Opening Statement of the Hon. Benjamin L. Cardin, a Representative in Congress from the State of Maryland

Hearing on the President's Unemployment Administrative Financing Reform Initiative

March 5, 2002

Mr. Chairman, a dark cloud hangs over this committee today as we discuss possible reforms to our Nation's unemployment insurance system.

We have yet to enact an extension of unemployment benefits, despite the fact that more than 1.5 million jobless workers have had their regular benefits expire since September 11^th, and despite the fact that Congress has routinely provided extended benefits during past recessions.

It is far past time to separate a simple extension of unemployment benefits from discussions about more controversial items. Every week we delay consideration of this issue, another 80,000 Americans exhaust their regular UI benefits. They do not need any more empty promises. Unemployed workers need and deserve immediate assistance in paying their bills and buying food for their families.

Regarding the Administration's long-term proposal on administrative financing for the unemployment insurance system, I am concerned the plan would begin to dismantle the current Federal/State partnership in responding to unemployment. The proposal would eliminate the payments now sent by the Federal government to the States for the administrative cost of their UI programs, and it would eliminate three-quarters of the Federal FUTA tax, which finances extended unemployment benefits and loans to the States, in addition to the administrative grants.

The Administration's plan leaves States with three options to make up for the loss of the administrative payments they now receive from the Federal government - raise taxes, cut benefits, or reduce the solvency of their UI trust funds. None of these options are particularly attractive. In addition, by draining money out of the Federal UI accounts and by eliminating the Federal authority to disburse grants, the plan may reduce the Federal government's ability to respond to rising unemployment during recessions.

I am also very troubled that the Administration's proposal ignores one of the biggest problems with the UI system - the lack of coverage for many low-wage and part-time workers. The Government Accounting Office has informed us that low-wage workers are only half as likely to receive UI benefits compared to higher-wage workers, even when employed for similar periods of time. This inequity not only hurts many workers, it also has troubling implications for our welfare reform efforts. Congress and the States have spent considerable time, money, and effort in attempting to break the cycle of dependency on welfare, but the UI system forces too many low-wage workers back on to welfare when they are laid off.

Let me conclude by urging both this Committee and the Administration to review a consensus proposal developed 18 months ago by the major stakeholders in the UI system. The plan would have: (1) guaranteed States mandatory spending for their administrative grants, (2) eliminated one-quarter of the FUTA tax on employers, and (3) improved UI coverage for low-wage and part-time workers.

In my opinion, such a balanced proposal has a better chance of achieving bipartisan support and eventual enactment. Thank you.