Strengthening the Texas Unemployment Insurance System

1
Strengthening the Texas Unemployment Insurance
System
NELP
National Employment Law Project

• Maurice Emsellem, Policy Co-Director
• National Employment Law Project
• [phone]
• emsellem_at_nelp.org

2
The Nations 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.

3
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.

4
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).

5
One in Five Unemployed TexansCollects UI
Benefits (Ranking 50th)
6
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• Outdated Work-History Requirement Latest 3-6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).

7
21 States Adopt theAlternative Base Period
(ABP)
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ABP Critical to Low-Wage Workers(Michigan Case
Study)

• In 2003, there were 26,219 ABP recipients.
• ABP payments averaged 232 a week (4,600 a
  year), compared with 90 in TANF averaged per
  week.
• ABP benefits totaled 86 million in 2003 (equal
  to 25 of TANF payments).

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(No Transcript)
10
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)

• Maines work-search rule permits history of
  part-time work or good cause related to child
  care or dependent care.
• 886 workers collected UI under Maines part-time
  UI law (2.7 of all UI claims).
• Collected 1.8 million in benefits, averaging
  2,078 per worker.
• Another 920 part-time workers were paid UI after
  looking for full-time work.

12
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).

14
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.

15
Insufficient Texas Reserves to Pay Benefits for
One Year at Recession Levels
Source U.S. Department of Labor Office of
Workforce Security Division of Fiscal and
Actuarial Services. UI Data Summary, Third
Quarter 2008
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Insolvency in Texas U.S. Predates the Recession
17
Texas Fails to Expand Contributions During Good
Economic Times
Major Economic Expansion, But No Increase in
Contributions
18
Record Low UI Taxes In Texas
Source U.S. Department of Labor Employment and
Training Administration. Unemployment Insurance
Financial Data Handbook
19
Texas Trust Funds ReservesFail to Keep Pace with
Benefits Paid
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.
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Time for Texas to Increasethe 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.
• Texass especially low taxable wage base places a
  disproportionate tax burden on small businesses
  and low-wage employers.
• Texas only taxes 20 of the states 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.