Finally, the House provision could also allow states to impose new eligibility requirements not directly based on workers’ employment history, such as requiring UI recipients to have a high school diploma or GED.

Job training, adult education, and other such services are important, but they should complement UI benefits, not replace them.  These programs are heavily oversubscribed in many areas and often have waiting lists; they have also been hit hard by state and federal funding cuts.  If policymakers want to enable more unemployed workers to participate, they should invest in these programs to ensure they are effective and more widely available.

The Facts on SNAP — Again

January 17, 2012 at 3:31 pm

Newt Gingrich’s ongoing criticism of the rise in food stamp enrollment under President Obama has brought more public attention to the program, formally known as the Supplemental Nutrition Assistance Program (SNAP).  As we noted last week, we have updated two key papers that provide background information on SNAP:

  • Policy Basics:  Introduction to SNAP.  In 2011, SNAP helped almost 45 million low-income Americans to afford a nutritionally adequate diet in a typical month.  Nearly 75 percent of SNAP participants are in families with children; more than one-quarter are in households with seniors or people with disabilities.  While SNAP’s fundamental purpose is to help low-income families, the elderly, and people with disabilities afford an adequate diet and avoid hardship, it promotes other goals as well, such as reducing poverty, supporting and encouraging work, protecting the overall economy from risk, and promoting healthy eating.
  • SNAP Is Effective and Efficient.  SNAP caseloads have risen significantly since late 2007, as the recession and lagging recovery battered the economic circumstances of millions of Americans and dramatically increased the number of low-income households who qualify and apply for help from the program.  Yet, despite the rapid caseload growth, SNAP payment accuracy has continued to improve, reaching all-time highs (see graph).  Moreover, the Congressional Budget Office predicts that SNAP spending will fall as a share of the economy in coming years as the economy recovers and temporary benefit expansions that Congress enacted in 2009 expire.

Note: The Center on Budget and Policy Priorities is a non-partisan organization and takes no position on political candidates.

In Case You Missed It…

January 13, 2012 at 5:12 pm

This week on Off the Charts, we focused on the federal budget and taxes, state budgets, food assistance, and low-income housing assistance.

  • On the federal budget and taxes, Robert Greenstein debunked the claim by Republican presidential candidate Mitt Romney that most federal spending on low-income programs fails to reach beneficiaries.  Chuck Marr urged Congress to shrink the “tax gap” by taking steps to boost the collection of taxes that are already owed.
  • On state budgets, Nick Johnson warned against recent proposals to raise taxes on poor families while slashing them for the wealthiest households.  Michael Leachman summarized our joint report with the ACLU on state corrections spending and listed examples of cost-saving criminal justice reforms.  Phil Oliff noted that while state revenues are improving, states still face a long and uncertain recovery.
  • On food assistance, Dottie Rosenbaum highlighted two newly updated papers providing background information on SNAP, formerly known as the Food Stamp Program.
  • On low-income housing assistance, Douglas Rice explained why a proposed expansion of the Moving to Work block grant program would be a mistake.

In other news, we released reports on Mitt Romney’s charge that most federal low-income spending goes to overhead and bureaucracy, improving budget analysis of state criminal justice reforms, and the danger of expanding the Moving to Work housing initiative.

State Cost Savings From Criminal Justice Reforms: Some Examples

January 13, 2012 at 4:41 pm

As I noted yesterday, state spending on corrections has soared in recent decades, leaving less for schools and other priorities. If states had spent the same share of their budgets on corrections in 2010 as in 1986, they would have had over $16 billion to protect these priorities from the harmful spending cuts imposed that year.

Several states have enacted criminal justice reforms in recent years that provide cost-saving alternatives to incarceration. These states have seen their crime rates remain at historically low levels or decline further.  For example:

  • In 2007, building on earlier reforms, Kansas enacted laws that expanded parole eligibility and reduced the number of people sent to prison for technical parole and probation violations. These reforms are projected to save the state $80 million between 2007and 2012 and to reduce by about 14 percent its prison population in 2017. After 2007, Kansas’ crime rate fell to its lowest level since 1973.
  • Kentucky enacted a law in 2011 that eliminated pre-trial detention and offered probation for many drug offenses. The law made marijuana possession a misdemeanor, reduced sentences for some drug crimes, and expanded parole eligibility. This reform is projected to save the state $422 million by 2020 and reduce its prison population growth by over 17 percent.
  • In 2010, South Carolina enacted a law that required fiscal impact statements for criminal justice bills, eliminated some mandatory minimum sentences, equalized sentencing for crack and powder cocaine crimes, provided non-prison alternatives for some drug offenses, and expanded parole and probation eligibility. This reform is projected to save the state $241 million by 2014 and reduce its prison population growth by 7 percent.
  • From 2007 to 2011, Texas enacted laws that created drug treatment programs, offered non-prison sanctions for technical parole violations, and expanded parole and probation eligibility. Through the current fiscal year, these reforms saved the state an estimated $2 billion in prison construction costs and reduced its projected prison population by over 11,000 people. After 2007, as in Kansas, Texas’ crime rate fell to the lowest level since 1973.

More states might take steps like these if lawmakers knew about the potential cost savings.  The report we released this week with the ACLU describes how states can do a better job of analyzing the budgetary impact of criminal justice reforms.

More States Propose Reverse-Robin-Hood Tax Policy

January 13, 2012 at 4:04 pm

Kansas Governor Sam Brownback and a legislatively appointed task force in Oklahoma have proposed raising taxes on working-poor families with children and impoverished seniors in order to help finance large tax cuts that mostly benefit the well-to-do.

The new proposals would eliminate each state’s Earned Income Tax Credit and grocery tax credit.  (Kansas and Oklahoma are among the few states that still tax grocery food; the grocery credits help blunt the impact of the tax on the poor.)  Low-income seniors, working parents, and others would end up paying more tax.  Other proposed changes would raise taxes on middle-income families, too.

Meanwhile, the plans would slash taxes for the highest-income households in those states.

For instance, the Oklahoma plan would cost a married couple with two children and a $25,000 income $647 a year in higher taxes and lost credits.  But it would give the top 1 percent of taxpayers, those with incomes over $357,400, an average benefit of $2,833.

As one Oklahoma task force member — a prominent Republican businessman — explained: “Basically, you’re taking money from the poor and giving it to the rich. . . .  I can’t support that.”  Unfortunately, most of his fellow task force members, including several leading lawmakers and top political appointees of Governor Mary Fallin, have endorsed the proposal.

The Kansas proposal would have a similar impact, taking hundreds of dollars from seniors and the working poor and giving thousands of dollars to the wealthy.

Remarkably, such proposals are not unique in recent years.  As we noted last year, Michigan, New Jersey, and Wisconsin have acted in the last two years to raise taxes on the poor to finance tax cuts for businesses and the wealthy.