$3.1B Set Aside for Jobless Unclaimed

Aug. 31, 2009 -- More than $3.1 billion in stimulus money for state unemployment insurance programs is sitting in a federal trust fund because 23 states haven't expanded their jobless benefits, Labor Department records show.

Nearly 350,000 out-of-work Americans could get benefits if all those states revamp their unemployment systems to qualify for federal money, according to estimates from the National Employment Law Project (NELP), a workers' advocacy group. In all, the stimulus package offers $7 billion to states that make changes, which can include offering benefits to part-time workers.

Some Republicans such as Gov. Rick Perry of Texas have criticized the program, saying expanding benefits would force their states to raise taxes on employers once the stimulus money runs out.

GOP governors or lawmakers in 11 states have declined to change their systems to qualify for about $1.7 billion in stimulus funding. The other 12 states have either made only some of the changes, not applied for the funds or not taken legislative votes on the changes.

The federal funds are enough to cover an average of about seven years of expanded benefits and could forestall tax hikes in some states, says Maurice Emsellem of the NELP. That's because taxes on employers in most states automatically go up when their unemployment insurance trust funds are depleted. Unemployment taxes will go up in Indiana, Alabama and Florida and are likely to rise in Texas, all states that declined to seek the money.

"This little increase in benefits is not going to be the straw that breaks the camel's back to determine whether taxes are going up," Emsellem says.

Taking stimulus funds might have helped in the short term, but the expanded benefits would have cost Texas at least $75 million a year after that money ran out, leading to higher taxes, Perry spokeswoman Katherine Cesinger says.

"If the federal government really wanted to help us, they would have sent those dollars down without any strings attached," she says.

States can get a third of the money by relaxing their rules on the length of employment needed to qualify for jobless benefits.

They can get the rest by providing two of four kinds of unemployment benefits: Extra money for the worker's dependents, for part-time workers, for those in training programs or for those who quit because of "compelling family circumstances" — such as fleeing domestic violence or caring for a sick relative.