Durbin, Reed, Brown Introduce Bill to Ensure Long-Term Stability of Unemployment Insurance

Proposal will save employers money, help cash-strapped states and provide a lifeline to struggling families

[WASHINGTON, D.C.] – To prevent a tax increase on small businesses and to ensure that cash-strapped states are able to continue providing a critical lifeline to struggling families as they search for work, Assistant Senate Majority Leader Dick Durbin (D-IL), Senator Jack Reed (D-RI) and Senator Sherrod Brown (D-OH) today introduced legislation to revamp the unemployment insurance program and ensure its long-term solvency. The Unemployment Insurance Solvency Act - which will likely be deficit neutral - will solidify the program’s finances while giving states greater flexibility in managing their costs. A similar proposal was included in President Obama’s budget.

“This proposal will return the critical but overextended unemployment insurance program to solvency over several years, without raising the taxes on employers. Illinois employers will save an estimated $300 million over the next two years and the state will save $200 million more,” said Durbin. “This is the kind of common sense, fiscally responsible proposal that America must have more of as we work to create more jobs and reduce our debt.”

“We need to do everything we can to accelerate economic growth and get companies hiring again. This bill will give businesses and states extra time to strengthen their finances as an economic recovery takes hold. It will also allow states to continue meeting their jobless compensation obligations,” said Reed. “This bill will help states rebuild their UI trust funds and boost our economy.”

“This is about shoring up the unemployment insurance system and giving employers the ability to hire workers by states not having to raise taxes,” Brown said. “We know that unemployment insurance is a lifeline for workers while they look for new jobs, but it also places a big strain on states’ budgets. This bill will ensure that Ohio families can continue to count on unemployment insurance, while keeping payroll taxes low. Ohio will save more than $200 million in interest payments. This about keeping our economy growing through continued private sector job creation.”

Although joblessness rates have fallen, there are still currently more than 1.2 million unemployed workers in Illinois, Rhode Island and Ohio and nearly 14 million unemployed nationwide. At a time when such a huge number of people are temporarily relying on unemployment insurance, the trust funds from which those payments are made can become depleted.

Under current law, states are required to immediately pay interest on any money they need to borrow to make payments to the jobless if their trust funds run dry. States must then raise unemployment taxes on local employers to quickly make up for any shortfalls.

Today’s proposal would waive the interest payments that state governments would otherwise be required to pay for the next two years. It would also waive the requirement that states immediately charge companies higher taxes. This will allow states to focus on making the payments it owes to its vendors and creditors, and employers to focus on hiring new workers.

Beginning in 2014, once the economy has better recovered, Illinois, Ohio and other states will have greater flexibility in figuring out how to replenish its trust fund and prepare for the next downturn.

Leading economists, including the nonpartisan Congressional Budget Office, rank providing unemployment insurance as one of the most simulative things the federal government can do during an economic downturn, because nearly every dollar provided is immediately plowed back into the economy. That spending helps drive up demand for what private companies sell, which encourages companies to hire more workers to meet that demand.