Unemployment Benefits Bill Will Help Long-Term Unemployed Now, But It Cuts Future Benefits Without Fixing the Financing of the UC System

Harrisburg lawmakers have agreed to a compromise bill that will allow an estimated 135,000 long-term unemployed Pennsylvanians to continue receiving unemployment benefits that are funded by the federal government. But this agreement makes permanent cuts in the state’s unemployment compensation (UC) program, without addressing the program’s flawed financing system that has caused the insolvency of the UC Fund.

Senate Bill 1030 will be amended to make a technical amendment to the state UC law that will avoid the cut-off of 13 weeks of federally funded Extended Benefits to 45,000 Pennsylvanians next week. The bill will also permit 90,000 other Pennsylvanians to qualify for EB through the end of 2011.

However, the compromise will also permanently cut UC eligibility in the future. Some of the provisions of the bill, while technical, will fall particularly hard on thousands of the most economically vulnerable workers in Pennsylvania. The bill will:

• Increase the amount of earnings needed for a “credit week” that qualifies workers for benefits from $50 now, to $100 in 2013, and to 16 times the minimum wage in 2015;
   
• Disqualify workers who have fewer than 18 credits weeks, beginning in 2015 (currently, workers with 16 or 17 credit weeks can get limited benefits);
   
• Limit the maximum number of weeks during which a worker can receive benefits to the number of his credit weeks, beginning in 2015 and affecting an estimated 75,000 workers per year (currently a worker with at least 18 credit weeks can receive benefits up to 26 weeks); and
   
• Increase the minimum benefit of $35 per week to $70 per week, beginning in 2013 (meaning that persons whose earnings calculations would result in a benefit below $70 will receive no benefit at all).

These changes will particularly harm low wage workers, because of their often unstable employment as well as their low wages.

Moreover, while this compromise is anticipated to cut more than $100 million per year of benefits, it does not solve the funding crisis of Pennsylvania’s UC system. Currently, Pennsylvania is more than $3.6 billion in debt to the federal government.

Pennsylvania’s unemployment compensation system is financed primarily through employer taxes on a “taxable wage base” of only the first $8,000 of each employee’s wages. This taxable wage base was last raised in 1984. According to the Pa. Department of Labor and Industry, if the taxable wage base had been increased since 1984 for cost of living, it would currently be at $21,500.

Sharon Dietrich, who heads the Community Legal Services employment law practice in Philadelphia, said, “Pennsylvania’s UC trust fund is insolvent because the system’s financing is broken. Too little revenue is coming into the system to fund the benefits needed by Pennsylvania’s unemployed. We are paying unemployment benefits based on 2011 wages, as we should, but we are taxing employers as though it is 1984.”

Dietrich continued, “Recently, the state legislature has looked at addressing the insolvency of the trust fund only by making huge benefit cuts on Pennsylvania’s unemployed. The unemployed did not get us into this mess and should not be the ones to get us out of it. It is time to increase the taxable wage base, both to pay down our federal debt and to make the system solvent for the future.”

Community Legal Services has represented the interests of low wage workers affected by Senate Bill 1030.

Press release issued by: Community Legal Services, Inc., 1424 Chestnut St., Philadelphia, PA 19102.
Media contact: Sharon Dietrich, CLS 215-981-3719 or sdietrich@clsphila.org