Unemployment Compensation Proposal in Congress Offers States Options

Republican lawmakers in the U.S. House want to give states new options for using federal unemployment compensation dollars.

Under the Jobs, Opportunity, Benefits and Services (JOBS) Act of 2011 (HR 1745), states would be givenflexibility in how to spend the remaining $31 billion in federal unemployment funds this year. 

Specifically, if JOBS becomes law–and a state adopts legislation to implement it–the program would allow the state to:

• Continue paying regular or extended unemployment benefits
• Prevent a hike in employer federal unemployment taxes next year to repay the federal loans
• Pay interest or principal on federal unemployment loans
• Promote job creation and hiring through the use of reemployment services, including wage subsidies.

The House Republican proposal takes an approach that shifts decision-making back to the states at a time when many unemployment systems have been overwhelmed by the impact of the recession.

Under current law, the federal dollars only could be spent for unemployment benefits, which could stretch up to 99 weeks. Connecticut would receive the same amount of federal funds–$571 million–under JOBS as it would under the current system.

Earlier this month, the House Ways and Means Committee approved the proposal and sent it to the House, where it now awaits action. The GOP controls the House, but Democrats hold the edge in the Senate.

Employers this summer will face a $40 million tax to pay back the interest on the federal loans the state used to keep the system afloat. The interest payments, at an average of $40 per employee, will start to be collected in August. Additional payments for interest and principle will follow soon afterward.

Employers in Connecticut are the sole source of funds for the unemployment compensation system, and they have been hard-hit by taxes that ultimately hinder their ability to add jobs. Connecticut’s unemployment rate is stuck at nine percent, and economists believe the road to recovery will be slow.      

In light of Connecticut's unemployment outlook, it’s not clear if and how this new federal legislation will be change our circumstances but CBIA urges the state to consider anything that will alleviate the tax burden on employers.

For more information, contact CBIA’s Kia Murrell at 860.244.1931 or kia.murrell@cbia.com.