1) How would the proposal affect the federal budget?

The proposal would save money by reducing costs associated with FUTA tax collection, changing the role of the U.S. Department of Labor to cut costs, and reducing unemployment benefit payout with properly funded integrity measures and reemployment services to be provided to individuals claiming unemployment compensation. The proposal would increase revenue by placing claimants into jobs more quickly and improving FUTA tax collection by transferring FUTA tax collection functions to the states.

2) What effect did the passage of the Balanced Budget Act of 1997 which extended the 0.2% FUTA surcharge and raised the cap on the FUA account from .25% to .5% of FUTA covered wages have on the Coalition's proposal?

The Coalition's proposal would repeal the 0.2 FUTA surtax after 2004.  In addition, the proposal would return the language providing that the FUA account balance should be capped at .25% of total employer payroll subject to taxation rather than the .50% provision included in budget language. Amounts in FUA in excess of the .25% cap would be distributed to the State Employment Security Administrative Accounts based on each State's relative share of FUTA taxable wages.

Although the proposal would reduce FUTA taxes as compared to the Balanced Budget Act of 1997, we believe that the proposal as a whole is self contained so as to impose no negative impact on the federal budget. Revenue and savings identified since the enactment of the Balanced Budget Act, including savings that would be realized under the proposal make it consistent with budget guidelines.

3)How does the proposal affect Extended Benefits?

The proposal would require that states maintain the extended benefit programs with the current federal extended benefit trigger levels. The excess in the Federal Extended Unemployment Compensation Account would be distributed to the state employment security administrative accounts to provide additional funds to the state for administration. The transfer of funds to state administrative accounts would be made within the Federal Unemployment Trust Fund so as not to increase outlays from the federal unified budget. The proposal also would provide that benefit eligibility with respect to state extended unemployment compensation, including work search requirements, be established under state rather than federal law.

4) What will happen to our national employment security system and what powers will USDOL have to ensure conformity by states?

One of the underlying premises of the Coalition's proposal is that it is critical to preserve a national employment security system. The proposal does this in several ways.

The proposal preserves the core features of the unemployment insurance program, labor market information programs, and veterans employment programs. USDOL continues to have the responsibility to ensure that state laws are in conformity and compliance with federal law, and would continue to certify whether states were in conformity and compliance with federal requirements. A state failing to meet federal requirements would be subject to losing the FUTA off-set credit reduction for employers in the state. The proposal generally maintains USDOL authority to interpret federal law and would allow for other, less onerous sanctions in addition to the loss of the off-set credit, such as those proposed as part of UI Performs. However, the proposal does provide that states would not be required to adopt methods of administration of the state law as prescribed by DOL if such methods, such as quality control requirements, imposed additional burdens on the states without additional administrative funding.  In addition the proposal clarifier that states are not required to enact state statutes to meet USDOL interpretation of performance measures under the Goverment Performance Results Act of 1993.

The proposal would replace the United States Employment Service with the United States Employment Security Service responsible for performing the federal role related to employment security.

The primary change in the federal role relative to employment security core programs would be that the federal role relative to public employment services would become a role under which DOL would review state law and administration for specific conformity requirements under FUTA and titles III and IX of the Social Security Act rather than approving expenditures. Under the proposal, public employment services would be required to be made available to all job seekers and specifically provided to individuals claiming unemployment compensation. However, the states would be provided greater flexibility in the delivery of public employment services. The Coalition believes this actually strengthens the employment security system by providing a stronger link between public employment services and the Unemployment Insurance program.

5) Is a state agency permitted to collect a federal tax ( FUTA)? If so, how would the collection responsibility be transferred and maintained?

The Coalition's proposal would require that state agencies collecting the state unemployment tax also collect the FUTA tax as agents of the Secretary of the U.S. Treasury. Such a provision is a permissible method by which a state agency may collect a federal tax. The collection of the FUTA tax would become the responsibility of the states beginning with calendar year 2000. Any change in the FUTA tax would require Congressional action. The proposal provides for transition of the collection responsibility to the states by 1) delaying the effective date for the transfer of collection responsibilities to the year 2001, 2) providing transition funding for the transfer of responsibility by distributing funds from the ESAA to the statesduring the transition period prior to January of 2001, and 3) authorizing the Secretary of the Treasury to enter into arrangements with the states to facilitate the collection of the tax and administration of FUTA.

6) How will having state legislatures appropriate the funds impact the level of funding for our system and what about "the race to the bottom"?

The Coalition believes that state legislatures will actually have a better perspective on the State's needs than the Congress. State legislators are more immediately aware of the impact of funding levels on service delivery to their constituents and more likely to understand the need for a strong service delivery structure for employment security programs. Because state legislatures have not had to be familiar with the administrative financing of employment security programs, there will be a need for state employment security agencies to educate them.

The Coalition also believes the concern about the proposal leading to a "race to the bottom" is unfounded. Although state legislatures have not been primarily responsible for administrative funding for employment security, they have been responsible for legislating state unemployment laws for both state unemployment tax and benefits and have done so very responsibly over the years. There is no reason to believe that state legislatures would now abuse their power. In addition, state legislators will necessarily be more directly accountable to both business and labor constituents which will help ensure that the entire employment security system is responsive to both.

7) Will there be enough administrative funding if there is a really bad recession?

Yes, even without the additional .2% surcharge the funding provided under the proposal would be sufficient. The distribution of funds from the ESAA to the states to fund transition to the new system, the availability of interest earnings on balances in the FUA, and EUCA, and the growth in FUTA collection over the years will provide the revenue needed for administration. Under the proposal, states could draw down for appropriation by their state legislators up to 140% of the amount appropriated during the prior fiscal year. This is sufficient to meet any increased administrative cost associated with an increase in claims workload. Small states dependent on funding from the Supplemental Employment Security Administration Account would be provided with the necessary funding. The 2% Supplemental pot would provide ample funding for these states.

8) What happens to the Employment Service as a result of the proposal?

The Coalition's proposal would amend the Wagner Peyser Act to specify the public employment services to be provided by the states as part of federal conformity and compliance requirements under the FUTA and Social Security Act. The Wagner Peyser Act would no longer serve as the vehicle through which states would be authorized to spend FUTA funds for employment service activity. Instead the proposal would establish the United States Employment Security Service to assist in coordinating the employment security system and exercising oversight functions. States would be required to make public employment services available to job seekers in general and specifically to provide public employment services to individuals claiming unemployment benefits. This feature of the proposal provides a stronger link between UI claimants and employment services. In addition, states would have greater flexibility in choosing the methods to be used to deliver employment services.

9) How will funding for Veterans Employment Services work?

States will be required to provide Veterans Employment Services (LVERs and DVOPs) pursuant to Title 38 utilizing funds appropriated by the state legislature from the State Employment Security Administrative Account. In addition, funding for oversight functions currently performed by the US Department of Labor would be continued to assure that the provisions of Title 38 were being met.

10) How does the proposal impact states that have moved to initial unemployment claims by telephone?

There is nothing in the proposal that would inhibit or prevent States from offering the option of filing initial unemployment claims or continued claims by telephone.

11)  Under the proposal of the Coalition for Employment Security Financing Reform, state legislatures (instead of Congress) will appropriate funds for veterans' employment service in states. What effect will that have?

The Coalition's proposal maintains veterans' programs. The Local Veterans Employment Representative (LVER) and Disabled Veteran Outreach (DVOP) programs will be maintained, as Title 38 of the US Code requires. State legislatures will have to follow Title 38.

12)  We fund DVOP & LVER staffing today from Congressional appropriations. How does the Coalition's proposal deal with that?

DVOP & LVER positions are not now fully funded. By getting more funds to states, the Coalition's proposal provides more funding available for veterans' employment service in states. State legislatures will be mandated to appropriate funds for veterans' programs under the Federal requirement of Title 38. Under the Coalition's proposal, full funding for DVOP & LVER staffing becomes possible.

13)  Under the Coalition's proposal, what assurances are there of continued state support for veterans' employment programs?

The Coalition's proposal makes no changes in any laws providing veterans' employment service. The Coalition's proposal brings decision-making closer to constituents by giving funding authority to states. State legislators often are much closer to voters than are members of Congress. Veterans' organizations, employers and job-seekers alike can work directly with their state legislators.

14)  If we enact the Coalition's reform proposal, will veterans' employment programs remain national programs?

All employment security programs remain national programs under the Coalition's proposal. The national programs include unemployment insurance, job service, labor market information and Veterans' reemployment help. Funding provided by the Coalition's proposal strengthens these programs, while maintaining a national system.

15)  In the Coalition's proposal, is 2% for national programs adequate for veterans' programs?

The Coalition wants adequate technical assistance for national programs. The Department of Labor national programs received an estimated $170 Million in FUTA funding. The Coalition's proposal gives a dedicated 2% of FUTA revenue for national programs. This would provide approximately $120 Million for Department of Labor staffing of national programs. Budget and appropriation recommendations for national veterans' programs would be the responsibility of the US Department of Labor, just as it is today. Available funds would grow 2 to 3% a year, as FUTA revenues grow.