June 7, 2011
Senate Bill 1030 will bring equity, fairness and cost-control to UC system
Opposition to commonsense reform threatens UC benefit extension
After grappling with the issue for the past few years, it’s time for Pennsylvania to begin fixing the problems plaguing its unemployment compensation system.
Senate Bill 1030, as amended by the House Labor and Industry Committee, is now the most viable option before the legislature to bring fairness and equity to the system and control cost, all of which are in the best interest of job creators and those most in need of UC assistance.
The problem: UC system has morphed beyond its intended purpose
Pennsylvania’s UC system has expanded well beyond its safety-net intent due to the liberalization of benefits over the years. The Commonwealth has been paying out more money from its UC Fund than has been coming in, and some of the reasons why this is true defy logic and common sense:
• Pennsylvania is the only state in the nation that doesn’t require recipients to prove they are actually looking for work.
• Individuals can collect severance pay and UC benefits at the same time, effectively being able to earn 150 percent of the pay they received while employed.
• Individuals that are out of work due to their own actions can collect UC benefits because of the lack of a clear definition of willful misconduct. The entire premise of the UC Law is that benefits should only be paid to individuals who are unemployed through no fault of their own.
• Under current law, recipients can also feasibly turn down legitimate work in certain circumstances and still collect UC benefits.
The result: a costly, uncompetitive UC system
• Pennsylvania has borrowed nearly $4 billion from the federal government through March 2011 for UC benefits, the third-highest behind California and Michigan. While part of this is attributed to the recent economic downturn, officials from the Department of Labor and Industry under former Gov. Ed Rendell acknowledged that the UC system presented problems regardless of the economic distress of the recession.
• Pennsylvania is second to only California in the amount of UC benefits paid out over the past year, despite an unemployment rate that is lower than most states.
• Pennsylvania ranks in the top 10 of states for UC taxes paid by employers. Employers will pay $230 million this year, and an additional $95 million in 2012.
• According to the U.S. Department of Labor, Pennsylvania had $377 million in fraudulent and/or unrecoverable UC overpayments in 2009.
• 77 percent of member and non-member businesses cited the state’s UC system as a deterrent to business growth and job creation*
Pennsylvania can no longer ignore the problems plaguing the UC system. Senate Bill 1030 is a reasonable proposal that will ensure that the system works as intended, resulting in savings to the system of about $137 million. Senate Bill 1030 would require recipients to look for work (supported by 91 percent of job creators*) and reform the existing severance pay policy (supported by 64 percent of job creators*). The bill would also clearly define detrimental actions by employees that would disqualify them from receiving benefits designed to help those unemployed through no fault of their own (supported by 83 percent of job creators*). The bill would also allow for work share programs, which give employers options to prevent employee layoffs, keeping individuals employed.
For these reasons, the business community supports S.B. 1030 as amended and asks the General Assembly to do the same.
Solvency still a concern that demands attention
But, while S.B. 1030 makes fair and equitable improvements to the UC system that will help control costs, the system’s indebtedness to a federal government that has its own serious debt problem must be resolved once and for all.
The business community welcomes the changes proposed in S.B. 1030, but urges legislative leaders to revisit the issue of the UC Trust Fund’s insolvency in the near future.
*PA Chamber’s 20th Annual Pennsylvania Economic Survey.
Contact: Lesley Smith, director of communications, 717 720-5446.
The Pennsylvania Chamber of Business and Industry is the state’s largest broad-based business association, with its membership representing nearly 50 percent of the private workforce. More information is available on the Chamber’s website at www.pachamber.org
Pennsylvania Chamber of Business and Industry
417 Walnut Street, Harrisburg, PA 17101, Phone 800 225-7224, Fax 717 255-3298, www.pachamber.org