Job-Related Stimulus Funds Fuel Debate

Expanded Unemployment Benefits Would Hurt Business, Va. Republicans Say

Thousands of jobless Virginians could be eligible for enhanced unemployment benefits under the stimulus package passed by Congress last month, but a group of Republican lawmakers is urging the state to reject $125 million in federal money, saying it would mean higher taxes for businesses once the stimulus money is exhausted.

The stimulus bill includes incentives to expand benefits to many more jobless people, including part-time workers and those in approved job training programs, among others. For the state to receive its full allotment, however, Gov. Timothy M. Kaine (D) and the General Assembly must change state law, which provides some of the lowest unemployment benefits in the country. Kaine has not taken a position on the issue, but several Democratic lawmakers said they are gearing up to support the changes, which they view as essential for helping laid-off workers.

"I don't see how you turn your back on $100 million," said House Minority Leader Ward Armstrong (D-Henry). "It helps people pay [for] their groceries, make the car payment, get the car fixed. It has a huge impact on local economies."

Virginia, which recorded a 6.4 percent unemployment rate in January, is already eligible for $62.5 million in federal job benefits money, about one-third of its total allotment. To be eligible for the other two-thirds, the state would have to provide coverage to at least two of four groups of unemployed people: those only available to work part time; workers who left their jobs for compelling family reasons such as domestic violence, a spouse moving to take another job or caring for a sick child; workers with dependent children; and workers who need benefits extended through certain kinds of job retraining.

House Republican leaders and officials with the Virginia Chamber of Commerce said that such an expansion would upend the letter and spirit of the state's unemployment insurance system.

"Our jobless benefits system is an insurance program, not an entitlement," said Del. Samuel A. Nixon (R-Chesterfield), chairman of the House Republican Caucus. "This isn't free money. This is money that we'll have to pay for by way of higher taxes down the line."

Several GOP governors, including those in Alabama, Georgia and Louisiana, share that view. But the political situation is somewhat complicated in Virginia, with Kaine, who also serves as chairman of the Democratic National Committee, possibly squaring off with the Republican-led House of Delegates, a fiscally conservative body that has long opposed fundamental changes to laws that extend such benefits.

To draw down the federal money, Kaine would have to amend a bill that he is reviewing, or insert changes into the state budget. Lawmakers would then have to vote on those changes when they return to Richmond for their regularly scheduled one-day session April 8.

Maryland officials said they probably would not seek the federal funds until next year, when they begin overhauling components of their state's jobless benefits program. Lawmakers there are considering a bill that would grant coverage to part-time workers, apart from the stimulus package. The District must approve one of the four federal requirements to receive its full allotment, and officials said they are studying the long-term impact of any new legislation.

Nixon said that once the federal money runs out, Virginia would have to raise taxes on businesses to maintain the expanded benefits. Those increases would start in about two years.

The total cost of the changes would depend on which provisions the state adopted. According to state reports, as many as 950 people would benefit from job training provisions immediately, at a cost of $8.1 million a year. On average, that would cost each employer $2.25 per worker each year after the federal funding expired. The part-time worker provision would open benefits to an estimated 6,867 people and cost $10 million a year -- an average increase of $2.36 a worker for each employer.

"There isn't any combination [of provisions] that we are agreeable to," said Keith Cheatham, vice president for government relations for the Chamber of Commerce. "Benefits are not based on need, they are based on earnings."