Unemployment benefits are funded by a payroll tax on employers, collected at a rate that is supposed to keep the funds solvent. Firms that fire lots of people are supposed to pay higher rates. Over the boom years, the drive to minimize state taxes on employers reduced revenues, and when the ranks of the unemployed grew during the crisis, the funds could not meet the need.
Collectively, the states owe the federal government $46 billion for the shortfalls in their unemployment funds. Those deficits put pressure on the states to reduce benefits or raise the payroll taxes.
This month, the Florida House approved a measure reducing the maximum benefit period from 26 to as little as 12 weeks while curbing increases in unemployment taxes paid by employers. The jobless rate in Florida is 11.9 percent.
“We are sending a message to the business community that Florida is quickly becoming the most business-friendly state in the country,” said state Rep. Doug Holder (R-Sarasota), the sponsor of the Florida bill.
It would go into effect Aug. 1.
In Arkansas, lawmakers are moving toward freezing unemployment benefits levels while trimming the maximum benefit period for state benefits from 26 to 25 weeks.
“The more that states look at the severity of the solvency problems, the more measures like this will be seriously considered,” said Douglas Holmes, president of UWC, an organization that provides advice on unemployment policy to businesses and some states.
The federal extensions — the latest one pushed forward by President Obama in December — have led to criticism that the unemployment program has morphed from a temporary bridge for laid-off workers into an expensive entitlement, a critique that angers advocates for the unemployed.
“We have had such high unemployment for so long, people maybe don’t have as much sympathy for the jobless as they did in 2008 or 2009,” said Rick McHugh, a staff attorney with the National Employment Law Project.
Pointing out that the maximum unemployment benefit in Michigan is $362 a week and $275 a week in Florida, McHugh added that it is unlikely that many people are financially comfortable just collecting unemployment benefits.
The Michigan measure was part of a bill that was necessary to ensure jobless people could receive a 20-week federal extension of unemployment benefits, the governor’s office said. Without it, about 35,000 people would have lost their benefits as of April 1.
A spokesman for Snyder said that he will sign the bill because it ensures that presently unemployed workers will continue to get benefits but that he would have preferred not to reduce the maximum benefit period.
“This makes sure we have that lifeline still in place,” Snyder spokeswoman Sara Wurfel said. “It was a necessary compromise. The votes to do anything else weren’t there otherwise.”