The Nine States Slashing Unemployment Benefits

Around 14 million people in the U.S. are jobless today. Yet, several states — even some that are experiencing economic recoveries — have begun to cut jobless benefits, according to recent data obtained by 24/7 Wall St. This is another example that the unemployment problem has become more insidious. Federal and state governments use two milestones — 26 weeks and 99 weeks — to determine unemployment insurance payments and when they are terminated. The number of people out of work for each of these time periods, or longer, grows.

States with the highest unemployment also tend to have the most financial trouble themselves. This is due to low tax receipts caused in large part by the high unemployment level. People out of work pay little or no taxes. But financial desperation is only one reason for states to decrease jobless benefits. A second group of states, some of which have begun strong recoveries, has also begun cutbacks. Governors and legislators of these states want to decrease budget deficits both by taking advantages of improved economic positions and through austerity programs for state costs.

24/7 Wall St. examined how the relationship between employment insurance and state finances has begun to change from the ways they operated in the early part of the recession until 2011. We reviewed the just released report on state unemployment law by the National Employment Law Project. The report identifies the states that are reducing their unemployment insurance coverage. The nine that are reducing benefits this year did so by either cutting the number of eligibility weeks or by reducing the payment amount.

Our analysis shows that local governments are choosing to make these reductions for a variety of reasons. Some, like Michigan and Arkansas, are seemingly forced to cut benefits because of ballooning unemployment rates along with struggling local economies. Others, like Illinois and Wisconsin, which are seeing their economies recover and the unemployment rates improve, are cutting also benefits.

All states that have altered their unemployment payment rules, either because of economic weakness or a desire to couple improved tax receipts with austerity, have one thing in common. They are part of a breakdown in a system to support a huge pool of Americans who have not found jobs for months, and may not find them at any time in the foreseeable future. This is especially true if there is another recession. The decisions by the states affect the extent to which the federal government has to bear the economic burden of the jobless. Recent battles in Washington make it less and less likely that there are nearly limitless funds to support the jobless once they have exhausted their state benefits. In addition to the other weight the jobless carry, they also may no longer be financially supported by governments in a similar manner to the recent past.

1. Arkansas
> Unemployment: 8.1% (25th highest)
> Total home vacancy: 13.2% (18th highest)
> State GDP per capita: $31,492 (3rd lowest)
> Key reduction: maximum benefits decrease to $451/week

In late March, the Arkansas legislature approved a measure to reduce the number weeks the new unemployed can receive benefits to 25, from 26. More substantially, the state set a permanent maximum benefit at $451 per week. This number will not be adjusted for inflation unless further legislation is created. The state also expanded the list of reasons a recipient can be disqualified from coverage. Arkansas is one of the poorest states in the country, and while unemployment is below the national average, the state has one of the lowest GDPs per capita in the U.S., as well as above-average vacancy rates.

2. Florida
> Unemployment: 10.6% (4th highest)
> Total home vacancy: 17.4% (3rd highest)
> State GDP per capita: $35,815 (13th lowest)
> Key reduction: benefit weeks reduced to a range of 12 to 23, depending on unemployment

Florida has adopted some of the most severe cuts in the U.S. If the state’s unemployment rate remains above 10.5%, unemployed workers will be able to receive up to 23 weeks of benefits. For every 0.5 percentage points the unemployment rate drops, however, the number of weeks of benefits available will decrease by one week. The lowest amount possible will be 12 weeks, if unemployment hits 5%. This new system will go into effect in January 2012.

3. Illinois
> Unemployment: 9.2% (18th highest)
> Total home vacancy: 8.6% (4th lowest)
> State GDP per capita: $45,302 (15th highest)
> Key reduction: benefit weeks reduced to 25

Illinois may be one of the states that is adopting these new benefit reductions not because of budget demands, but because it is exercising fiscal responsibility. Despite some problems in its major cities, Illinois appears to be doing relatively well. The state has an unemployment rate on par with the national average, healthy GDP per capita, and one of the lowest vacancy rates in the country. The state is reducing the weeks a new applicant can receive benefits to 25.

4. Indiana
> Unemployment: 8.3% (23rd highest)
> Total home vacancy: 10.4% (17th lowest)
> State GDP per capita: $37,855 (20th lowest)
> Key reduction: benefits based on average salary, not highest quarter

Under Indiana’s current system, unemployment benefit amounts are based on a worker’s highest quarter of earnings. Starting July 1, 2012, the state’s benefits will instead be based on a worker’s past four quarters earnings. Average weekly benefits are expected to drop from $283 to $220. Furthermore, a worker will be “assumed to have refused suitable work if the offer of work is withdrawn by a prospective employer after he or she tests positive for drugs, or refuses to take a drug test,” making it more difficult for workers to apply for benefits.

5. Michigan
> Unemployment: 10.5% (6th highest)
> Total home vacancy: 14.5% (10th highest)
> State GDP per capita: $34,893 (9th lowest)
> Key reduction: benefit weeks reduced to 20

Michigan’s legislature reduced the maximum number of weeks new unemployed citizens can receive benefits from 26 weeks to just 20. While Michigan’s unemployment rate is no longer the worst, as it was for a good portion of the recession, it still has one of the highest rates in the country. The state is also among the ten worst for vacancy and GDP per capita. This is a state that is reducing benefits because its budget demands it.

6. Missouri
> Unemployment: 8.8% (20th highest)
> Total home vacancy: 12.4% (20th highest)
> State GDP per capita: $36,287 (14th lowest)
> Key reduction: benefit weeks reduced to 20

The number of weeks a person in Missouri can collect unemployment benefits changed from 26 to 20 in April of 2011. This change was tacked on to a bill that temporarily provided unemployed workers with an additional 20 weeks of benefits after they had exhausted state and emergency federal assistance. In defense of this trade off, Missouri Governor Jay Nixon stated that “thousands of Missouri families are struggling to make ends meet right now, and it was vital that we provide extended assistance to these families immediately.”

7. Rhode Island
> Unemployment: 10.8% (3rd highest)
> Total home vacancy: 10.7% (19th lowest)
> State GDP per capita: $41,816 (24th highest)
> Key reduction: benefits recalculated, payoffs now average $100 less

Rhode Island has silently crept up the unemployment rate ranks, and now has the third highest in the country, behind only California and Nevada. While the state is performing quite well, the massive unemployment rate has the potential to weigh heavily on the state’s budget, either in the short-term or the long-term. The state is attempting to reduce the effects in the short-term, at least, by adjusting the way benefit rates are calculated. NELP estimates that this reconfiguration of the system will reduce the average weekly benefits of residents by as much as $100. Workers will also have a longer period of ineligibility for benefits if they quit their job.

8. South Carolina
> Unemployment: 10.5% (5th highest)
> Total home vacancy: 15.7% (6th highest)
> State GDP per capita: $31,378 (2nd lowest)
> Key reduction: Benefit weeks reduced to 20

South Carolina’s unemployment rate is the fifth worst in the country, it also has the sixth worst home and rental vacancy in the country. These poor economic conditions indicate why the state has cut the number of weeks residents can collect unemployment benefits from 26 to 20. In addition to this, companies that operate for 36 weeks consecutively may be designated as seasonal employers, making it so that employees in the off-season not receive benefits. This 36 week period is the longest among all states.

9. Wisconsin
> Unemployment: 7.6% (20th lowest)
> Total home vacancy: 13.1% (17th highest)
> State GDP per capita: $38,912 (19th lowest)
> Key reduction: Waiting a week before benefits

Beginning in January of 2012, there will be a waiting week for unemployed workers in Wisconsin looking to receive unemployment benefits. This means that, despite a person’s eligibility for benefits, they must wait one week before collecting any aid. Additionally, workers are considered to have “refused suitable work” if they test positive for drugs or refuse to take a drug test. This was passed as part of a bill signed by Governor Scott Walker, which makes another 13 weeks of federal unemployment benefits available to out of work Wisconsinites. Luckily for residents of the state, unemployment is at a relatively low 7.6%.

Douglas A. McIntyre, Michael B. Sauter, Charles B. Stockdale

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