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OPA News Release: [12/03/2002]
Contact Name: Elissa
Pruett
Phone Number: (202) 693-4676
U.S. Department of Labor Takes Action to Protect
Integrity of Unemployment Insurance Trust Funds
WASHINGTON—Citing the need to protect shrinking unemployment
reserves, the Department of Labor announced today a proposed repeal of the
Birth and Adoption Unemployment Compensation Rule of 2000 (BAA-UC). The rule
was an experiment by the previous Administration to let states use unemployment
insurance funds for purposes other than helping laid-off workers.
Post-September 11th economic conditions increased the need to
protect the integrity of UI trust funds. Many states are reporting low reserve
levels in their state unemployment trust funds:
- At the close of last year, 28 states had less than 12 months of
benefits in reserve.
- 13 states raised taxes last January to cover UI benefit costs, at a
time when businesses needed more capital.
- At least six states have trust fund balances that make borrowing
likely.
- The $8 billion Reed Act distribution included in President
Bush’s Economic Security package last March is the only action that has
kept many states from borrowing to this point.
The unemployment insurance system was created to provide temporary
financial assistance to laid-off American workers, but the BAA-UC rule exposed
UI trust funds to claims Congress never intended to fund. By proposing a repeal
of this rule, the Department of Labor is taking action to reverse this threat
to the trust funds’ solvency.
“Our first priority is to help laid-off workers and their families,
and this new measure strengthens their safety net,” said Assistant
Secretary of Labor for Employment and Training Emily Stover DeRocco. “At
the close of last year, 28 states had less than the Department of Labor’s
recommended level of reserves in their trust funds—and no state has
enacted BAA-UC legislation due in part to concerns about trust fund
balances—leading the Department to propose that this experiment be
withdrawn.”
Other
actions taken by the Labor Department to assure trust fund integrity include
convening a task force on UI fraud and abuse and working with states to
minimize overpayments. In addition, the Department has transmitted an
unemployment insurance/employment services reform proposal to Congress that
seeks to strengthen both programs.
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