BILL ANALYSIS AB 23 X3 Page 1 ( Without Reference to File ) ASSEMBLY THIRD READING AB 23 X3 (Coto and Arambula) As Amended March 16, 2009 2/3 vote. Urgency INSURANCE 8-2 APPROPRIATIONS 11-4 ----------------------------------------------------------------- |Ayes:|Coto, Blakeslee, |Ayes:|De Leon, Ammiano, | | |Arambula, Carter, Feuer, | |Charles Calderon, | | |Hayashi, Nava, Torres | |Fuentes, Hall, Jones, | | | | |John Perez, Price, | | | | |Skinner, Solorio, | | | | |Torlakson | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Garrick, Niello |Nays:|Nielsen, Duvall, Harkey, | | | | |Miller | ----------------------------------------------------------------- SUMMARY : Establishes eligibility for an additional 20 weeks of federally-funded extended unemployment insurance (UI) benefits. Specifically, this bill : 1)Sets an "on" indicator for federal-state extended UI benefits when the average rate of total unemployment in the state in the most recent three months equals or exceeds 6.5%, and the average rate of total unemployment in the most recent three months equals or exceeds 110% of that average for either or both of the corresponding three month periods ending in the two preceding calendar years. 2)Specifies that this "on" indicator shall apply to weeks of unemployment beginning on February 1, 2009, and shall become inoperative on December 6, 2009, or on the date the federal sharable extended compensation authorized by Public Law 111-5 (the 2009 federal economic stimulus legislation) expires, whichever is later. 3)Establishes the total extended compensation amount that an eligible individual may receive when the total unemployment rate during the most recent three months exceeds 8%. In that AB 23 X3 Page 2 instance, the amount shall be not less than whichever of the following is the least: a) 80% of the total amount of regular compensation payable to him or her during that benefit year; b) 20 times his or her average weekly benefit amount; c) 46 times his or her average weekly benefit amount, reduced by the regular compensation paid to him or her during that benefit year. 4)Provides that individuals who continue to meet all other requirements may not be required to re-apply for federal extended UI benefits. 5)Specifies that these extended benefits (described in #3, above) apply to weeks on or after February 1, 2009. This state law and the authority for the benefits expires on December 6, 2009, or on the date the federal sharable compensation authorized by Public Law 111-5 expires, whichever is later. 6)Establishes this act as an urgency statute necessary to address the weakened state economy. EXISTING LAW : 1)Establishes an "on" indicator for purposes of implementing federal-state UI extended benefits if during the preceding 13 weeks the insured unemployment rate (IUR) equals or exceeds 6%, or 120% of the average of the rates for the corresponding 13-week period ending in each of the preceding two calendar years and exceeds 5%. 2)Requires that in order to qualify for federal extended benefits, an unemployed individual must have previously been found eligible for regular UI, have exhausted their regular UI benefits, must continue to seek work, and have had earnings exceeding 40 times the weekly UI benefit during a one-year base period, or earnings exceeding 1.5 times the highest calendar quarter of earnings. FISCAL EFFECT : The Assembly Appropriations Committee analysis AB 23 X3 Page 3 states the following: Increased federal funding in the range of $2.5 billion to $3 billion for 20 weeks of additional emergency UI benefits during 2009. Potential, likely minor, General Fund costs to state and educational agencies (schools and colleges) related to emergency benefit increases. Unknown impacts to local public agencies to the extent increased federally funded benefits require an increased employer contribution. COMMENTS : 1)The UI Program is administered by the California Employment Development Department (EDD) as part of a federal-state system to provide unemployment compensation to workers who lose their job through no fault of their own. The benefits range from $40 to $450 per week in California depending upon earnings during a 12-month base period. The regular UI Program is financed by employers who pay unemployment taxes on the first $7,000 of earnings by each worker. In the most recent period in which data are available, January 2009, there were 1,863,000 people unemployed in California and the unemployment rate was 10.1%. In January 2009, 717,525 people received regular UI benefits during the survey week. Another 259,903 people were certified for federal emergency UI benefits in California in January 2009. Thus, only 52% of unemployed workers in California receive UI benefits. 2)A new federal law, titled the American Recovery and Reinvestment Act (ARRA, commonly referred to as the "federal stimulus legislation"), provides authority for states with high rates of unemployment to enact state legislation which permits long-term unemployed people to access up to an additional 20 weeks of extended benefits under the UI Program that are 100% payable by the federal government. This bill proposes to accomplish this for California. 3)Under existing law, the maximum duration of regular UI benefits is 26 weeks and the maximum duration of federal emergency unemployment benefits is 33 weeks. Thus, the present maximum duration of UI benefits in California is 59 weeks. The enactment of the federal ARRA and this bill will make it possible for long-term unemployed Californians, who meet specific criteria, to obtain up to a total of 79 weeks of AB 23 X3 Page 4 unemployment benefits (26+33+20 weeks). These 20 weeks of extended benefits would not affect employers' reserve accounts. 4)The federal extended UI benefits made available by this bill (AB 23 X3) to unemployed residents of California will result in 100% federal funding during calendar year 2009. This amount is estimated to be between $2.5 billion and $3 billion in benefits in 2009. This bill will not cause an increase in state costs during calendar year 2010 as a result of the extended benefits provision (i.e., there will not be a 50/50 split of federal and state costs for extended UI benefits during calendar year 2010 as a result of this bill). The bill specifies that the extended benefits provision sunsets on December 6, 2009, or on the date the federal sharable extended compensation authorized by the federal ARRA legislation expires, whichever is later. The relevant federal provision expires on December 31, 2009 (Section 2005 (a) of the ARRA, as cited in the text of AB 23 X3). Analysis Prepared by : Manny Hernandez /INS. / (916) 319-2086 FN: 0000192