Chairman DeSaulnier, Ranking Member Allen, and other members of the Subcommittee on Health, Employment, Labor, and Pensions, thank you for inviting me to testify at this morning’s hearing examining the administration of the Unemployment Insurance system. My name is Matt Weidinger, and I am a senior fellow and Rowe Scholar in poverty studies at the American Enterprise Institute. I previously served on the staff of the House Committee on Ways and Means, including for 15 years as the staff director of its subcommittee with jurisdiction over the nation’s unemployment benefits system.
Background on the unemployment benefits system
The nation’s Unemployment Insurance (UI) program was created in 1935 in response to the Great Depression. It remains a shared partnership between the federal government and the states—which generally determine eligibility for, the amount of, and the duration of weekly UI benefit checks.[1] The federal role includes providing states funds to administer benefits, as well as in recent decades legislating temporary federal programs offering extended benefits for those who exhaust up to 26 weeks of state UI checks. A permanent federal/state program called Extended Benefits (EB) was created in 1970; during the past two recessions that program was temporarily supported with 100 percent federal funds. States administer both state and federal unemployment benefits, and state payroll taxes paid by employers on behalf of covered workers support state benefit costs. A federal payroll tax supports the cost of permanent law federal responsibilities, including program administration and the normally 50 percent federal share of EB program expenses. Other federal costs, such as for the extraordinary benefits provided during the pandemic, have been supported with federal general revenue and added to the deficit.[2]