Yesterday, the National Academy of Social Insurance (NASI) released the final report of its Unemployment Insurance (UI) Task Force, of which I am a member. The task force was created in December 2020, as state UI agencies were besieged by record pandemic benefit claims and unprecedented fraud. I was one of several members added in late 2023. The purpose of the task force, which includes experts of all political stripes, is to discuss “issues that the UI system has faced both historically and during the pandemic, potential solutions, and how those solutions might work and might be perceived.”

As the report notes, NASI reports “aim to assess policy options without advocating for any particular option.” Thus, the new report “does not provide policy recommendations,” but instead “is intended to provide policymakers, advocates, and the media with a range of thoughts” on the broad range of UI reform topics the task force reviewed.

I see three key takeaways from the report.

First, the report is refreshingly clear-eyed about the high costs and difficult political implications of proposals to expand UI benefits. A variety of current liberal proposals would force the UI system to pay bigger benefit checks, to more people, for far longer. For example, major proposals would permanently revive—and automatically turn on whenever unemployment rises—the type of unprecedented federal benefits paid temporarily in response to the once-in-a-lifetime pandemic.   

The report acknowledges that policy options “that increase benefits also increase costs.” To cover those elevated costs, significant tax hikes are needed, especially in low-benefit—and mostly red—states:  

Each of the above UI benefit expansions…would entail additional benefit costs, generally requiring greater payroll taxes to offset such increased costs. The proposed benefit increases and resulting payroll tax hikes would be especially large in low-benefit states, adding an important political dynamic to the practical effect of such proposals and their potential to earn broad political support.

The report admits the resulting “political realities” create “significant barriers” to proposed expansions.

Second, the report focuses on needed administrative funding reforms, correctly suggesting that past underfunding for program administration contributed to both payment delays and massive fraud and abuse during the pandemic. It views this as a bipartisan challenge:

The most critical area of agreement is that the federal-state UI system was flawed before the pandemic and that the stress of paying historic levels of claims under both regular and huge new programs strained UI systems to the point of breaking. While the economy is currently healthy, it is critical that policymakers and states take steps to prepare for the next downturn…

The report notes that “federal revenues are already sufficient” to support increased administrative funding, even as “states are currently not getting back the share of funding that employers have paid into the system” for that purpose. As a result, it acknowledges that raising federal UI taxes collected for this purpose “makes little sense.” Instead, the report offers policymakers several options to make “a more direct connection” between revenues collected and administrative funding available to state agencies. One proposal, which tracks a reform I recently included in testimony submitted to the House Ways and Means Committee, would

…allow states to set and collect what is now the bulk of the federal payroll tax, providing for a more direct connection between states’ funding needs to effectively administer this system and the payroll taxes actually collected to do so.

Third, the report generally supports maintaining the current federal/state UI partnership model, instead of advocating for a federal takeover as some have proposed. In addition to spotlighting the large costs and political challenges associated with federal mandates to expand UI benefits, the report also suggests a federal takeover of UI administration is a bridge too far:

Some proposals in recent years have recommended administering the program fully at the federal level. This could reduce disparities between states and streamline administration. However, unspooling the current system would be a massive undertaking… Most of the Task Force believes that time and resources are better spent focusing on improving the state/federal system we have in place.

In the end, beyond technical changes or specific anti-fraud policies like those that Congress is already considering, the prospects for enactment for many of the reforms described in the task force report remain slim. Indeed, as the report notes, many of the policies it describes resemble similar—and still unimplemented—“improvements” suggested by two prior expert reports commissioned by the Department of Labor over the past 50 years. Like those past efforts, the new task force report is a worthy attempt to summarize potential changes to the UI system and their implications. But a report alone can’t overcome the steep cost and political barriers that have long stood in the way of the significant UI expansions some desire.