UC Stimulus Vs. Reality

During the 2009 legislative session, a battle was fought over what was called “unemployment compensation (UC) stimulus” money. As the 2010 session approaches, the prospect of that same battle looms on the horizon.

Approximately $98 million from a fund paid for by employer federal UC taxes was made available to Louisiana’s UC trust fund under the American Recovery and Reinvestment Act of 2009 (ARRA), more commonly known as the “stimulus package.” However, the ARRA attached “strings” to these dollars—those strings being that Louisiana enact permanent laws expanding UC benefits to a new set of claimants. It should be noted that as the ARRA was moving through Congress, an amendment was proposed to give states this money to shore up their UC trust funds without strings attached. Unfortunately, the amendment was rejected because the leadership in Congress insisted that the permanent benefit expansions had to be part of this distribution.

Therefore, to qualify for the ARRA UC funds, Louisiana must first change its law to allow a more costly method of determining claimants’ eligibility for benefits, which would only serve a very narrow group of individuals with little work history or attachment to the workforce. Governor Jindal and the Louisiana business community opposed this change because it would lead to tax hikes for individual employers, and the UC stimulus monies would not be sufficient to cover the ultimate cost of the change. Furthermore, state and local governments would see an immediate impact as they do not pay UC taxes but instead are billed at the end of each quarter for all benefits paid to their former employees during that period.

Nevertheless, there were legislators who pushed hard for adoption of this law last year. They argued that Louisiana needed to make the change and get the money in order to prop up the state UC trust fund so it would not fall to a level that by law automatically triggered employer tax increases and claimant benefit reductions. In response, the Louisiana Workforce Commission provided data showing that, even with $98 million added in, the impact of the national recession on Louisiana’s economy and the resultant increase in claims filed were already driving the fund to a point that would trigger higher taxes and lower benefits for 2010. So, the legislation was ultimately killed.

When the Revenue Estimating Conference met last September to examine the data and develop a trust fund balance projection for August 30, 2010, the figure it adopted supported the Commission’s claim. But the Commission’s data also indicates something else important. Were Louisiana to make the law change some clamored for so loudly last session, the effect would be to prolong the period of time that the trust fund remains below the trigger level. Employer taxes would stay higher and claimant benefits lower for two years longer if Louisiana enacts the ARRA provisions into law—helping a select group to the detriment of all others.

The ARRA gave states until 2011 to change their laws and receive the UC stimulus dollars. That means the battle over bills seeking to enact such a law is likely to be fought again during the next two sessions.

Despite the increasing pressure from initial and continuing UC claims, our state UC trust fund is still one of the healthiest in the country. Louisiana’s business community has long defended the trust fund against legislative actions that jeopardize it. We hope that the Legislature will protect it just as fervently and continue to refuse to enact the ARRA provisions.

(Dan Juneau is the President of the Louisiana Association of Business and Industry. Jim Patterson, LABI’s Vice President of Governmental Relations and Employee Relations Council Director, contributed to this column.)

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