More states used money the federal government dispensed last year to boost unemployment insurance funds to give tax breaks to employers than to improve benefits to workers, according to a new report by the National Association of State Workforce Agencies.
The study found that 23 states used part of their share of the $8 billion in funding to cut companies' unemployment tax rates. In 22 states funds were used to improve services such as job training; 17 states spent money in unemployment insurance administration, while the District and seven states including Maryland improved jobless benefits. In Mississippi, $16 million of the $64.7 million the state received will be used to build a state office building.
The federal funding was intended to ease the pain of joblessness following the Sept. 11, 2001, terrorist attacks and provide an economic stimulus.
"The Democrats wanted to help unemployed workers and wanted to expand the availability of unemployment insurance to part-time workers and others with only recent earnings," said Richard A. Hobbie, the association's unemployment insurance director. "The administration and House Republicans touted it as a more flexible way to get money to the states."
In Texas, which borrowed money from the federal government last year to restore its unemployment insurance fund to solvency, state officials used the post-attack money to reduce the size of the employer tax increase they had projected. In effect, that reduced the employer tax bill by about $596 million in 2003, the report said.
Employers in Texas paid an average of about $90 per employee to the state unemployment fund in 2002, and at one point, state officials said they believed their tax bill would double. Instead, the employer tax bill rose to about $150 per worker per year.
"It's a good thing for claimants and a good thing for Texas business," said Larry Jones, a spokesman for the Texas Workforce Commission. He said Texas has a "long-standing philosophy" to keep money circulating in the economy rather than sitting in the trust fund. He said the state had not been able to make any improvements to claimants' benefits because the legislature only meets every other year.
Delaware, like many states, used the money to replenish the state fund, avoiding the need for higher corporate taxes.
Maurice Emsellem, public policy director of the National Employment Law Project, a worker advocacy group, said he believed the federal money had been "squandered."
. "In most states, employers call the shots," Emsellem said.
The District used the money to loosen rules regarding how long a worker must have been employed before they become eligible for benefits, a reform many Democrats have sought because they say requiring long periods of fixed employment makes it harder for low-wage workers, who tend to move from job to job more easily, to qualify for state assistance. The District also spent money to improve the program's administration and reduce overpayments.
Maryland used the money to raise the maximum weekly benefit to $310, up from $280 at the beginning of 2002, according to NASWFA. It also gave the state a thicker cash cushion for the future.
Virginia used the money to boost its program's solvency and eliminate the need for potential unemployment tax increases.