Congressional action needed to ensure that emergency unemployment benefits do not expire

Minnesota’s December unemployment rate was down from its 8.4 percent June peak, but many Minnesotans remain out of work and unable to find it. In January, the state said there were approximately 141,000 Minnesotans collecting state unemployment insurance. Another 88,000 Minnesotans had run out of state unemployment benefits and were receiving federal emergency unemployment benefits through the American Recovery and Reinvestment Act. But important improvements in assistance for struggling Minnesotans will end this month unless Congress takes action.

Unemployment insurance (UI) plays a critical role in a recession. In addition to providing replacement income for unemployed workers who lost their jobs through no fault of their own, it maintains consumer purchasing power in an economic downturn. The state’s UI program replaces approximately half of a qualifying worker’s gross income for up to 26 weeks. Minnesota recipients get a maximum of $585 a week – the equivalent of 40 percent above the 2009 federal poverty line for a family of four.

The federal Recovery Act provided several key supports to unemployed workers, including:

• Additional weeks of UI benefits (in Minnesota, the maximum is now 86 weeks between state and federal resources).
• A $25-per-week supplemental payment to all UI checks. In 2009, that provision was estimated to provide $180 million to unemployed Minnesota residents, and by extension to the state’s economy.
• A federal income tax exemption for the first $2,400 of UI payments in tax year 2009.
• Assistance for unemployed workers to continue their health insurance coverage through COBRA.

After February 28, eligibility ends for the federal emergency UI extension, the $25 a week supplementary payment and the COBRA support. Those getting benefits as of February would get a “soft landing” continuation. Those applying March 1 or later would not qualify.

Since unemployment remains high, Congress is considering extending the emergency UI assistance and federal COBRA extensions. These would likely be part of a jobs bill moving through Congress in February. (The National Employment Law Project is a good resource with information about efforts to extend eligibility through 2010.)

There is a strong argument for such extensions. Despite some recent positive economic signs, Minnesota’s December unemployment rate was 7.4 percent, still a high figure. The job situation remains severe and the outlook, “is still grim,” according to Minnesota’s November 2009 economic forecast:

Economists often stress that job creation can lag an economic turnaround by as much as 6 to 9 months … Tight credit conditions, sluggish demand, and no clear evidence that the recovery is sustainable will force employers to squeeze more productivity from remaining workers and hold back hiring for much of 2010.

Without a federal UI extension, thousands of Minnesotans are likely to run out of benefits before they find work. Their spending will drop, a further drag on the economy, and they will increase demands on other parts of the broader social service network. Last fall, approximately 500 Minnesotans a week were exhausting their federal and state UI benefits before the federal government added more weeks of eligibility.

After February 28, the impact on individual unemployed workers would depend on where they are in the system. They would qualify for some extended benefits, but not the current level.

Those who qualified for the COBRA health insurance support by the end of February would be allowed to continue their eligibility in the following months. As it works now, unemployed workers pay for 35 percent of the COBRA premium for themselves and their family. Families remain eligible for up to 15 months. (Minnesota also has a state COBRA Premium Subsidy that covers 35 percent of the COBRA premium. It has tighter income and asset limits than the federal program.)

The economy seems to be slowly turning the corner, but not quickly enough to help thousands of unemployed Minnesotans. Congress needs to continue extended unemployment benefits and COBRA support until the economy is on stronger footing. It not only helps people on the financial edge, but their increased spending will help support the recovery.

-Scott Russell