I 

108TH CONGRESS 

1ST SESSION H. R. 1802

To amend the Federal Unemployment Tax Act and the Social Security Act 

to modernize the unemployment insurance system, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 11, 2003

Mr. MCDERMOTT (for himself, Mr. SANDERS, Ms. NORTON, Mr. NADLER, Ms. 

CARSON of Indiana, Mr. EVANS, Mr. OWENS, Ms. SOLIS, Mr. STARK, Mr. 

KUCINICH, Mr. LANTOS, Ms. LEE, and Mr. FRANK of Massachusetts) introduced the following bill; which was referred to the Committee on Ways 

and Means 

A BILL

To amend the Federal Unemployment Tax Act and the Social Security Act to modernize the unemployment insurance system, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Keep America Working Act of 2003’’. 

6 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; etc. 

TITLE I—RESTORING INSURANCE ELIGIBILITY IN AN EVOLVING 

ECONOMY 
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Sec. 101. Expansion of circumstances under which unemployment compensation 

is payable. 

Sec. 102. Expansion of unemployment tax wage base. 

Sec. 103. Determinations of whether individuals are employees for purposes of 

employment taxes. 

Sec. 104. Repeal of determination of employer’s liability for certain employment 

taxes. 

Sec. 105. Effective dates. 

TITLE II—ENCOURAGING JOB MOBILITY AND ADEQUATE 

COMPENSATION 

Sec. 201. Separation from work due to a move relating to spouse’s or domestic 

partner’s new principal place of work not a bar to receiving unemployment compensation; replacement ratios for lower paid 

workers who become unemployed. 

TITLE III—ENSURING SOLVENCY AND PREPARING FOR 

RECESSION 

Sec. 301. Increase and decrease in earnings credited to State accounts when 

States meet or fail to meet funding goals. 

Sec. 302. Amendments to trigger provisions of extended benefit program. 

Sec. 303. Eliminate special Federal eligibility requirements for extended compensation. 

TITLE IV—IMPROVING ADMINISTRATIVE FUNDING FOR THE 

UNEMPLOYMENT SYSTEM 

Sec. 401. Funding for administration of State unemployment compensation, 

State systems of public employment offices and veterans employment service programs.

1 TITLE I—RESTORING INSUR2 ANCE ELIGIBILITY IN AN 

3 EVOLVING ECONOMY 

4 SEC. 101. EXPANSION OF CIRCUMSTANCES UNDER WHICH 

5 UNEMPLOYMENT COMPENSATION IS PAY6 ABLE. 

7 (a) IN GENERAL.—Subsection (a) of section 3304 of 

8 the Internal Revenue Code of 1986 (relating to approval 

9 of State unemployment compensation laws) is amended by 

10 striking ‘‘and’’ at the end of paragraph (18), by redesig-
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1 nating paragraph (19) as paragraph (29), and by insert2 ing after paragraph (18) the following new paragraphs: 

3 ‘‘(19) compensation shall not be denied to an 

4 individual solely because such individual is seeking 

5 only part-time work, if—

6 ‘‘(A) such individual otherwise qualifies for 

7 unemployment compensation, based wholly or 

8 mostly on part-time work; and 

9 ‘‘(B) the part-time work sought by such in10 dividual generally requires at least 20 hours per 

11 week; 

12 ‘‘(20) compensation is payable to an eligible in13 dividual in an amount which is not less than the 

14 amount determined by applying a base period ending 

15 at the close of the calendar quarter most recently 

16 completed before the date of the individual’s applica17 tion for benefits; 

18 ‘‘(21) except as provided in paragraphs (6) and 

19 (13), compensation shall not be denied in such State 

20 to any otherwise eligible individual solely on the 

21 basis that such individual is a seasonal worker; 

22 ‘‘(22)(A) if any individual leaves employment 

23 because of sexual harassment, for purposes of deter24 mining such individual’s eligibility for compensation 

25 for any subsequent week for which such individual 
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1 meets the State law requirements relating to avail2 ability for work and active search for work, such in3 dividual shall be treated as having left such employ4 ment for good cause, and 

5 ‘‘(B) for purposes of subparagraph (A), ‘sexual 

6 harassment’ shall be considered to have been shown 

7 upon the demonstration of facts sufficient to estab8 lish a prima facie case that the individual involved 

9 was victimized by sexual harassment in violation of 

10 title VII of the Civil Rights Act of 1964; 

11 ‘‘(23) if any individual leaves employment be12 cause of loss of adequate child care for a dependent 

13 child under the age of 13, for purposes of deter14 mining such individual’s eligibility for compensation 

15 for any subsequent week for which such individual 

16 meets the State law requirements relating to avail17 ability for work and active search for work—

18 ‘‘(A) such individual shall be treated as 

19 having left such employment for good cause, 

20 and 

21 ‘‘(B) any failure to return to such employ22 ment or to otherwise meet such State law re23 quirements, while the lack of such child care 

24 continues, shall be disregarded; 
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1 ‘‘(24) if any individual leaves employment be2 cause the individual is a victim of domestic violence, 

3 for purposes of determining such individual’s eligi4 bility for compensation for any subsequent week for 

5 which such individual meets the State law require6 ments relating to availability for work and active 

7 search for work—

8 ‘‘(A) such individual shall be treated as 

9 having left such employment for good cause, 

10 and 

11 ‘‘(B) any failure to return to such employ12 ment or to otherwise meet such State law re13 quirements while the risk of further domestic 

14 violence is significant shall be disregarded; 

15 ‘‘(25) the State law provides for the distribution 

16 to unemployed individuals information packets ex17 plaining unemployment insurance eligibility condi18 tions in that State; 

19 ‘‘(26) the State periodically reviews and adopts 

20 the best practices of other States in addressing con21 tract and temporary worker issues, including—

22 ‘‘(A) clarifying the definitions of employee 

23 and independent contractor,

24 ‘‘(B) specifying employer liability for pay25 roll taxes,
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1 ‘‘(C) licensing, bonding, or regulating the 

2 employee leasing industry, and 

3 ‘‘(D) the strategic targeting of audits; 

4 ‘‘(27) compensation shall not be denied in such 

5 State to any otherwise eligible individual solely on 

6 the basis that such individual was employed at the 

7 applicable minimum wage for not less than 20 hours 

8 a week for 30 weeks in the base period; 

9 ‘‘(28) compensation is payable to any individual 

10 who is a parent of a child by blood or adoption and 

11 who takes an unpaid leave of absence from the em12 ployer at any time during the first year after—

13 ‘‘(A) in the case of a child by blood, the 

14 birth of such child, and 

15 ‘‘(B) in the case of a child by adoption by 

16 such individual, the adoption of such child; 

17 and’’. 

18 (b) UNEMPLOYMENT COMPENSATION NOT REDUCED

19 BY EXEMPT TRUST ROLLOVERS.—Paragraph (15) of sec20 tion 3304(a) of such Code is amended by inserting ‘‘(other 

21 than a rollover described in section 402(c), 403(a)(4), 

22 403(b)(8), 408(d)(3), or 457(e)(16))’’ after ‘‘periodic pay23 ment’’ the first place it appears. 
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1 SEC. 102. EXPANSION OF UNEMPLOYMENT TAX WAGE BASE. 

2 (a) IN GENERAL.—Paragraph (1) of section 3306(b) 

3 of the Internal Revenue Code of 1986 is amended by strik4 ing ‘‘$7,000’’ and inserting ‘‘the contribution and benefit 

5 base (as determined under section 230 of the Social Secu6 rity Act)’’. 

7 (b) DECREASE IN FUTA TAX RATE.—Section 3301 

8 of such Code is amended by striking ‘‘equal to—’’ and 

9 all that follows through ‘‘thereafter;’’ and inserting ‘‘equal 

10 to 5.59 percent’’. 

11 SEC. 103. DETERMINATIONS OF WHETHER INDIVIDUALS 

12 ARE EMPLOYEES FOR PURPOSES OF EM13 PLOYMENT TAXES. 

14 (a) REPEAL OF PRIOR AUDIT SAFE HARBOR WITH

15 RESPECT TO DETERMINATIONS OF EMPLOYMENT STA16 TUS.—

17 (1) IN GENERAL.—Paragraph (2) of section 

18 530(a) of the Revenue Act of 1978 is amended by 

19 striking subparagraph (B) and redesignating sub20 paragraph (C) as subparagraph (B). 

21 (2) CONFORMING AMENDMENTS.—Section 

22 530(e) of such Act is amended—

23 (A) in paragraph (2) by striking subpara24 graph (A) and redesignating subparagraphs (B) 

25 and (C) as subparagraphs (A) and (B), respec26 tively, 
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1 (B) in paragraph (4)(B) by striking ‘‘sub2 paragraph (A), (B), or (C)’’ and inserting ‘‘sub3 paragraph (A) or (B)’’. 

4 (b) REPEAL OF PROHIBITION AGAINST REGULA5 TIONS AND RULINGS ON EMPLOYMENT STATUS.—Section 

6 530 of the Revenue Act of 1978 is amended by striking 

7 subsection (b). 

8 SEC. 104. REPEAL OF DETERMINATION OF EMPLOYER’S LI9 ABILITY FOR CERTAIN EMPLOYMENT TAXES. 

10 (a) IN GENERAL.—Section 3509 of the Internal Rev11 enue Code of 1986 is repealed. 

12 (b) CLERICAL AMENDMENT.—The table of sections 

13 for chapter 25 of such Code is amended by striking the 

14 item relating to section 3509. 

15 SEC. 105. EFFECTIVE DATES. 

16 (a) IN GENERAL.—Except as provided by subsection 

17 (b), the amendments made by this title—

18 (1) shall take effect on January 1, 2004, and 

19 (2) in the case of sections 103 and 104, shall 

20 apply to periods beginning after December 31, 2003. 

21 (b) EXCEPTION.—In the case of any State the legisla22 ture of which has not been in session for at least 30 cal23 endar days (whether or not successive) between the date 

24 of the enactment of this Act and December 31, 2003, the 

25 amendments made by section 101 shall take effect 30 cal-
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1 endar days after the first day on which such legislature 

2 is in session on or after January 1, 2004. 

3 TITLE II—ENCOURAGING JOB 

4 MOBILITY AND ADEQUATE 

5 COMPENSATION 

6 SEC. 201. SEPARATION FROM WORK DUE TO A MOVE RE7 LATING TO SPOUSE’S OR DOMESTIC PART8 NER’S NEW PRINCIPAL PLACE OF WORK NOT 

9 A BAR TO RECEIVING UNEMPLOYMENT COM10 PENSATION; REPLACEMENT RATIOS FOR 

11 LOWER PAID WORKERS WHO BECOME UNEM12 PLOYED. 

13 (a) REVENUES FROM INDIVIDUAL INCOME TAXES

14 ATTRIBUTABLE TO UNEMPLOYMENT COMPENSATION TO

15 BE CREDITED TO UNEMPLOYMENT ACCOUNTS OF QUALI16 FYING STATES.—

17 (1) IN GENERAL.—There is hereby appro18 priated to accounts of certified States in the Unem19 ployment Trust Fund (as described in section 903 of 

20 the Social Security Act (42 U.S.C. 1103)) amounts 

21 equivalent to the amount of tax liabilities under 

22 chapter 1 of the Internal Revenue Code of 1986 

23 which is attributable to the application of section 85 

24 of such Code to payments from such accounts. 
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1 (2) TRANSFERS.—The amounts appropriated 

2 by paragraph (1) to any such account shall be trans3 ferred from time to time (but not less frequently 

4 than quarterly) from the general fund of the Treas5 ury on the basis of estimates made by the Secretary 

6 of the Treasury, in consultation with the Secretary 

7 of Labor, of the amounts referred to in such para8 graph. Any such quarterly payment shall be made on 

9 the first day of such quarter and shall take into ac10 count unemployment compensation estimated to be 

11 received from such account during such quarter. 

12 Proper adjustments shall be made in the amounts 

13 subsequently transferred to the extent prior esti14 mates were in excess of or less than the amounts re15 quired to be transferred. 

16 (3) CERTIFIED STATES.—For purposes of this 

17 subsection, the term ‘certified State’ means a State 

18 for which a certification under subsection (d) is in 

19 effect. 

20 (4) REPORTS.—The Secretary of the Treasury 

21 shall submit annual reports to the Congress on—

22 (A) the transfers made under this sub23 section during the year, and the methodology 

24 used in determining the amount of such trans25 fers and the account to which made, and
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1 (B) the anticipated operation of this sub2 section during the next 5 years.

3 (b) CONDITIONS FOR APPROVAL OF STATE LAWS.—

4 The Secretary of Labor shall (for purposes of this section) 

5 approve any State law submitted to the Secretary under 

6 this section, within 30 days of such submission, which the 

7 Secretary finds provides that—

8 (1) compensation shall not be denied to any in9 dividual by reason of such individual’s separating 

10 from employment, if—

11 (A) that separation is related to a change 

12 in such individual’s spouse’s place of residence 

13 in connection with the commencement of work 

14 by the spouse (as an employee or as a self-em15 ployed individual) at a new principal place of 

16 work; 

17 (B) the spouse’s new principal place of 

18 work satisfies the condition under subsection 

19 (c)(1) of section 217 of the Internal Revenue 

20 Code of 1986 (relating to the minimum dis21 tance required, between a taxpayer’s former 

22 residence and new principal place of work, in 

23 order to qualify for a moving expenses deduc24 tion under such section); and 
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1 (C) the separating individual has both the 

2 former residence and the new residence as his 

3 principal place of abode; and 

4 (2) in the case of any individual who becomes 

5 entitled to receive compensation from such State, 

6 and whose average weekly wages (for the period on 

7 the basis of which such individual qualifies for such 

8 compensation, determined without any limitation on 

9 amount) do not exceed 50 percent of the average 

10 weekly wages subject (determined without any limi11 tation on amount) to contributions under the unem12 ployment compensation law of such State (as deter13 mined by the Secretary based on the data the Sec14 retary considers most appropriate), compensation 

15 shall be computed in a manner that results in a 

16 wage replacement ratio for such individual that is at 

17 least equal to the sum of—

18 (A) 50 percent, plus 

(B) 1 19 ⁄4 of 1 percent times the percentage 

20 by which such individual’s average weekly 

21 wages (for the aforementioned period) are less 

22 than the average weekly wages subject to con23 tributions under the unemployment compensa24 tion law of such State (as so determined). 
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1 The condition under paragraph (2) shall not be considered 

2 met if, in order to satisfy such paragraph, the State modi3 fies its State law in a way that, as determined by the Sec4 retary, has the general effect of reducing the replacement 

5 ratio for individuals whose average weekly wages equal or 

6 exceed the 50-percent threshold described in such para7 graph, except for good cause shown. 

8 (c) NOTIFICATION.—The Secretary of Labor shall, 

9 upon approving such law for purposes of this section, no10 tify the governor (or, if none, the chief executive officer) 

11 of the State of the Secretary’s approval. 

12 (d) CERTIFICATION.—On October 31 of each year, 

13 the Secretary of Labor shall certify to the Secretary of 

14 the Treasury each State whose law the Secretary of Labor 

15 has previously approved for purposes of this section, ex16 cept that the Secretary of Labor shall not certify any 

17 State which, after reasonable notice and opportunity for 

18 hearing to the State agency, the Secretary of Labor finds 

19 has amended its law so that it no longer contains the pro20 visions specified in subsection (b) or has with respect to 

21 the 12-month period ending on such October 31 failed to 

22 comply substantially with either provision of such sub23 section. 

24 (e) NOTICE OF NONCERTIFICATION.—If at any time 

25 the Secretary of Labor has reason to believe that a State 
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1 whose law the Secretary has previously approved for pur2 poses of this section may not be certified under subsection 

3 (d), the Secretary shall promptly so notify the governor 

4 (or, if none, the chief executive officer) of such State. 

5 (f) DEFINITIONS.—For purposes of this section—

6 (1) the terms ‘‘State’’, ‘‘State law’’, ‘‘State 

7 agency’’, ‘‘compensation’’, and ‘‘week’’ have the re8 spective meanings given such terms under section 

9 205 of the Federal-State Extended Unemployment 

10 Compensation Act of 1970; 

11 (2) the terms ‘‘wages’’ and ‘‘contributions’’ 

12 have the respective meanings given such terms under 

13 section 3306 of the Internal Revenue Code of 1986; 

14 (3) the term ‘‘wage replacement ratio’’ shall 

15 have such meaning as the Secretary of Labor shall 

16 by regulation prescribe consistent with the purposes 

17 of this section; and 

18 (4) the term ‘‘spouse’’ shall include a domestic 

19 partner, as defined under regulations of the Sec20 retary of Labor. 
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1 TITLE III—ENSURING SOLVENCY 

2 AND PREPARING FOR RECES3 SION 

4 SEC. 301. INCREASE AND DECREASE IN EARNINGS CRED5 ITED TO STATE ACCOUNTS WHEN STATES 

6 MEET OR FAIL TO MEET FUNDING GOALS. 

7 (a) IN GENERAL.—Section 904 of the Social Security 

8 Act (42 U.S.C. 1104) is amended by adding at the end 

9 the following new subsection: 

10 ‘‘Increase and Decrease in Amount of Earnings Allocated 

11 to State Accounts When States Meet or Fail to Meet 

12 Funding Goals 

13 ‘‘(h)(1) If the average daily balance in a State ac14 count in the Unemployment Trust Fund for any calendar 

15 quarter exceeds the funding goal of such State, the 

16 amount otherwise creditable to such account under sub17 section (e) for such quarter shall be increased by the inter18 est premium on such excess. If the average daily balance 

19 in such a State account for any calendar quarter is less 

20 than the funding goal of such State, the amount otherwise 

21 creditable to such account under subsection (e) for such 

22 quarter shall be decreased by the interest penalty. 

23 ‘‘(2) Paragraph (1) shall not apply with respect to 

24 any interest premium or interest penalty to the extent that 

25 such application would result in an increase or decrease
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1 of more than $2,500,000 in the amount creditable to any 

2 State account for any calendar quarter. 

3 ‘‘(3) For purposes of this subsection, the term ‘inter4 est premium’ means, for any calendar quarter—

5 ‘‘(A) with respect to the State with the largest 

6 percentage value of excess of the average daily bal7 ance in the State account in the Unemployment 

8 Trust Fund over the funding goal of such State,

9 one-half of one percent of the amount of such ex10 cess, and 

11 ‘‘(B) with respect to each other State, the prod12 uct of—

13 ‘‘(i) the amount of the excess of the aver14 age daily balance in the State account in the 

15 Unemployment Trust Fund over the funding 

16 goal of such State, and 

17 ‘‘(ii) the percentage which bears the same 

18 ratio to one-half of one percent as—

19 ‘‘(I) the percentage value of such ex20 cess, bears to 

21 ‘‘(II) the percentage value of the ex22 cess of the State referred to in subpara23 graph (A). 

24 The Secretary shall make appropriate adjustments in the 

25 interest premium for any calendar quarter if the aggregate 
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1 interest premiums payable for such quarter exceed the ag2 gregate interest penalties for such quarter. 

3 ‘‘(4) For purposes of this subsection, the term ‘inter4 est penalty’ means, for any calendar quarter—

5 ‘‘(A) with respect to the State with the largest 

6 percentage value of excess of the funding goal of 

7 such State over the average daily balance in the 

8 State account in the Unemployment Trust Fund, 

9 one-half of one percent of the amount otherwise 

10 creditable to such account under subsection (e), and 

11 ‘‘(B) with respect to each other State, the prod12 uct of—

13 ‘‘(i) the amount otherwise creditable to 

14 such account under subsection (e), and 

15 ‘‘(ii) the percentage which bears the same 

16 ratio to one-half of one percent as—

17 ‘‘(I) the percentage value of the excess 

18 of the funding goal of the State over such

19 average daily balance of such State, bears 

20 to 

21 ‘‘(II) the percentage value of such ex22 cess of the State referred to in subpara23 graph (A). 

24 ‘‘(5) For purposes of this subsection, the term ‘fund25 ing goal’ means, for any State for any calendar quarter, 
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1 the average of the unemployment insurance benefits paid 

2 by such State during each of the 3 years, in the 20-year 

3 period ending with the calendar year containing such cal4 endar quarter, during which the State paid the greatest 

5 amount of unemployment benefits. 

6 ‘‘(6) For purposes of this subsection, the term ‘per7 centage value’ means—

8 ‘‘(A) with respect to any excess of the average 

9 daily balance in a State account in the Unemploy10 ment Trust Fund over the funding goal of such 

11 State, the percentage which such excess bears to 

12 such funding goal, and 

13 ‘‘(B) with respect to any excess of such funding 

14 goal over such average daily balance, the percentage 

15 which such excess bears to such funding goal.’’. 

16 (b) CONFORMING AMENDMENTS.—

17 (1) AMOUNTS CREDITED TO STATE AC18 COUNTS.—Subsection (e) of section 904 of the So19 cial Security Act (42 U.S.C. 1104(e)) is amended in 

20 the first sentence by inserting ‘‘(as modified by sub21 section (h))’’ after ‘‘a proportionate part’’. 

22 (2) INTEREST RATE ON REPAYMENT OF AD23 VANCES DETERMINED WITHOUT REGARD TO INTER24 EST PREMIUMS OR PENALTIES ON AMOUNTS CRED25 ITED TO STATE ACCOUNTS.—Subparagraph (A) of 
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1 section 1202(b)(4) of such Act (42 U.S.C. 

2 1322(b)(4)) is amended by inserting ‘‘(determined 

3 without regard to section 904(h))’’ after ‘‘preceding 

4 calendar year’’. 

5 (c) REPORT.—Not later than 6 months after the date 

6 of the enactment of this Act, the Secretary of Labor shall 

7 submit to the Congress a report recommending sources of 

8 funding for the crediting of interest premiums under sub9 section (h) of section 904 of the Social Security Act (42 

10 U.S.C. 1104), as added by this section, in the event that 

11 the imposition of interest penalties under such subsection 

12 is insufficient to fund such premiums. 

13 (d) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to calendar years beginning after 

15 December 31, 2005. 

16 SEC. 302. AMENDMENTS TO TRIGGER PROVISIONS OF EX17 TENDED BENEFIT PROGRAM. 

18 (a) LOWERING OF EXTENDED BENEFIT ‘‘ON’’ INDI19 CATOR.—Section 203(d) of the Federal-State Extended 

20 Unemployment Compensation Act of 1970 (26 U.S.C. 

21 3304 note) is amended—

22 (1) in paragraph (1)(B), by striking ‘‘5 per cen23 tum’’ and inserting ‘‘4 per centum’’, and 

24 (2) in the first sentence following paragraph 

25 (2)—
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1 (A) by striking ‘‘5’’ and inserting ‘‘4’’, and 

2 (B) by striking ‘‘6’’ and inserting ‘‘5’’. 

3 (b) ALTERNATIVE TRIGGER.—Section 203(f) of such 

4 Act is amended—

5 (1) by striking ‘‘(f)(1)’’ and all that follows 

6 through ‘‘section—’’ and inserting the following: 

7 ‘‘(f)(1) Effective with respect to compensation for 

8 weeks of unemployment beginning after December 31, 

9 2003, for purposes of this section—’’; and 

10 (2) in the last sentence of paragraph (1), by 

11 striking ‘‘Notwithstanding the provision of any State 

12 law described in this paragraph,’’ and inserting 

13 ‘‘Notwithstanding any other provision of this sub14 section,’’. 

15 (c) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply for purposes of determining wheth17 er there are State ‘‘on’’ or ‘‘off’’ indicators for weeks be18 ginning on or after January 1, 2004. 

19 SEC. 303. ELIMINATE SPECIAL FEDERAL ELIGIBILITY RE20 QUIREMENTS FOR EXTENDED COMPENSA21 TION. 

22 (a) IN GENERAL.—Section 202(a) of the Federal23 State Extended Unemployment Compensation Act of 1970 

24 (26 U.S.C. 3304 note) is amended by striking paragraphs 

25 (3) through (7).
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1 (b) CONFORMING AMENDMENT.—Section 202(a)(2) 

2 of such Act is amended by striking ‘‘Except’’ and all that 

3 follows through ‘‘title, the’’ and inserting ‘‘The’’. 

4 (c) EFFECTIVE DATE.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the amendments made by this section 

7 shall apply in the case of compensation paid to indi8 viduals during eligibility periods beginning on or 

9 after January 1, 2004. 

10 (2) SPECIAL RULE FOR CERTAIN STATES.—In 

11 the case of any State the legislature of which has 

12 not been in session for at least 30 calendar days 

13 (whether or not successive) between the date of the 

14 enactment of this Act and January 1, 2004, the 

15 amendments made by this section shall apply in the 

16 case of compensation paid to individuals during eli17 gibility periods beginning after the end of the first 

18 session of the State legislature which begins on or 

19 after January 1, 2004. 
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1 TITLE IV—IMPROVING ADMINIS2 TRATIVE FUNDING FOR THE 

3 UNEMPLOYMENT SYSTEM 

4 SEC. 401. FUNDING FOR ADMINISTRATION OF STATE UNEM5 PLOYMENT COMPENSATION, STATE SYSTEMS 

6 OF PUBLIC EMPLOYMENT OFFICES AND VET7 ERANS EMPLOYMENT SERVICE PROGRAMS. 

8 (a) IN GENERAL.—Paragraph (1) of section 901(c) 

9 of the Social Security Act (42 U.S.C. 1101(c)(1)) is 

10 amended by striking all that precedes clause (i) of sub11 paragraph (B) and inserting the following: 

12 ‘‘(c)(1)(A) There are hereby appropriated out of the 

13 employment security administration account for each fis14 cal year—

15 ‘‘(i) the amount determined under subsection 

16 (g) for such year for assisting the States in the ad17 ministration of their unemployment compensation 

18 laws as provided in title III (including administra19 tion pursuant to agreements under any Federal un20 employment compensation law), 

21 ‘‘(ii) the amount determined under subsection 

22 (h) for such year for providing reemployment serv23 ices, including administering the work test for the 

24 State unemployment compensation system and pro-
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1 viding job finding and placement services, to unem2 ployment compensation claimants, 

3 ‘‘(iii) the amount determined under subsection 

4 (i) for such year for the establishment and mainte5 nance of systems of public employment offices in ac6 cordance with the Wagner-Peyser Act (29 U.S.C. 49 

7 et seq.), and 

8 ‘‘(iv) the amounts determined under sections 

9 4103A(a)(1) and 4104(a)(1) of title 38 of the 

10 United States Code for such year for carrying out 

11 sections 4103A and 4104 of such title, respectively. 

12 The Secretary of Labor may reserve not more than 0.4 

13 percent of the funds appropriated under clauses (i) and 

14 (ii), respectively, for any fiscal year to carry out national 

15 activities that benefit the Federal-State unemployment 

16 compensation system as a whole, are interstate or 

17 multistate in nature, or are more efficiently and effectively 

18 performed on a centralized basis. 

19 ‘‘(B) There are hereby authorized to be made avail20 able for expenditure out of the employment security ad21 ministration account for each fiscal year such amounts 

22 (not in excess of the limit provided by paragraph (4) with 

23 respect to subparagraph (A)(iii)) as the Congress may 

24 deem appropriate for the necessary expenses of the De-
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1 partment of Labor for the performance of its functions 

2 under—’’. 

3 (b) FUNDING FORMULAS.—Section 901 of the Social 

4 Security Act (42 U.S.C. 1101) is amended by adding at 

5 the end the following: 

6 ‘‘Amounts Appropriated for Administrative Costs of 

7 State Unemployment Compensation Programs 

8 ‘‘(g)(1) For fiscal year 2004 and each fiscal year 

9 thereafter, the amount appropriated for funding costs of

10 administering State unemployment compensation pro11 grams under subsection (c)(1)(A)(i), shall be the sum of—

12 ‘‘(A)(i) the amount determined under this 

13 clause for the prior fiscal year (except that in deter14 mining funding for fiscal year 2004, the amount for 

15 the prior fiscal year shall equal $789) multiplied by 

16 the projected change in the gross domestic product 

17 price index for the fiscal year for which the deter18 mination is being made, multiplied by 

19 ‘‘(ii) the projected average weekly number of in20 dividuals filing claims for compensation (within the 

21 meaning of section 85(b) of the Internal Revenue 

22 Code of 1986) for such fiscal year, except that an 

23 individual shall not be included in such number sole24 ly by reason of filing a claim for assistance under 

25 section 410(a) of the Robert T. Stafford Disaster 
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1 Relief and Emergency Assistance Act (42 U.S.C. 

2 5177(a)); and 

3 ‘‘(B)(i) the amount determined under this 

4 clause for the prior fiscal year (except that in deter5 mining the funding for fiscal year 2004, the amount 

6 for the prior fiscal year shall equal $138) multiplied 

7 by the projected change in the gross domestic prod8 uct price index for the fiscal year for which the de9 termination is being made, multiplied by 

10 ‘‘(ii) the average quarterly number of employers 

11 subject to State unemployment compensation laws 

12 projected for such fiscal year. 

13 ‘‘(2) In addition to the amounts determined under 

14 paragraph (1) for a fiscal year, if the weekly average of 

15 insured unemployed individuals for such fiscal year (as 

16 projected using the economic assumptions released by the 

17 President during such fiscal year under section 1106 of 

18 title 31, United States Code, and excluding the same 

19 claimants as are excluded under paragraph (1)(A)(ii)) ex20 ceeds the projection used in such paragraph (1)(A)(ii), 

21 then additional amounts shall be appropriated under sub22 section (c)(1)(A)(i) for funding the costs of administering 

23 the State unemployment compensation programs equal 

24 to—
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1 ‘‘(A)(i) the amount determined under this sub2 paragraph for the prior fiscal year (except that in 

3 determining funding for fiscal year 2004, the 

4 amount for the prior fiscal year shall equal $298) 

5 multiplied by the projected change in the gross do6 mestic product price index for the fiscal year for 

7 which the determination is being made, multiplied by 

8 ‘‘(ii) the difference between the weekly average 

9 of insured unemployed individuals (as measured 

10 using the most recent economic assumptions re11 leased by the President during such fiscal year) and 

12 the weekly average of insured unemployed individ13 uals projected under paragraph (1)(A)(ii) for such 

14 fiscal year. 

15 The additional amounts made available pursuant to this 

16 paragraph for a fiscal year shall be available to be allo17 cated to the States only to the extent that the projected 

18 weekly average of insured unemployed individuals for such 

19 fiscal year, as referred to in the preceding sentence (in 

20 the matter preceding subparagraph (A)) exceeds the pro21 jection used in paragraph (1)(A)(ii). 

22 ‘‘Amounts Appropriated to States for the Provision of 

23 Reemployment Services 

24 ‘‘(h) For fiscal year 2004 and each fiscal year there25 after, the amount appropriated for funding costs of pro-
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1 viding reemployment services to unemployment compensa2 tion claimants under subsection (c)(1)(A)(ii) shall be—

3 ‘‘(1) the amount determined under this para4 graph for the prior fiscal year (except that in deter5 mining funding for fiscal year 2004, the amount for 

6 the prior fiscal year shall equal $11.10) multiplied 

7 by the projected change in the gross domestic prod8 uct price index for the fiscal year for which the de9 termination is being made, multiplied by 

10 ‘‘(2) the projected number of payments of un11 employment compensation representing first weeks 

12 compensated in a benefit year for such fiscal year. 

13 ‘‘Amounts Appropriated for Administration of State 

14 Public Employment Offices 

15 ‘‘(i) For fiscal year 2004 and each fiscal year there16 after, the amount appropriated for funding the costs of 

17 administering the State system of public employment of18 fices under subsection (c)(1)(A)(iii) shall be—

19 ‘‘(1) the amount determined under this para20 graph for the prior fiscal year (except that in deter21 mining funding for fiscal year 2004, the amount for 

22 the prior fiscal year shall equal $7.30) multiplied by 

23 the projected change in the gross domestic product 

24 price index for the fiscal year for which the deter25 mination is being made, multiplied by 
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1 ‘‘(2) the projected average monthly number of 

2 individuals in the civilian labor force for such fiscal 

3 year. 

4 ‘‘Calculation of Appropriated Amounts by the Secretary 

5 of Labor 

6 ‘‘(j) For purposes of subsections (g), (h) and (i)—

7 ‘‘(1) each projection shall be made by the Sec8 retary of Labor using the economic assumptions re9 leased by the President for such fiscal year, during 

10 the preceding fiscal year, under section 1106 of title 

11 31, United States Code, except as otherwise pro12 vided under subsection (g)(2) or (h)(2), and 

13 ‘‘(2) the projected change in the gross domestic 

14 product price index for the fiscal year for which the 

15 determination is being made shall equal the sum of 

16 1 and the quotient of the percent change in the 

17 gross domestic product price index projected for 

18 such fiscal year divided by 100. 

19 ‘‘Special Rules Relating to Use of Amounts Appropriated 

20 ‘‘(k)(1) Amounts appropriated under paragraphs 

21 (1)(A)(i)–(ii) and (6) of subsection (c) with respect to a 

22 fiscal year shall remain available for obligation by the 

23 States during such fiscal year and the first quarter of the 

24 following fiscal year, except that funds used for automa25 tion acquisitions shall remain available for obligation by 
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1 the States through the end of the second fiscal year fol2 lowing the fiscal year in which such funds are appro3 priated. 

4 ‘‘(2) Amounts reserved by the Secretary of Labor 

5 under the second sentence of subsection (c)(1)(A) may be 

6 obligated in contracts, grants, or agreements with non7 State entities. 

8 ‘‘(3) Amounts appropriated under paragraph (1)(A) 

9 and paragraph (6) of subsection (c) may be used by the 

10 States to fund integrated employment service and unem11 ployment compensation automation efforts notwith12 standing the cost allocation principles prescribed under 

13 Office of Management and Budget Circular No. A–87.’’. 

14 (c) FUNDING FOR IMPROVED TECHNOLOGY TO AS15 SIST IN DETERMINING BENEFIT ELIGIBILITY.—Section 

16 901(c) of the Social Security Act (42 U.S.C. 1101(c)) is 

17 amended by adding at the end the following new para18 graph: 

19 ‘‘(6) In addition to amounts provided under para20 graph (1)(A)(i)–(ii), there is hereby appropriated out of 

21 the employment security administration account 

22 $60,000,000 for fiscal year 2004 for the purpose of assist23 ing States in funding technology and other costs that ac24 celerate access to wage and employment information in 
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1 order to determine eligibility for unemployment compensa2 tion.’’. 

3 (d) CONFORMING AMENDMENTS.—

4 (1) PAYMENTS TO STATES FOR REEMPLOYMENT

5 SERVICES.—Section 302 of the Social Security Act 

6 (42 U.S.C. 502) is amended by adding at the end 

7 the following: 

8 ‘‘(d) The Secretary of Labor shall from time to time 

9 certify to the Secretary of the Treasury for payment to 

10 each State such amounts as the Secretary of Labor deter11 mines appropriate for providing reemployment services, in12 cluding administering the work test for the State unem13 ployment compensation system and providing job finding 

14 and placement services, to claimants for unemployment 

15 compensation.’’. 

16 (2) EXPENDITURE OF FUNDS FOR REEMPLOY17 MENT SERVICES.—Section 303(a)(8) of the Social 

18 Security Act (42 U.S.C. 503(a)(8)) is amended—

19 (A) by inserting ‘‘subsections (a) and (b) 

20 of’’ after ‘‘pursuant to’’; and 

21 (B) by inserting before the semicolon at 

22 the end the following: ‘‘and the expenditure of 

23 all moneys received pursuant to section 302(d) 

24 of this title solely for the purposes and in the 

25 amounts found necessary by the Secretary of
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1 Labor for providing reemployment services to 

2 claimants for unemployment compensation’’. 

3 (3) REPLENISHMENT OF FUNDS NOT USED FOR

4 REEMPLOYMENT SERVICES.—Section 303(a)(9) of 

5 the Social Security Act (42 U.S.C. 503(a)(9)) is 

6 amended—

7 (A) by inserting ‘‘subsections (a) and (b) 

8 of’’ after ‘‘pursuant to’’; and 

9 (B) by inserting before the semicolon at 

10 the end the following: ‘‘and the replacement, 

11 within a reasonable time, of any moneys re12 ceived pursuant to section 302(d) of this title 

13 which, because of any action or contingency, 

14 have been lost or have been expended for pur15 poses other than, or in amounts in excess of, 

16 those found necessary by the Secretary of 

17 Labor for providing reemployment services to 

18 claimants for unemployment compensation’’. 

19 (4) REPEALS.—The following provisions of the 

20 Social Security Act are repealed: 

21 (A) Paragraph (3) of section 901(c). 

22 (B) The second sentence of section 

23 901(f)(3)(A). 

24 (5) AMOUNT OF AUTHORIZATION UNDER THE

25 WAGNER-PEYSER ACT.—
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1 (A) Section 901(c)(4) of the Social Secu2 rity Act (42 U.S.C. 1101(c)(4)) is amended—

3 (i) by striking ‘‘paragraphs (1)(A)(ii) 

4 and’’ and inserting ‘‘paragraph’’; 

5 (ii) by striking ‘‘the proportion of the 

6 total cost of administering the system of 

7 public employment offices in accordance 

8 with the Act of June 6, 1933, as amended, 

9 and of’’; and 

10 (iii) by striking the last sentence. 

11 (B) Section 901(c)(1)(B) of the Social Se12 curity Act (42 U.S.C. 1101(c)(1)(B)) is amend13 ed by moving clauses (i) through (v) 2 ems to 

14 the left, and by striking clause (iii) and insert15 ing the following: 

16 ‘‘(iii) the Wagner-Peyser Act (29 U.S.C. 49 et 

17 seq.),’’. 

18 (6) APPROPRIATION REFERENCE IN THE WAG19 NER-PEYSER ACT.—Section 5 of the Wagner-Peyser 

20 Act (29 U.S.C. 49d) is amended—

21 (A) by striking all that precedes subsection 

22 (b) and inserting the following: 

23 ‘‘SEC. 5. (a) The amounts available to carry out sec24 tions 1 through 13 of this Act shall be appropriated in 

25 accordance with section 901 of the Social Security Act.’’; 
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1 (B) by striking subsection (b); and 

2 (C) by redesignating subsection (c) as sub3 section (b). 

4 (e) BUDGET JUSTIFICATION.—No funds may be ex5 pended under the amendments made by this section unless 

6 the Secretary of Labor includes in the Department of La7 bor’s annual budget justification to Congress a detailed 

8 description of the specific activities for which the funds 

9 made available by such amendments have been used in the 

10 prior and current years (if applicable) and the activities 

11 and costs planned for the budget year. 

12 (f) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to fiscal year 2004 and subsequent 

14 fiscal years.

Æ