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Strengthening the Texas Unemployment Insurance System

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Strengthening the Texas Unemployment Insurance System Powered By Docstoc
					NELP     National Employment Law Project




    Strengthening the Texas
 Unemployment Insurance System

       Maurice Emsellem, Policy Co-Director
        National Employment Law Project
                 (510) 663-5700
               emsellem@nelp.org
              The Nation’s
           Economic Challenge
• Economists predict a prolonged “U” shape recession
  lasting two years (versus 10 months average post-WWII).
• Deep recession, with unemployment rates of 8.0% to
  8.5% (or over 10% if the auto industry, employing over
  130,000 Texans, collapses).
• Unemployment rates may not peak until two years after
  the recession ends, which was the case during the last
  two recessions.
• Significant decline in the share of families with enough
  resources to cover a spell of unemployment (down from
  51% to 44% in just three years).
• By the end of 2009, the percent of the population in
  poverty will increase from 12.5% to at least 14.3%.

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          Major Increase in
        Texas Unemployment
• Texas unemployment rate up 30% in the past
  year, to 5.6% (657,000 Texans unemployed,
  up 166,000).
• Texans collecting unemployment insurance in
  the past year increased by 30% (360,000, up
  from 277,000).
• 69,000 Texans exhausted their state benefits
  during the last six months, up 30% compared
  to last year.
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         The Critical Role of
       Unemployment Insurance
• Stimulates the economy in those communities hardest hit
  by joblessness ($2.15 for every dollar circulating in the
  economy).
• From July to November, Texans already collected $215
  million in federal Emergency Unemployment
  Compensation benefits (before the new EUC expansion)
• Stabilizes housing (46% of housing delinquencies are now
  due to unemployment, and 40% of benefits spent on
  housing).
• Alleviates economic hardship (without the help of
  unemployment benefits, poverty increases by 50% for the
  long-term jobless).
• Maintains quality jobs (e.g., UI benefits increase earnings
  and increases access to jobs with health care).
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 One in Five Unemployed Texans
Collects UI Benefits (Ranking 50th)




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 Major Gaps in Texas UI Benefits
    Limit Economic Stimulus
• Outdated Work-History Requirement: Latest 3-6 months of
  earnings not counted toward eligibility for UI in Texas, denying
  benefits to large numbers of low-wage workers. GAO finds low-
  wage workers twice as likely to be unemployed and one-third as
  likely to collect UI benefits.
• Full-Time Work-Search Requirement: Once qualified, Texans
  have to seek full-time employment to keep collecting UI benefits,
  denying benefits to large numbers of women workers with
  families looking for part-time employment. GAO finds part-time
  workers about half as likely as full-time workers to collect UI
  benefits.
• Compelling Family Reasons for Leaving Work: Texas law
  recognizes verified medical conditions and domestic violence as
  valid reasons for leaving work, but not separations that result
  from workers having to leave work to follow their spouse to a
  new job (except military families).
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      21 States Adopt the
“Alternative Base Period” (ABP)




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ABP Critical to Low-Wage Workers
     (Michigan Case Study)
   Percent Collecting UI Due          •   In 2003, there were
   to Michigan's ABP (2003)               26,219 ABP
   17.4%                                  recipients.
                                      •   ABP payments
                                          averaged $232 a
                                          week ($4,600 a
                                          year), compared
                                          with $90 in TANF
                                          averaged per week.
                    1.6%              •   ABP benefits totaled
                                          $86 million in 2003
                                          (equal to 25% of
  Low-Wage      Higher-Wage               TANF payments).
   Workers        Workers

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                                 Major Increase in Coverage
                               Outweighs Increased ABP Costs
                       7%
                                       6.5%
                                                6.2%
                       6%   5.5%
                                5.2%
                                                                        Percent of UI
Share of State Total




                       5%                4.7%        4.7%
                                                                        Claims
                                                                        Percent of UI Costs
                       4%
                                                                        3.1%
                       3%                                    2.7%
                                                                                   2.1%
                       2%                                        1.7%
                                                                            1.4%
                                                                                        1.1%
                       1%



                       0%

                            Michigan   Maine    New Jersey   Georgia    Virginia     North
                                                       www.nelp.org                 Carolina   9
 Nearly Half the States Extend
UI Benefits to Part-Time Workers




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  Part-Time Benefits Critical to
Women Workers (Maine Case Study)
                                     • Maine’s work-search rule
     Maine's Part-Time
                                       permits history of part-
   Worker UI Reform (2004)
                                       time work or “good
                                       cause” related to child
    70.5%                              care or dependent care.
                                     • 886 workers collected UI
                                       under Maine’s part-time
                                       UI law (2.7% of all UI
                  29.5%
                                       claims).
                                     • Collected $1.8 million in
                                       benefits, averaging
                                       $2,078 per worker.
                                     • Another 920 part-time
    Women          Men                 workers were paid UI
                                       after looking for full-time
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             Economic Recovery Legislation
              Modernizes the UI Program
                 (S.1871/H.R. 2233)
• The Unemployment Insurance Modernization Act (UIMA) provides
  $7 billion in “Reed Act” funds to states that qualify for incentive
  payments to modernize their UI programs.
• All states qualify for $500 million in supplemental funding to pay for
  administration of the program, responding to prior cuts in federal
  funds and rising caseloads.
• Program improvements would help an estimated 500,000 workers,
  targeting the long-term unemployed and the gaps that deny UI to
  low-wage, part-time and women workers.
   -One-third share requires “alternative base period.”
   -Remaining two-thirds share requires two of the following: Part-
      time provision, family-friendly voluntary quit provisions, extra UI
      for workers in training (Senate bill also includes dependent
      allowances and 26-week uniform duration of state benefits).

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      UIMA Generates Significant
   Funding for Texas to Modernize UI
• Texas automatically collects $38 million in federal
  administrative funding under the UIMA (36% of the
  Texas 2008 federal grant).
• Texas receives $530 million in total incentive funds,
  which would cover more than 6.5 years of key UI
  reforms (including the alternative base period, part-
  time worker benefits and “trailing spouse”).
• Texas receives $177 million in incentive funds to
  adopt the ABP, covering more than three years of
  benefits and helping 28,000 workers a year (CPPP
  estimates these workers will collect an average of
  10 weeks of benefits in Texas at $136 per week).

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Texas UI Funding Driven by Tax
Cuts, Not Responsible Financing
• Texas has consistently suffered from insolvency well before the
  recessions produced major increase in benefits.
• Major tax cuts in Texas undermine need to raise revenue in
  good times to pay benefits during recessions (“forward
  funding”).
    -$300 million in rebates in 2007
    -average tax rate declined from 1.74% in 2004 to .98% in 2008
    -74% of employers paid the minimum tax rate of .26% (nationally,
       28% of employers pay the minimum state tax).
• The $9,000 taxable wage base in Texas has not been increased
  since 1989.
• TWC projects an October 2009 trust fund balance of $730
  million (or half the current balance), triggering a tax increase to
  fill a $141 million gap required by state law.


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                  Insufficient Texas Reserves to Pay
               Benefits for One Year at Recession Levels




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Source: U.S. Department of Labor Office of Workforce Security Division of Fiscal and Actuarial Services. UI Data Summary, Third Quarter 2008
Insolvency in Texas & U.S.
  Predates the Recession




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Texas Fails to Expand Contributions
   During Good Economic Times




              Major Economic
             Expansion, But No
          Increase in Contributions




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Record Low UI Taxes In Texas




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Source: U.S. Department of Labor Employment and Training Administration. Unemployment Insurance Financial Data Handbook
      Texas Trust Funds Reserves
  Fail to Keep Pace with Benefits Paid




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*2008 figures reflect revenues and benefits for the 12-month period ending September 2008. 2008 Trust Fund Balance as of Oct. 2008
                        Source: US DOL Employment and Training Administration, Unemployment Insurance Financial Data Handbook.
     Time for Texas to Increase
      the Taxable Wage Base
• The Texas taxable wage base of $9,000 was last
  increased 20 years ago.
• If the Texas taxable wage base had kept pace with
  inflation since 1989, it would be over $15,000.
• Texas’s especially low taxable wage base places a
  disproportionate tax burden on small businesses and
  low-wage employers.
• Texas only taxes 20% of the state’s average annual
  wage, well below most of the neighboring states:
  Oklahoma (37%), New Mexico (53%), Arkansas
  (29%).
• Oklahoma and New Mexico also index their taxable
  wage base.
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