Unemployment Insurance: States' Use of the 2002 Reed Act Distribution

The Unemployment Insurance (UI) program, administered by the U.S. Department of Labor in partnership with states, plays a critical role in ensuring the financial security of America's workforce. In fiscal year 2002, state UI programs paid benefits totaling $50.8 billion to 10.6 million unemployed workers. In March 2002, in response to an increase in unemployment and the September 11, 2001, terrorist attacks, the federal government passed the Job Creation and Worker Assistance Act of 2002. This broad stimulus package included a distribution to states of $8 billion of the unemployment tax revenue it holds in reserve, referred to as a Reed Act distribution. Under the act, these funds may be used to pay UI benefits, and/or to enhance UI benefits, such as increasing weekly benefit payments, extending the period of time benefits are paid, or otherwise expanding eligibility to groups that currently do not qualify for benefits. The funds may also be used for the administration of UI and employment services (ES) programs, including one-stop service centers, if appropriated by state law. This report provides information on (1) the proportion of Reed Act dollars that states have spent, to date; (2) the proportion of total Reed Act dollars that remains in state UI trust funds and the effect this has had on employer UI taxes; (3) the proportion of those Reed Act dollars remaining in state UI trust funds that have been officially obligated to their trust funds or appropriated by state law for administering the UI, ES, or one-stop systems; and (4) the makeup of state UI advisory boards and any proposals they have made for using Reed Act dollars.