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Florida Governor Signs Bill Reforming State Unemployment Compensation Program

by CORY EUCALITTO | July 5, 2011

Last Monday, Florida Governor Rick Scott signed a bill (HB 7005) that broadly reforms Florida's unemployment compensation program. The new law makes Florida the only state in the country to tie state benefits to unemployment rates. At the end of the day, it is estimated to save Florida's Unemployment Compensation Fund $103 million per year.

Under the new law, the current maximum state benefits duration of 26 weeks is shifted to a range between 12 and 23 weeks. The exact amount of time will be determined on a sliding scale, in accordance with state jobless numbers. For example, unemployment rates higher than 10.5% guarantee the maximum duration of benefits. If joblessness falls as low as 5%, the duration of benefits shifts to 12 weeks. Florida's unemployment rate currently stands at 10.6%.

On top of the benefits duration adjustment, the law also takes common-sense steps to assist Florida's unemployed in finding new jobs. Claimants will now be required to contact at least five potential employers per week. Online skill review surveys will help the state's career centers assist in the job hunt. Weekly meetings with a career center representative will also satisfy the potential employer contact requirement. A full rundown of the changes brought about by the bill can be found here.

Florida's Unemployment Compensation Fund has been in desperate need of serious reform. The fund, fueled by state business taxes, ran out of money as recently as 2009. It was subsequently forced to tap into a $2 billion loan granted through federal stimulus spending. Beginning in September, the state will have to begin paying off this loan plus $61 million in interest.

Florida is hardly the only state experiencing troubles with its unemployment compensation system. Throughout the recent recession, the states have had to rely on a combined $41 billion in federal loans to cover unemployment insurance costs.

While unemployed Floridians will now face greater incentive to actively seek new work, as well as receive increased assistance in doing so, employers will experience savings through reduced business taxes. These taxes, which provide for the Unemployment Compensation Fund, were increased threefold in 2010, from an average of $104 to $312 per employee. These increased taxes have taken money away from employers that could have instead been used to hire new employees.

Supporters of the legislation, according to the Palm Beach Post, argued that on top of taking steps to protect the long term health of the fund, relief was desperately needed for employers faced with a skyrocketing amount of claims. Critics, such as AFL-CIO lobbyist Rich Templin, see the bill as a "ghoulish attack on the victims of the recession." One thing is certain, however: the program could no longer survive solely on mounting federal loans and higher employer taxes.

As State Budget Solutions has previously pointed out, all states ought to be looking for innovative new solutions to the problems caused by mounting unemployment insurance costs. One idea suggested by Oregon's Cascade Policy Institute is the creation of Individual Asset Accounts, which would allow individuals to build up a personal safety net. Florida's new reform, especially tying compensation duration to levels of unemployment, takes a dynamic approach to the task of conquering the explosive growth of state financial obligations.

 

Filed Under : Unemployment Insurance


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