Unemployment Benefits: Legislative Issues in the 107th Congress Page: 1 of 6
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Order Code 95-742 EPW
Updated December 30, 2002
CRS Report for Congress
Received through the CRS Web
Unemployment Benefits: Legislative Issues
in the 107th Congress
Specialist in Social Legislation
Domestic Social Policy Division
Changes in the federal-state unemployment compensation (UC) system were
considered during the 107th Congress. The Congress enacted H.R. 3090 (P.L. 107-147),
which included a 13-week extension of UC benefits, a $8 billion distribution to states,
and 13 additional weeks of extended UC benefits in high unemployment states. These
temporary benefits ended on December 28, 2002. Legislation was considered to extend
these temporary benefits, but the Congress failed to reach agreement on such a bill
before the adjournment of the 107th Congress. (This report will not be updated.)
The UC system, funded by both federal and state payroll taxes, pays benefits to
covered workers who become involuntarily unemployed for economic reasons and meet
state-established eligibility rules. Federal administration of UC is under the U.S.
Department of Labor (DoL). The UC system, established by the Social Security Act of
1935 (P.L. 74-271), operates in each state, the District of Columbia, Puerto Rico, and the
Virgin Islands. Federal law sets broad rules that the 53 state programs must follow and
levies a payroll tax on employers under the Federal Unemployment Tax Act (FUTA).
States set most of the specific rules for eligibility, benefits, and financing. States also
process the claims and pay the benefits. The UC system helps counter economic trends.
When the economy grows, UC revenue rises and program spending falls, thereby slowing
growth. In a recession, revenue falls and program spending rises, stimulating the
economy. Benefits totaling $23.5 billion are expected to be paid to 7.5 million UC
claimants in FY2001.
Coverage. Federal law defines the jobs a state UC program must cover to avoid
its employers' having to pay the maximum FUTA tax rate (6.2%) on the first $7,000 of
each employee's annual pay. If a state complies with all federal rules, the net FUTA tax
rate is only 0.8%. A state must cover jobs in firms that pay at least $1,500 in wages
during any calendar quarter or employ at least one worker in each of 20 weeks in the
current or prior year. The FUTA tax is not paid by governmental or nonprofit employers,
Congressional Research Service V The Library of Congress
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Unemployment Benefits: Legislative Issues in the 107th Congress, report, December 30, 2002; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc811874/m1/1/: accessed April 21, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.