UNEMPLOYMENT INSURANCE: 

ASSESSMENT OF 

THE IMPACT OF THE 

2002 REED ACT DISTRIBUTION 

Final Report 

Qualitative and Quantitative Analysis 

Washington, D.C. 

December 2004 

This project has been funded, either wholly or in part, with Federal funds from the U.S. 

Department of Labor, Employment and Training Administration. The contents of this 

publication do not necessarily reflect the views or policies of the Department of Labor, 

nor does mention of trade names, commercial products, or organizations imply endorsement of same by the U.S. Government. 
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TABLE OF CONTENTS 

RESEARCH PREFACE.................................................................................................. 7

RESEARCH TEAM PREFACE............................................................................................. 8

ACKNOWLEDGEMENTS .................................................................................................... 8

EXECUTIVE SUMMARY .............................................................................................. 11

EXECUTIVE SUMMARY................................................................................................... 12

SECTION I BACKGROUND................................................................................... 17

1.1 HISTORY OF THE REED ACT ............................................................................ 18

1.1.1 Before the Reed Act ......................................................................................18

1.1.2 The Reed Act.................................................................................................19

1.1.3 Reed Act Distributions...................................................................................20

1.2 THE SOURCE OF THE 2002 SPECIAL REED ACT DISTRIBUTION........................... 23

1.2.1 Purpose of the Act.........................................................................................23

1.2.2 Genesis of the Reed Act................................................................................23

1.3 POSSIBLE STATE USE OF REED ACT FUNDS..................................................... 24

1.3.1 Using Reed Act Funds to Improve Solvency and Lower Taxes ....................24

1.3.2 Using Reed Act Funds for Benefits ...............................................................24

1.3.3 Using Reed Act Funds for Administrative Purposes......................................25

1.3.4 Acquiring Real Property with Reed Act Funds ..............................................26

1.3.5 Suggested Uses of Reed Act Distributions for Administrative Purposes.......27

1.4 FUNDING OF THIS RESEARCH EFFORT ............................................................. 28

1.5 STRUCTURE OF THIS REPORT ......................................................................... 28

SECTION II RESEARCH FINDINGS....................................................................... 29

2.1 OVERVIEW..................................................................................................... 30

2.2 SUMMARY OF KEY RESEARCH FINDINGS .......................................................... 31

2.2.1 Summary of the Qualitative Study.................................................................33

2.2.2 Summary of the Quantitative Study...............................................................33

2.3 REED ACT DISTRIBUTIONS’ IMPACT.................................................................. 35

2.3.1 Immediate fiscal impact of the distribution.....................................................35

2.3.2 Short- to intermediate-term impact of the distribution....................................38

2.3.3 The long-term impact of the distribution ........................................................39

SECTION III QUALITATIVE ANALYSIS .................................................................. 41

3.1 OVERVIEW OF QUALITATIVE ANALYSIS ............................................................. 42

3.2 PROCESS FOR SELECTING STATES AS CASE STUDIES....................................... 43

3.2.1 State Selection Criteria..................................................................................43
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3.2.2 Case Study Approach....................................................................................45

3.3 THEMES AND OBSERVATIONS FROM THE STATE INTERVIEWS ............................. 47

3.3.1 Introduction....................................................................................................47

3.3.2 Summary characteristics of the states...........................................................47

3.3 3 Individual states' experiences........................................................................48

3.4 SPECIFIC QUESTIONS OF INTEREST ................................................................. 52

3.5 CONCLUSIONS OF THE QUALITATIVE STUDY...................................................... 54

3.6 COMPLETE STATE INTERVIEWS........................................................................ 56

3.6.1 Iowa...............................................................................................................57

3.6.2 Louisiana .......................................................................................................60

3.6.3 Michigan ........................................................................................................64

3.6.4 Minnesota......................................................................................................67

3.6.5 Montana.........................................................................................................69

3.6.6 New Jersey....................................................................................................73

3.6.7 Ohio...............................................................................................................76

3.6.8 Virginia...........................................................................................................80

3.6.9 Washington....................................................................................................83

SECTION IV QUANTITATIVE ANALYSIS................................................................ 89

4.1 INTRODUCTION TO QUANTITATIVE ANALYSIS ..................................................... 90

4.1.1 Background and Purpose..............................................................................90

4.1.2 Quantitative Analysis Approach.....................................................................90

4.1.3 Data limitations and other challenges............................................................91

4.1.4 Definitions of terms used in the quantitative analysis....................................92

4.2 TRENDS OF EMPLOYMENT RELATED VARIABLES FOR SELECT STATES ................ 93

4.2.1 Trends in Trust Fund Balances .....................................................................95

4.3. TRUST FUND MEASURES AND DESCRIPTIVE STATISTICS.................................... 99

4.3.1 Introduction....................................................................................................99

4.3.2 Summary of Trust Fund Measures and the Average High Cost Multiple ....101

4.3.3 Detail of Trust Fund Measures and the Average High Cost Multiple...........102

4.3.4 Analysis of NASWA Surveys on states' use of Reed Act funds ..................106

4.4 SPECIFIC HYPOTHESES ABOUT USE OF REED ACT FUNDS ............................... 108

4.4.1 Introduction..................................................................................................108

4.4.2 Testing process ...........................................................................................109

4.4.3 Summary Results of Hypothesis Testing.....................................................110

4.4.4 Results of Testing Hypothesis 1..................................................................112

4.4.5 Results of Testing Hypothesis 2..................................................................115

4.4.6 Results of Testing Hypothesis 3..................................................................118

4.4.7 Results of Testing Hypothesis 4..................................................................120

4.4.8 Results of Testing Hypothesis 5..................................................................122

4.4.9 Results of Testing Hypothesis 6..................................................................126

4.5 CONCLUSIONS OF THE QUANTITATIVE STUDY ................................................. 126

SECTION V LIST OF FIGURES ............................................................................ 129

SECTION VI BIBLIOGRAPHY................................................................................ 133
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6.1 GOVERNMENT REPORTS............................................................................... 134

6.2 NASWA SOURCES ...................................................................................... 134

6.3 GOVERNMENT SOURCES............................................................................... 134

United States Congress.....................................................................................................134

Other U.S. Department of Labor References ....................................................................136

Other Government Sources...............................................................................................136

6.4 OTHER NON-GOVERNMENT SOURCES ........................................................... 136

SECTION VII ATTACHMENTS................................................................................ 137

ATTACHMENT A – PROCESS FOR CONDUCTING STATISTICAL ANALYSIS .......................... 138

ATTACHMENT B – NASWA SURVEYS .......................................................................... 140

B.1 Winter 2004 Survey.....................................................................................140

B.2 Fall 2003 Survey..........................................................................................150

ATTACHMENT C – ADDITIONAL DETAILS OF HYPOTHESIS TESTING.................................. 160

ATTACHMENT D – QUALITATIVE STUDY INTERVIEW GUIDE ............................................. 168

ATTACHMENT E – TRENDS IN AWBA FOR SELECTED STATES 1999.1 TO 2003.2............ 171
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RESEARCH PREFACE 

 
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RESEARCH TEAM PREFACE

The “Reed Act” was once an obscure provision of the Social Security Act that had been 

activated only a few times since the 1950s. It provides for a distribution of federal unemployment tax funds to state unemployment insurance (UI) and employment service 

programs when the federal government has collected excess federal unemployment tax 

revenue. Because of a booming economy in the late 1990s and a substantial flow of 

federal unemployment taxes into the unemployment trust fund, the Secretary of Labor 

projected a Reed Act distribution of over $4 billion on October 1, 2002. This projection, 

the recession of late 2000 and early 2001, high unemployment, and a desire to stimulate the economy led to the enactment of the “Job Creation and Worker Assistance Act,” 

which President Bush signed into law on March 9, 2002. This Act contained a “Special” 

$8 billion Reed Act distribution to states. 

The purpose of the study is to provide an overview of past Reed Act distributions and 

identify how states chose to approach the current Reed Act distribution. Because the 

$8 billion Reed Act distribution was enacted in an economic stimulus package, policy 

makers expected it to stimulate the economy. It could accomplish this through cuts in 

state unemployment taxes or increases in state spending on benefits, UI administration, 

and employment services. This study finds the $8 billion Reed Act distribution stimulated the economy primarily through about $4 billion in lower unemployment taxes in 

2003 and 2004, but also led to some stimulating increases in spending on unemployment benefits, UI administration and employment services, which could continue for 

some years. 

This study was conducted under a grant from the U.S. Department of Labor (USDOL) 

by the Center for Employment Security Education and Research (CESER), an affiliate 

of the National Association of State Workforce Agencies (NASWA. 

 Richard A. Hobbie, Ph.D. 

 Executive Director, NASWA 

 December 20, 2004 

ACKNOWLEDGEMENTS

The Center for Employment Security Education and Research (CESER) thanks the U.S. 

Department of Labor (USDOL) for supporting this study. Throughout this research effort, CESER received support and comments from David Balducchi, Stephen Wandner, 

and Allison Vitalo of the Employment and Training Administration (ETA). In addition, 

valuable input was provided occasionally and on the final report by Stephanie Cabell, 

Anthony Dais, Lissette Gean, Gay Gilbert, James Herbert, Jerry Hildebrand, Michael 

Miller, Lynne Webb, and Ronald Wilus. 
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CESER thanks the National Association of State Workforce Agencies (NASWA) and the 

numerous employees of member states who provided information on how states were 

using Reed Act funds. Without their support, cooperation, and input through surveys 

conducted by NASWA for its members, this study could not have been conducted by 

CESER. 

CESER also thanks Andri Haraldsson of Decern Consulting and Anik Mehta of Booz 

Allen Hamilton for hard and tenacious work that resulted in the most comprehensive 

study of the Reed Act ever attempted or completed. Through this work, this study will 

be the reference source on the Reed Act for many years to come. 

This study was managed by Richard A. Hobbie, Curt Harris, and Brian Langley of 

CESER/NASWA. Any errors or omissions remaining are solely the responsibility of 

CESER and the authors. 
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EXECUTIVE SUMMARY 
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EXECUTIVE SUMMARY

The Center for Employment Security Education and Research (CESER), a component 

of the National Association of State Workforce Agencies (NASWA) with the assistance 

of Booz Allen Hamilton (Booz Allen) and Decern Consulting, conducted research of how 

states are using the $8 billion special Reed Act Distribution of 2002. The study was 

conducted from the fall of 2002 and through winter of 2004. 

Two main research efforts were undertaken, a qualitative interview study of nine states 

(Iowa, Louisiana, Michigan, Minnesota, Montana, New Jersey, Ohio, Virginia, and 

Washington), and a quantitative study of usage patterns among all 53 states and territories. 

The research team identified a number of significant patterns in how states chose to 

approach the Reed Act distribution, as well as broad indication that states with certain 

characteristics are more or less likely to increase benefits and/or raise taxes. 

Research findings can be found in Section II, and in-depth reporting of the research in 

later sections. 

Direct Impact of the Reed Act Distribution 

States appear to have been reluctant to appropriate Reed Act funds to increase or enhance benefits, with 18 states doing so by February 2004. Figure ES.1 shows a summary of the characteristics of how states reported their use of Reed Act funds, and its 

direct impact. 

Figure ES.1 

Direct Impact of Reed Act Distribution (as of February 2004) 

Impact and Use of 

Reed Act Funds 

Number 

of States Total Amount 

Tax Reduction (2003/2004) 25 $4,085 Million* 

Benefit Payments 

 Payment of regular benefits as 

trust fund became depleted 

 Increase Weekly Benefit 

Amount 

 New Benefits 

 Alternate Base Period 

9 

7 

4 

$2,945 Million* 

Administrative Uses 

 UI Administration 

 ES Administration 

40 

35 

25 

1,281 Million 

843 Million 

438 Million 

Remaining Reed Act Funds* $3,774 Million 

Source: All information in this table is compiled from NASWA’s Survey of 

member states in Winter 2004. 

* Estimate 
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The total economic stimulus that can be attributed to the Reed Act distribution (as of 

February 2004), comprises the tax reduction, the expenses on administrative uses, and 

those new or increased benefits that resulted from the Distribution. The research indicates that it may range from a low equivalent to the amount of the tax reductions in 

2003 and 2004, approximately $4.1 billion, to a high of over $8 billion dollars. The 

higher amount would indicate that states nearing or at Trust Fund insolvency would not 

have paid out regular benefits, or increased taxes to pay for those benefits, unless they 

had received the Reed Act distribution, and that all of the states’ authorized administrative expenses had already been incurred. Figure ES.1, shows the result of the stimulus 

impact of both the reduction in unemployment tax rates in the states and additional expenditures. 

It should be noted, however, that although the states have reported these amounts as 

potential economic stimulus, these combined amounts are an upper bound of the actual 

economic stimulus that would have been felt in the states. This is necessarily so as the 

actual expended (spent) amount always lags the amount obligated (authorized for use) 

by the state legislature. Thus a significant proportion of the roughly $1.3 billion designated for ‘Administrative Uses’ probably has not yet been spent. For example, a multimillion dollar acquisition of IT systems takes time to prepare and execute. Furthermore, 

even once a contractor has been selected and starts work, the total amount of the work 

is usually not paid up-front at start of the work. 

Similarly, the estimates for ‘Benefit Payments’ are estimates of the cost of changes in 

the benefits, and they include both benefit increases and benefits paid from the Reed 

Act distribution funds in states that otherwise would have been in a shortfall situation (or 

who were forced to borrow funds after spending the Reed Act distribution). Thus, although there has been a significant economic stimulus from the Reed Act as of February 2004, it should be cautioned that the total stimulating effect will not be felt until the 

remainder of the Reed Act distribution is spent. 

Themes and Observations 

Broadly, it can be observed, as Figure ES.2 shows that state solvency was highly correlated with certain behaviors. Furthermore, the evidence, so far, is that the Reed Act has 

contributed much of its economic stimulus through UI tax decreases in 2003 and 2004. 
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Figure ES.2 

Themes and Observations form the Reed Act Study 

Theme What Happened 

Solvency (AHCM)1 

High 

1. Generally saw taxes cut. 

2. Some appropriated for administrative purposes. 

3. More likely to increase benefits. 

Medium 

1. Commonly focused on increasing solvency. 

2. Some saw tax cuts or tax increase avoidance. 

3. A few made administrative funding appropriations. 

Low 

1. A few saw avoidance of tax increases. 

2. Many forced to spend all on benefits as they became insolvent. 

Bias Towards Tax Cuts Tax cuts are temporary in nature because of the inherent structure of the unemployment tax system. 

Bias Against Benefit Increases 

These must be approved by the state legislature in accordance 

with Federal Laws and permissible use of UI funds. Furthermore 

these are in perpetuity, and must be accounted for as such. 

Experience generally shows that ‘temporary’ benefit increases 

are extended indefinitely. 

Source: Research Team Analysis 

The findings in Figure ES.2 are examined in more detail in the hypothesis testing section of the quantitative analysis, but the figure shows there is marked difference in 

states’ tendencies for using Reed Act funds based on their level of solvency. 

The qualitative study also provides a valuable insight into the workings of getting Reed 

Act funds appropriated. The states were consistent in approaching the Reed Act distribution as ‘one-time funds for one-time expenses.’ Only two of the nine states interviewed had appropriated the full amount of the distribution. Those two states, (Michigan 

and Montana) furthermore, had multi-year plans for use of the funds. Montana planned 

significant investment in its IT infrastructure on both the ES and UI sides, while Michigan invested approximately three-quarters of its funds in the one-stop system’s infrastructure, and the remainder in UI system upgrades and making Internet job search access available in public libraries. 

The other states, although they had not appropriated the full Reed Act distribution 

amount, similarly invested primarily in IT and infrastructure upgrades. 

The Average High Cost Multiple (AHCM) 

Figure ES.3 shows another interesting evaluation the team completed as part of the research. The chart shows certain relationships that are true when the states are grouped 

based on the AHCM. As can be seen, the group with the lowest AHCM (less than 0.5), 

has four of the six factors going against greater solvency, while the other two groups 

have two factors working against greater solvency (these are bolded in the chart). The 

 

1 AHCM is the Average High Cost Multiple. This concept is further explained in Section III.2.1 
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two higher solvency groups, furthermore, do not share the factors that work against 

greater solvency. 

Although one must be careful in drawing broad conclusions from this chart, we present 

it here as an interesting insight for the policy maker in examining the heterogeneity in 

states’ responses to the distribution. 

Figure ES.3 

Average High Cost Multiple Groups’ Characteristics 

Source: UI Data Summary, U.S. Department of Labor; Research Team Analysis. 

Note: All relationships have been tested as significant with a t-test of the means assuming unequal 

variances. 

Bold text indicates effects that contribute to lower AHCM. 

In addition to figures ES.2 and ES.3, section IV.4. provide greater detail on the trends in 

how groupings of states used the Reed Act distribution. 

Summary Findings 

The Reed Act can be seen as having significant impact on the economy and on states’ 

ability to respond to the economic downturn that started in 2001. The main advantages 

and potential disadvantages of the distribution as identified by the research team are 

summarized in figure ES.4 

Substantial economic stimulus was achieved with the Reed Act distribution, although 

the distribution of this stimulus may not have been spread evenly among the states, and 

in fact there is evidence that it accrued considerably more to those states with higher 

AHCM. This is not only true for reduction in the employer tax schedule, but the research also suggests the more solvent states were more likely to increase benefits. 

Many states will now, and through prudent use of revolving funds perhaps into perpetuity, have funds to better manage the IT and infrastructure required to effectively manage 

both their UI and ES responsibilities. It can be anticipated these changes will take time, 

and an important issue to ensure the long-term value of the Reed Act distribution is to 

AHCM Group A: Low 

<0.5 

B: Medium 

0.5-1.0 

C: High 

>1.0 

Weeks compensated 

per 1000 covered workers MORE Less MORE

Duration as unemployed LONGER Shorter Shorter 

Average Weekly Benefit Amount (AWBA) HIGHER HIGHER Lower 

Tax revenue 

per 1000 covered workers LOWER Higher LOWER

Workers compensated 

per 1000 covered workers Fewer MORE Fewer 

Unemployment Rate Same Same Same 
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ensure states have access to lessons learned and best practices for investing in new, 

and overhauling old, IT systems. 

Figure ES.4 

Summary Advantages and Potential Disadvantages of the Reed Act Distribution 

Advantages Potential Disadvantages 

1. Eventual economic stimulus greater 

than the amount of the distribution: 

a. Lower taxes in 25 states generated 

economic stimulus. 

b. Some benefit expansion in 18 states. 

c. New funds appropriated for overdue 

administrative infrastructure improvements (40 states). 

2. Ability to respond to surge in Employment Service (ES) demand. 

3. Long-term investment in IT may improve efficiency of Unemployment Insurance (UI) and ES systems. 

4. Some additional benefits that otherwise 

might have proved impossible to pass 

given states’ fiscal situation. 

1. Taxes not lower in states where Trust 

Fund Balance (TFB) was low, causing 

uneven economic stimulus. 

2. Restoration authority not directly 

available in text of law. 

3. Possibility of wasteful IT spending as 

efforts are not coordinated across 

states. 

4. Too little time in some states to appropriate funds that might have had 

direct and immediate economic stimulus impact. 

5. USDOL Guidance on how to set up 

long-term revolving funds, although 

available, not necessarily deemed 

specific enough to help the states 

create revolving funds. 

Source: Research Team Analysis 

It must be emphasized, however, that there is not broad understanding of how to use 

the authority of the Reed Act distribution to set up revolving funds. USDOL may want to 

consider additional efforts to educate all states about the lessons learned in Washington 

and Iowa, where long-term financing arrangements for IT infrastructure have been accomplished. 

A final consideration, which the NASWA/CESER/Booz Allen/Decern Consulting research team sees as a potentially serious impediment to the long-term success of the 

Reed Act distribution, is the lack of restoration authority of Reed Act funds. The ability 

of states who were forced to use the Reed Act funds to pay benefits during the economic downturn to invest in infrastructure and technology may seriously hamper their 

ability to effectively manage their UI and ES programs as part of states’ ES/One-Stop 

delivery systems2. This should be amended at the earliest opportunity. 

 

2 Under the Workforce Investment Act, seventeen domestic programs, including state unemployment insurance programs 

under the Social Security Act and the Federal Unemployment Tax Act, and ES programs funded under the Wagner-Peyser 

Act, are mandatory partners in states’ ES/One-Stop delivery systems. 
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SECTION I 

BACKGROUND 
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1.1 HISTORY OF THE REED ACT3

The term “Reed Act” refers to a part of the Employment Security Administrative Financing Act of 1954. This legislation amended Titles IX and XII of the Social Security Act 

(SSA) and established the basic structure of the Unemployment Trust Fund (UTF). The 

amendments to Title IX provided for the transfer of excess funds in the Employment Security Administration Account in the UTF to the individual state accounts in the UTF. 

These transferred funds are commonly referred to as “Reed Act” funds. 

Under the SSA, the primary purpose of the Reed Act funds is the payment of “cash 

benefits to individuals with respect to their unemployment, exclusive of expenses of 

administration” (Section 903 (c) (1), SSA). However, subject to conditions specified in 

Section 903 (c) (2), SSA, a State is permitted, at its discretion, to use Reed Act funds 

for the “administration of its unemployment compensation law and public employment 

offices.” In addition, the US Department of Labor (USDOL) has suggested certain administrative uses for Reed Act funds such as improving Unemployment Insurance (UI) 

claims filing and payment methods, reducing UI fraud and abuse, etc. 

Until recently the Reed Act authority had only been activated in the late 1950s. As the 

federal government approached a balanced budget in the late 1990s, Reed Act distributions occurred in five consecutive years beginning in fiscal year 1998 with a $16 million 

distribution and culminating in the $8 billion distribution in March 2002. The following 

sections provide a brief history of the Reed Act. 

1.1.1 Before the Reed Act 

The Social Security Act not only established old-age pensions, but it also created a 

framework for a federal-state unemployment insurance system. The federal government provided an umbrella under which states would enact their own federally-approved 

state UI programs. States would impose unemployment taxes on employer wages paid 

to employees in their states and these taxes, plus accumulated interest credited to state 

accounts in the UTF, would finance benefits under the state UI program. States would 

be required to deposit their unemployment taxes into their respective state accounts of 

the federal unemployment trust fund. The federal government would pay interest on 

state balances. States would withdraw funds to cover the cost of benefits for eligible 

unemployed workers. 

Title IX of the Social Security Act originally imposed a payroll tax on covered employers 

and generally provided for the funding of the federal-state UI system. States enacted 

their own employer taxes within the federal framework and employers received a credit 

against the federal tax for paying the state unemployment tax. By 1937 all states had 

enacted federally approved UI laws and by 1939 all states were paying UI benefits. In 

 

3 A more detailed version of this historical background can be found in “The $8 Billion Reed Act Distribution in March 2002: 

How Have States Used the Funds?” by Richard A. Hobbie Executive Director of NASWA, and Curt Harris, Congressional 

and Intergovernmental Affairs Director of NASWA. 
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1939, the tax provisions of Title IX of the Social Security Act were moved to the Internal 

Revenue Code under the Federal Unemployment Tax Act (FUTA). 

Title III of the Social Security Act provides for federal grants to states to administer the 

UI system in a “proper and efficient manner” and for the provision of public employment 

services. 

With the end of World War II approaching, it became apparent that states might run out 

of funds in their state accounts to pay benefits if unemployment rose substantially with 

the return of military personnel. Congress responded to the post-war risk of high unemployment by creating the “George Loan Fund” in the War Mobilization Act of 1944 

(Haber and Murray, 1966, pp. 385-386). This fund was named after Senator George of 

Georgia, Chairman of the Committee on Finance. The fund was intended to ensure UI 

benefits were paid even if a state temporarily ran out of funds in its account in the UTF. 

Because the economy was able to absorb returning service personnel after the War, the 

George Loan Fund was not used and Congress allowed its authority to expire on March 

31, 1952. 

1.1.2 The Reed Act 

In response to a recession, high unemployment, and high UI costs, Congress passed 

the Employment Security Administrative Financing Act of 1954. This Act is known as the 

“Reed Act” because its sponsor was Congressman Reed of New York, Chairman of the 

House Committee on Ways and Means. (Haber and Murray, 1966, pp. 388-390) The 

Reed Act earmarked excess FUTA funds to the UTF, automatically appropriated these 

funds to the UTF, and provided a mechanism to send surplus FUTA balances back to 

states in proportion to the covered wages paid in each state. Previously, these funds 

were deposited in the general fund and used for any federal purposes. The Act also 

created the Employment Security Administrative Account (ESAA) and the Federal Unemployment Account (FUA), and established ceilings on the balances in these accounts. The Act also limited state use of funds in excess of the ceilings, or “Reed Act 

funds,” to the payment of UI benefits, administrative expenditures for UI and the public 

employment service (ES), and certain real property purchases for UI and ES. 

Title IX of the Social Security Act requires the Secretary of Labor to recommend “appropriate action” whenever the Secretary believes a Reed Act distribution will happen in the 

next fiscal year. A Reed Act distribution will occur if the following conditions exist in the 

federal accounts of the Unemployment Trust Fund (UTF): 

• The balances in the Extended Unemployment Compensation Account (EUCA) 

and the Federal Unemployment Account (FUA) have reached their statutory ceilings and all general revenue advances and related interest have been repaid; 

• An amount in excess of the statutory ceiling remains in the Employment Security 

Administration Account. 

If such conditions exist, the excess amount or “Reed Act distribution” is transferred to 

the state accounts in the UTF at the beginning of the following fiscal year. 
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The share of a Reed Act distribution that each state account receives is equal to the 

product of the aggregate Reed Act distribution and the proportion of total wages covered by the Federal Unemployment Tax Act (FUTA) attributable to each state during the 

prior calendar year. The term “state” includes the fifty states and the District of Columbia, Puerto Rico, and the Virgin Islands. An exception to this formula occurred under 

the Taxpayer Relief Act of 1997 when $100 million in each of fiscal years 2000, 2001, 

and 2002 was distributed to states based on each state’s share of the base allocation 

made to states in each of these years to fund proper and efficient administration of their 

UI programs. 

Reed Act distributions may not be credited to a state account if on October 1: 

• The Secretary of Labor finds the state UI program is not certified as an approved 

program under federal law; or 

• The state has an outstanding UI loan from the federal government. 

If a state does not have a federally approved UI program on October 1, the state’s Reed 

Act distribution is held in the FUA (currently, all state UI programs are federally approved). If the Secretary certifies the state UI program by the end of the year, the 

amount held in reserve is then credited to the state’s account. However, the state earns 

no interest on the amount while it is held in reserve. If the Secretary does not certify the 

state UI program by the end of the fiscal year, the reserved amount is no longer available to the state as a Reed Act distribution. The amount is added to the balance in the 

FUA and is available for the intended use of the funds in the FUA, namely loans to state 

UI programs for the payment of benefits. 

If a state has an outstanding UI loan from the federal government on October 1, the 

Reed Act distribution to this state is reduced by the mandatory repayment of the balance of the loan, but not below zero. If a state’s Reed Act distribution is not reduced to 

zero, the balance is transferred to the state account in the UTF. 

1.1.3 Reed Act Distributions 

The First Reed Act Distribution 

The first Reed Act distributions were substantial. They occurred at the beginning of fiscal years 1957, 1958, and 1959. The nominal amounts for these years were $33.4 million, $71 million, and $33.5 million, respectively. When adjusted to current wage levels, 

these amounts range from a low of about $220 million to a high of nearly $500 million 

today. 

In 1968, President Johnson ordered the creation of the unified budget, which brought 

together the administrative budget and the consolidated cash budget. Previously, the 

news media and others concerned about the federal budget tended to focus on the administrative budget and to ignore the consolidated cash budget, which was made up of 

all trust funds, including the UTF. The administrative budget covered all general fund 

spending. With the creation of the unified budget, the news media and the public began 
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to take note of the effect of general and trust fund revenues and expenditures on the 

federal budget deficit or surplus and overall fiscal policy (Henle, July 1980). 

In 1970, the Extended Unemployment Compensation Act created the Federal-State Extended Benefits Program, which provides up to 13 weeks of added benefits during periods of high unemployment in states. The Act also created the Extended Unemployment 

Compensation Account (EUCA) and established a ceiling for its balance. Costs were 

set at 50 percent each for the federal government and state UI programs, and the FUTA 

taxable wage base was raised from original $3,000 to $4,200. 

During the early 1970s, the U.S. economy experienced “stagflation,” economic stagnation and inflation. The resulting high unemployment and rising nominal wage levels led 

to substantially higher UI benefit costs. Over half of the states had to borrow from the 

FUA and the UTF had to borrow from the federal general fund to cover some of the unanticipated high costs (National Commission on Unemployment Compensation, July 

1980, pp. 87-88). To repay the general fund, Congress passed a temporary 0.2 percent 

FUTA surtax under the Unemployment Compensation Amendments of 1976. This temporary surtax was scheduled to expire when the EUCA UTF had repaid the loans from 

the general fund. 

In 1981, Congress passed the Omnibus Budget Reconciliation Act. In order to discourage further borrowing by states to cover UI benefit costs, this Act contained a provision 

charging interest on UI loans for the first time. A State UI program still could obtain 

“cash flow” loans (loans obtained January through September of the fiscal year), but in 

the future it would have to pay interest on loans not repaid in the fiscal year in which it 

obtained them. (Committee on Ways and Means, 1982, pp. 94-95) 

As federal spending continued growing in the early 1980s and income taxes were cut, 

federal unified budget deficits grew and remained stubbornly high. The federal government became more concerned about federal budget deficits and began trying to reduce 

the deficit by controlling spending. In 1985, Congress passed the Balanced Budget and 

Emergency Deficit Control Act, or so-called “Gramm-Rudman-Hollings.” This Act imposed caps on federal discretionary spending and made it harder for Congress to appropriate sufficient amounts from the UTF for discretionary spending on the administration of the UI and ES programs. At least in part as a result of the spending restraint imposed by these caps, the purchasing power of ES (Wagner-Peyser Act) program budget 

began to shrink in the mid 1980s. (Committee on Ways and Means, 1985, pp. 719-746) 

With pressure mounting to reduce the federal budget deficit, Congress not only tried to 

cut or at least restrain spending, but it also looked for tax increases or extensions that 

would help hold down or reduce the federal budget deficit. In 1987, one such possible 

extension was the FUTA 0.2 percent surtax. The UTF had repaid the general fund early 

in 1987, which meant the FUTA 0.2 percent surtax would expire at the end of 1987. Instead, Congress decided to extend the surtax three more years through 1990 to help 

reduce the federal budget deficit under the Omnibus Budget Reconciliation Act of 1987 

(Committee on Ways and Means, 1988, p. 352). In addition, Congress raised the FUA 

ceiling from 0.125 to 0.625 percent so that the additional FUTA funds would remain in 

the UTF to cover possible loans to state UI programs in the future. If Congress had not 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 22

raised the ceiling, substantial amounts would have automatically flowed to state UI programs through the Reed Act mechanism. 

In 1990, Congress again turned to extending the FUTA 0.2 percent surtax to reduce the 

federal unified budget deficit under the Omnibus Budget Reconciliation Act of 1990 

(Committee on Ways and Means, 1991, p. 504). This time, the extension was for five 

years through 1995. Then in 1991, Congress added another year to the extension 

through 1996 under The Emergency Unemployment Compensation Act of 1991 (Committee on Ways and Means, 1992, p. 521), and in 1993 it added two more years to extend the surtax through 1998 under the Unemployment Compensation Amendments of 

1993 (Telephone call, USDOL, May, 2003). 

While Congress was battling the budget deficit in the early 1990s, it also struggled with 

policies to alleviate an economic recession and high unemployment. UI benefits were 

extended and funds in the EUCA were drawn down to cover benefit extensions. At the 

same time, states were not borrowing from the federal government at the levels they 

had during the 1970s and 1980s. As a result, the FUA was retaining too much and the 

EUCA did not have enough in reserve for extended benefits. This led to an increase in 

the EUCA ceiling and a cut in the FUA ceiling. Under the Emergency Unemployment 

Compensation Act of 1992, the FUA ceiling was cut from 0.625 percent to 0.25 percent 

and the EUCA ceiling was raised from 0.375 percent to 0.5 percent. 

A Special Reed Act Distribution 

By the mid 1990s, the federal government still was trying to balance the budget, but an 

economic boom was aiding the cause. At the same time, the federal government began 

funding administration of the UI program at amounts that were lower than its “cost 

model” estimates suggested. States bridled under this under-funding and said it was 

hard for them to administer their programs in a proper and efficient manner with insufficient funds. Recognizing it was nearly impossible under discretionary spending caps to 

gain sufficient appropriations to reduce the underfunding, the federal government instead provided mandatory spending under the Taxpayer Relief Act of 1997 of $100 million in each of the years 1999, 2000, and 2001 through a “special Reed Act distribution.” 

These distributions used the basic Reed Act mechanism, but limited the distribution to 

$100 million for UI administration only and distributed it among the states on the basis 

of workload rather that total covered wages. In addition, this Act extended the FUTA 

0.2 percent surtax from 1998 through 2007 to help reduce the budget deficit and doubled the FUA ceiling on October 1, 2001 to retain FUTA revenue for loans out of the 

FUA account (Telephone conversation, USDOL, May, 2003). 

By the end of fiscal year 1998, the economic boom of the 1990s had provided so much 

FUTA revenue that the three federal accounts were full. This led to a small, unanticipated $16 million Reed Act distribution among the states at the beginning of fiscal year 

1999. 

By the turn of the century, states were clamoring for administrative financing reform. A 

coalition of states made one proposal and a group comprised of business, workers, Department of Labor, and State representatives made another proposal. No proposals 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 23

passed, but in the summer of 2001 it became apparent that a large Reed Act distribution would occur in October 1, 2002 if the ceiling on the FUA loan did not double. Even 

if the ceiling did double on October 1, 2001, projections suggested there would be a 

substantial Reed Act distribution on October 1, 2002. 

1.2 THE SOURCE OF THE 2002 SPECIAL REED ACT DISTRIBUTION

1.2.1 Purpose of the Act 

In response to the economic recession beginning in 2001, Congress passed and the 

President signed on March 9, 2002, the Job Creation and Worker Assistance Act of 

2002 (P.L. 107-147). This Act aimed to stimulate the economy. It was estimated to 

cost the federal government about $94 billion over five years. About $13 billion of the 

estimated net cost of the Act over five years stemmed from a temporary extension of 

unemployment compensation during 2002 and an $8 billion “Special Reed Act Distribution” to the state accounts of the unemployment trust fund on March 13, 2002. States 

may use the Special Reed Act Distribution to cover the cost of state benefits, employment services, labor market information, and administration of UI programs. All 53 state 

and territorial programs in the unemployment insurance system received shares of the 

$8 billion in proportion to their shares of taxable covered wages under the FUTA in calendar year 2000. 

1.2.2 Genesis of the Reed Act 

During the summer of 2001, staff of the National Association of Workforce Agencies 

(NASWA) worked with staff of the National Governors’ Association (NGA) to develop an 

“accelerated Reed Act distribution.” The idea was simple. Enact legislation that would 

declare a Reed Act distribution as if the FUA ceiling had not doubled as scheduled on 

October 1, 2001. Because the Social Security Act requires the Secretary of Labor to 

inform Congress when she projects a Reed Act distribution at the beginning of the next 

fiscal year, Secretary of Labor Chao sent a letter to Congress on October 1, 2001, informing it that the three accounts in the federal UTF were projected to exceed their ceilings by $4.3 billion on September 30, 2002 (Chao, 2001). Four days later, the NGA 

sent a letter to Congressional leaders requesting an “immediate transfer of $9 billion 

from the federal trust fund to state accounts” as a way to stimulate the economy 

(Sundquist and O’Bannon, 2001). 

Congress debated economic stimulus in the fall of 2001, but it was not until shortly after 

the President proposed an economic stimulus package early in 2002 that Congress 

passed legislation. In that package, the President not only proposed to extend unemployment compensation to workers who had exhausted regular state benefits, but he 

also proposed a special Reed Act distribution similar to what the NGA had proposed 

(USDOL, February 4, 2002). Ultimately, Congress passed much of the President’s pro-
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 24

posal in the Job Creation and Worker Assistance Act of 2002. It included a slightly 

scaled down $8 billion Reed Act distribution and the extension of unemployment benefits. States were given the flexibility to use the $8 billion to improve solvency, cut taxes, 

avoid tax increases, or cover the cost of benefits, employment services, and UI administration. 

1.3 POSSIBLE STATE USE OF REED ACT FUNDS

1.3.1 Using Reed Act Funds to Improve Solvency and Lower Taxes 

When the federal government transfers Reed Act funds into the state accounts of the 

UTF, the solvency of each state UI program immediately improves. Because state UI 

laws relate state unemployment taxes to solvency levels, improved solvency can activate lower tax schedules and lower tax rates for employers in states with improved solvency at the time of the state tax computation date. State tax computation dates vary, 

but many state tax computation dates are in the summer of each year. When improved 

solvency activates a lower tax schedule or tax rate, the lower taxes usually take effect at 

the beginning of the following calendar year. In addition, the governor and state legislature also might decide to enact legislation to lower taxes as a result of improved solvency. 

1.3.2 Using Reed Act Funds for Benefits 

Officials at the U.S. Department of Labor have assumed states would want to preserve 

Reed Act funds as long as they have funds in their respective UI accounts to cover 

benefit costs. Thus, the Department expects Reed Act funds to remain in state UI accounts as long as the balance in the state UI account (including Reed Act funds) exceeds the unspent balance of Reed Act funds. 

If a state does not have enough funds in its UI account, it may borrow from the federal 

government to cover benefit costs. However, all available funds must be considered to 

cover benefit costs, including unobligated Reed Act funds. (The U.S. Department of 

Labor considers funds obligated when an order is placed, a contract is awarded, or 

other transactions occur that require a current or future payment.) Consequently, all of 

a state's unobligated Reed Act funds must be considered to cover benefit costs, even 

unobligated Reed Act funds that have been appropriated, but not obligated yet, for administrative purposes. (Special Reed Act distributions for fiscal years 2000, 2001, and 

2002 are exceptions, however, to this general rule.) 

Reed Act funds that are obligated for an administrative expense before obtaining a federal loan to cover benefit costs may be shielded from a requirement that they otherwise 

must cover benefit costs if the state sets aside such amounts in a Reed Act “subaccount.” This provision does not apply to appropriations before an obligation. The following are the procedures for setting aside obligated amounts: 
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• Review each Reed Act obligation under which there is an unspent balance and 

validate the date of enactment of the appropriation, the date and amount of the 

obligation, and the unspent balance of each obligation; 

• Prepare a letter certifying the amount of unspent Reed Act obligations as of the 

end of the month in which the state wants to establish the initial credit for the set 

aside; 

• Identify withdrawal amounts requested from the subaccount when requesting 

funds. 

• Include all Reed Act subaccount transactions in Form ETA 8403 for the month in 

which they occurred. 

When a state spends Reed Act funds, the amount available to appropriate from Reed 

Act funds is reduced by that amount. However, under certain conditions, a state might 

restore Reed Act funds used to cover benefit costs for the purpose of covering administrative costs. These conditions are: 

• The governor must request that the Secretary of Labor restore Reed Act funds. 

• The funds to be restored must have been spent to cover benefit costs. 

• The amount to be restored must not exceed the balance in the state account of 

the UTF. 

• When the request is submitted, the state account must be free of federal loans to 

cover benefit costs. 

Restoring of Reed Act funds is more restricted if the state has borrowed from the federal 

government to cover benefit costs. The entire state account balance in the UTF, including Reed Act funds that have not been set aside in a subaccount, must be reduced to 

zero to calculate the amount of a loan. Then, the balance of such Reed Act funds in the 

state’s account on the date in the first month a federal loan for benefit costs was used is 

the amount of Reed Act funds used for benefits that could be restored later. 

If a state wants to restore Reed Act funds that were spent on benefits, it must submit: 

• Form ETA 8403 showing the date and year when the funds were used for benefits; and 

• A letter from the governor stating the state is free of federal unemployment loan 

obligations and the state’s UTF account has funds at least equal to the amount to 

be restored. 

The Secretary of labor will notify the governor that the restoration has been approved if: 

• The amounts the governor requests to restore were used to cover benefit costs 

and they did not exceed the amount in the state’s UTF account; and 

• All federal unemployment loans were repaid as of the date of the request. 

1.3.3 Using Reed Act Funds for Administrative Purposes 
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Center for Employment Security Education and Research 26

State legislatures must authorize the administrative use of Reed Act funds through a 

specific appropriation. The appropriation law must meet three conditions: 

• Specify the purpose and the amount of the appropriation; 

• Limit the authorization of obligation of funds to a two year period starting with the 

date of enactment of the law; and 

• Limit the amount authorized to be obligated to the balance of unobligated Reed 

Act funds in the state account of the UTF. 

Federal law requires only that Reed Act funds be used for administrative purposes for 

UI or the public employment service. Unlike regular annual grants for administration of 

state UI programs, there is no requirement that Reed Act funds be used for expenses 

the Secretary of Labor finds necessary for “proper and efficient” administration of state 

UI programs. 

Interest credits on Reed Act funds in the state accounts in the UTF may not be appropriated for administrative purposes. In other words, Reed Act funds are limited to the 

Reed Act distributions to state accounts in the UTF and interest on the balance does not 

augment the Reed Act distribution amount. In accordance with the withdrawal standard, 

the interest credits for the Reed Act balances in the UTF must be used to pay benefits. 

Except as provided under the Cash Management Improvement Act of 1990, funds that 

are required to be deposited by states or the federal government in state accounts of 

the UTF, including Reed Act funds, may not be invested by states. The U.S. Treasury 

credits interest on these balances as provided by federal law. 

1.3.4 Acquiring Real Property with Reed Act Funds 

States may use Reed Act funds to purchase land or buildings for use by state UI programs or the public employment service. States may lease extra space in these buildings until it is needed for the UI program or the public employment service, but lease 

income must be deposited in the state account of the UTF and may not be used to 

augment Reed Act funds. Proceeds from the sale of unamortized real property must be 

deposited in the state account of the UTF and will be credited as Reed Act funds up to 

the amount of the original expenditure for the real property. 

Reimbursing Reed Act Distribution from State Administrative Grants 

States can reimburse Reed Act distribution amounts through amortization of: 

• The cost of obtaining real property for UI program and public employment service 

purposes; 

• Capital improvements to state-owned office buildings to the extent such buildings 

are used for UI program and public employment service purposes; and 

• Acquisition of automatic data processing installations, including software costing 

$1 million or more. 
Assessment of the Impact of the 2002 Reed Act Distribution 

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The amortization of Reed Act expenditures for purchasing real property and capital improvements with federal administrative grant money creates “federal equity,” i.e., the 

federal government owns a share of the real property. The federal government “recaptures” the federal equity when the state stops using the property for UI program and 

public employment service purposes. Grant funds used to reimburse a state for Reed 

Act expenditures are required to be deposited into the state account of the UTF and 

credited to Reed Act funds. The state legislature can then “reappropriate” the reimbursed Reed Act funds for other Reed Act administrative purposes. 

1.3.5 Suggested Uses of Reed Act Distributions for Administrative Purposes 

On May 8, 2002, the Employment and Training Administration of the USDOL issued 

Training and Employment Guidance Letter No. 24-01, Suggested Uses of Reed Act Distribution for Administrative Purposes. The following is a summary of these suggestions: 

• Use Reed Act funds to purchase computer equipment and software. The software must cost at least $1 million. States can amortize these Reed Act expenditures from annual grants to states for the administration of the UI program and 

the public employment service. The Wagner-Peyser Act, Social Security Act, 

federal regulations, and the allowable cost principle in OMB circular A-87 limit reimbursements to allowable depreciation costs. 

• Use Reed Act funds improve performance where problems have existed for several years. This might include evaluating the current delivery system and funding 

the cost of improvements. 

• Use Reed Act funds to cover the costs of implementing the cross matching of 

claimant data with the state directory of new hires data to identify claimants who 

have returned to work, but have not ceased claiming UI benefits. Or, states 

could use the funds to link with the Social Security Administration’s data base for 

the purpose of verifying claimant identity and validating Social Security numbers 

in real time at the time of the initial claim. 

• Use Reed Act funds to establish or improve remote claims filing over the internet 

or telephone system. For example, states could improve claimant filing to include linkages with reemployment services and they could improve services to 

claimants with special needs, such as those with limited English proficiency. In 

addition, states could implement direct deposit of benefit payments, debit cards, 

and electronic payment of employer taxes. 

• Use Reed Act funds to improve the role of the public employment service in onestop career centers. States must take care to allocate costs properly to UI and 

the public employment service (ES), and not to non-UI and non-ES activities also 

occurring in one-stop centers. Examples include: 

o Hiring and training of staff to provide employment services; 

o Purchasing equipment for job search resource rooms; 

o Paying rent, utilities, and maintenance costs in accordance with cost sharing guidelines; 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 28

o Developing job search support products, such as printed information or job 

bank information technology; 

o Purchasing computer equipment, network equipment, telecommunications 

equipment, computer applications, and other information technology resources to support deliver of labor market information to workers, employers, and the general public’ 

o Developing and providing outreach materials for users on one-stop centers; 

o Improving access to services for individuals with disabilities or limited English proficiency (including language line services, development of forms, 

and automated voice messages in languages other than English); 

1.4 FUNDING OF THIS RESEARCH EFFORT 

This CESER research was completed with funding from USDOL Employment Training 

Administration (ETA) with supplemental information and analysis supported by NASWA 

and selected state contributions. These NASWA contributions consisted of two surveys 

conducted in the fall of 2003, and winter of 2004. In-depth interviews with nine states 

were conducted during the summer of 2003. 

1.5 STRUCTURE OF THIS REPORT

This report consists of five sections in addition to the Executive Summary and this 

background section. Section II, Summary of Research Findings, provides a narrative 

discussion of the key findings of this research project. Section III, Qualitative Analysis, 

provides the first of two main analytical components undertaken. This section is a compilation of the information learned from case interviews with nine states, as well as the 

complete state profiles compiled as a result of the interviews. Section IV, Quantitative 

Analysis, is an attempt to conduct more rigorous numerical and econometric evaluation 

of the trends and patterns in use of the Reed Act funding across all 53 states and territories. This section, broadly speaking, provides both descriptive statistics and charts of 

the trends that can be observed, as well as formal attempts to test with statistical rigor 

the validity of six hypotheses about how states might use the Reed Act funds. 

The remaining sections provide additional supporting information, including a list of all 

figures in this report (Section V), a bibliography (Section VI), and Attachments of relevant materials that did not properly fit into the main body of the report. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 29

SECTION II 

RESEARCH FINDINGS 
Assessment of the Impact of the 2002 Reed Act Distribution 

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2.1 OVERVIEW

The Process Evaluation Design completed jointly by Booz Allen and CESER in the fall 

of 2002, outlining the Reed Act research project, described the purpose of the study in 

the following manner: 

“This process evaluation analyzes the [Reed Act] spending of funds by the 

states and the factors that drive this spending. 

The purpose of the process evaluation is to study the states’ implementation, 

policies, institutional outcomes and individual state outcomes (from existing 

data) and to glean federal policy consequences. The process evaluation consists of data collection, quantitative and qualitative analysis of the use of funds 

and documentation.” 

This summary of research findings is intended to provide an accessible starting point for 

readers of the report. Each of the findings presented here can be evaluated in more detail in the research sections. Discussion of methods and approaches is excluded from 

this summary, unless deemed necessary for understanding the research findings. 

The context in which the Reed Act distribution took place and the research was completed is an important consideration. For example, the USDOL provided specific guidance to the states on appropriate and acceptable uses of the Reed Act funds4. In addition it must be remembered that although the Reed Act distribution represents large absolute amounts of money, in the context of the overall unemployment UI system the 

amount represents about 21% of the balance the states had in their trust funds at the 

time of the distribution. Put differently, the Reed Act distribution amounted to approximately 38% of the $21.2 billion in revenue collected into the trust funds of all the jurisdictions in 2002, the year of the Reed Act distribution 

Another very important consideration is the fiscal and economic situation in the states. 

Many, if not most, states were experiencing severe fiscal challenges and much of the 

political interest in the states was in finding any means to balance their budget (as required by law in most states). The economic situation is also very important to keep in 

mind. Although the period of contraction that marks the official recession lasted less 

than four quarters and ended in 2001.4, this (1) was not known until late in 2002; (2) did 

not mean that the economy was likely to produce a very big increase in jobs immediately following the recession; and (3) forced states to consider options for dealing with 

the potential of large numbers of claimants that had exhausted unemployment assistance and extensions provided for in federal legislation. 

A further issue that impacted the immediate use of the Reed Act funds was the ability to 

produce legislation in the period immediately after the distribution was made, and prior 

to a recess in the state assemblies’ legislative sessions. In those states where a short 

session was being held, or where the state assembly meets biennially, this represented 

 

4 Training and Employment Guidance Letters (TEGLs) Number 18-01 and 24-01. See bibliography for further information. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 31

a particular challenge that in some instances may have lengthened the time until Reed 

Act funds could be appropriated for other uses than shoring up the trust fund. And as 

has been noted in previous studies completed by NASWA, this was also in many cases 

desirable for the state economy as this had the effect of lowering the unemployment 

taxes that were computed for the calendar year 2003. 

With these considerations in mind, the summary of research findings is complemented 

by an examination of the immediate, short- to intermediate and long-term impact of the 

$8 billion Reed Act distribution disbursed in March 2002. 

2.2 SUMMARY OF KEY RESEARCH FINDINGS

The special Reed Act distribution of 2002 achieved success on a number of fronts: 

1. Reduced unemployment taxes in 25 states by increasing the Trust Fund Balance 

used to calculate the rate schedules used by many states in 2003 and 2004. 

2. Helped some states stave off insolvency for a period of time, and reduced the 

borrowing they needed once they reached insolvency. 

3. In some cases, helped fund increases or extensions of benefits to claimants, or 

funded benefits to new claimants. 

4. Although it is too early to state definitively, it may also help some states address 

long-standing underinvestment in the unemployment insurance system and employment services infrastructure. 

NASWA, in a survey of member states conducted in concert with this research effort, 

has reported an economic stimulus impact of the Reed Act distribution, through a combination of lower taxes (approximately $4 billion in 2003 and 2004) and increases in 

benefits and administrative expenditures that could have been as much as $4.3 billion 

(see Appendix B). 

Given that over half of the Reed Act distribution still remains in the state Trust Funds5, 

and that at least two states (Iowa and Washington) have set up long-term revolving 

funds based on the Reed Act distribution, the full impact of the distribution cannot yet be 

determined. 

On a few other fronts the Reed Act distribution does not appear to have had the full impact that was hoped for: 

 The states interviewed felt that there had been insufficient time to plan for the 

large infusion of the Reed Act funds, and to prepare comprehensive proposals 

for the use of the funds 

 

5 At the time the research team completed the research effort in early summer of 2004. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 32

 Although many states are planning to use at least a portion of the funds to address the underfunding of the UI infrastructure, there has been little guidance or 

assistance to coordinate these efforts and eliminate potential redundancy among 

states in acquisition of tax and benefit IT systems. 

 Direct restoration of Reed Act funds was not included in the provisions of the distribution, which means that states who were forced to spend their Reed Act funds 

on benefits as they reached insolvency cannot use any funds to address infrastructure and other administrative challenges. 

 Not all states seem clear on how they could (even though the act does allow this) 

use the Reed Act funds to establish a long-term capital planning mechanism that 

would help fund ongoing investment need for IT and other infrastructure. 

 The research indicates that two highly desirable effects of the Reed Act distribution, namely decrease in unemployment tax rates and increases in benefits, were 

more likely to accrue to those states who already were more solvent. 

Figure 2.2.1 

Summary of Research Findings 

Theme What Happened Remarks 

Solvency 

(AHCM) 

High 

1. Generally saw taxes cut. 

2. Some appropriated for administrative purposes. 

3. More likely to increase benefits. 

Medium 

1. Commonly focused on increasing solvency. 

2. Some saw tax cuts or tax increase avoidance. 

3. A few made administrative funding appropriations. 

Low 

1. A few saw avoidance of tax increases. 

2. Many forced to spend all on benefits as they 

became insolvent. 

More information on the AHCM can 

be found both in the descriptive statistics and the hypothesis testing 

sections. 

Bias towards Tax 

Cuts 

Through automatic schedule changes as Trust 

Fund Balance was increased prior to calculation of 2003 tax schedule. 

Tax cuts are temporary as the ‘selfcorrecting’ experience system and 

formulas for setting the rates will 

work to increase taxes over time if 

needed. 

Bias 

Against 

Benefit Increases 

These must be approved by the state legislature in accordance with Federal Laws and 

permissible use of UI funds. 

Distrust of sunset features and other 

provisions to make benefit increases 

temporary. Strong opposition from 

employer community. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 33

2.2.1 Summary of the Qualitative Study 

The interviews with the nine states provided a few generally consistent themes: 

Figure 2.2.2 

Key Findings of Qualitative Study 

Qualitative Study Findings 

1. States approached distribution as “one-time distribution for one-time 

spending.” 

2. Limited or small appropriations for use of funds in 2002 and 2003, although Michigan and Montana both approved long-term plans for 

spending all of the Reed Act distribution. 

3. Most states expected to use Reed Act funds to invest in infrastructure 

and IT systems for tax and/or benefit administration. 

4. Many states also planned some investment in the one-stop system. 

5. The states did not anticipate committing or using the bulk of appropriated funds until 2004 and in some cases 2005 as it would take time to 

get major investment proposals prepared and bids accepted. This 

spending could be pro-cyclical rather than counter-cyclical as the economic stimulus package hoped. 

6. Of the nine states interviewed in 2003, no state had, or planned to, 

explicitly increase benefits as a result of the Reed Act. (By February 

2004 Montana had increased benefits). 

7. Four of the nine states (Minnesota, Ohio, Virginia, and Washington) 

avoided tax increases, or reduced taxes as a result of the Reed Act. 

8. Given these responses, the states did not interpret the Reed Act to 

have had significant discretionary economic stimulus impact, although 

the four states agreed that the tax avoidance or reduction would have 

a stimulating impact. 

9. Iowa and Washington had already put in place mechanism to create 

long-term revolving funds that would allow them to fund investment of 

UI infrastructure for years to come. These innovative financing 

mechanisms have not been broadly explained to other states and were 

unknown to some of the other interviewees, let alone their state legislatures. 

10. The interviewees all agreed that the structure of the Reed Act distribution favored solvency and tax cuts greatly over benefit increases, as 

tax cuts were self-correcting, whereas politically, even temporary 

benefit extensions tended to be extended repeatedly, and thus not 

really temporary. 

2.2.2 Summary of the Quantitative Study 

The quantitative study provides insight into the similarity and differences in the impact 

the Reed Act distribution had on the states. As a complement to the qualitative analysis, it can provide valuable information about the broader implications of the distribution 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 34

has had across the U.S. It must be cautioned, however, that additional work remains to 

evaluate the impact of the distribution over a longer period of time. 

The three parts to the quantitative study provide compelling evidence of how the states 

are using the Reed Act distribution. The research also indicates that certain factors appear correlated with increased likelihood of increasing benefits or reducing taxes. 

These observations are particularly interesting when considering what may happen in 

states that have not yet spent a significant proportion of their distribution, or if states 

were given the authority to restore Reed Act funds that were forcibly spent on benefit 

payments as a state’s Trust Fund approached insolvency. Figure 2.2.3 shows the key 

findings of the quantitative study: 

Figure 2.2.3 

Key Findings of Quantitative Study 

Quantitative Study Findings 

1. Although all states’ Trust Funds are vulnerable to rapid increases 

in unemployment (claimants), some states appeared to see the 

impact more quickly (Section IV.2.1) 

2. UI tax rates had been on the increase in the period prior to the 

Reed Act distribution (Section IV.2.1) 

3. Over a 15 month period after the Reed Act distribution, seven 

states moved from a higher to a lower level of AHCM (Figure 

4.3.1) 

4. States in the three AHCM groupings of less than 0.5, 0.5 to 1.0 

and above 1.0, have very different profiles in terms of the tax 

revenue and benefit structure (Figure 4.3.2), while there is not a 

significant difference in the average unemployment rate in the 

three groups. 

5. Statistically tested hypotheses about how states might use the 

Reed Act distribution show specific trends (Section IV.4): 

a. Smaller increase in the rate of unemployment is consistent 

with improving solvency. Conversely higher rate of change in 

unemployment is consistent with weakening solvency. 

b. More solvent states were more likely to expand or increase 

benefits. 

c. More solvent states were more likely to reduce unemployment taxes. 

This study further showed6 that this reduction in unemployment taxes was more likely in 

states that were more solvent, although many states that were less solvent experienced 

lower unemployment taxes as well. 

The descriptive statistics provide an interesting insight as well into apparent causes for 

the difference in the AHCM among the states. Figure 4.3.2 showed compelling evidence about the differences in a number of variables. The lowest AHCM states appear 

 

6 More details can be found under Hypothesis 5, in Section IV.4.8. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 35

to have more factors (4 of the 6 evaluated) that work to reduce the trust fund balances 

than the other two groups, and most notably have longer unemployment duration 

among the insured population. 

The ‘medium’ and ‘high’ AHCM each have 2 (out of 6) factors against them, but not the 

same ones. The ‘medium’ states have higher AWBA and compensate a higher share of 

workers, whereas the ‘high’ group compensates more weeks per 1000 covered workers 

and collects less tax per 1000 covered workers. One could infer from this the relative 

importance of each of these factors in determining a state’s future fiscal position, although such inference has not been attempted here. 

The testing of hypotheses is also of considerable interest. Hypothesis 4, that more solvent states are more likely to extend benefits, and hypothesis 5, that more solvent 

states are more likely to reduce taxes, are of course logical in their presentation, but 

have now been tested and supported using fairly robust statistical tests. 

Hypothesis 1, that higher unemployment rates would correspond with greater likelihood 

of retaining Reed Act funds in the trust fund, was not only refuted, but it was also shown 

that the correlation is the opposite of the hypothesis, with higher unemployment being 

consistent with less Reed Act funds remaining in the trust fund. The results of the hypothesis testing have been summarized in figure 4.5.1 

2.3 REED ACT DISTRIBUTIONS’ IMPACT

2.3.1 Immediate fiscal impact of the distribution 

The initial impact of the Reed Act was felt through an increase in the trust fund balances 

of the state, and, in some instances, avoidance of a trust fund insolvency. 

The other immediate impact, although it may have manifested itself differently across 

the states, was the need to formulate a plan for the use of Reed Act funds. The qualitative analysis provides some detail on how the states approach this, but in general a few 

steps were involved: 

Figure 2.3.1 

Common States’ Response Immediately Following Reed Act Distribution 

Common Steps the States Took 

1. Educate the legislature and parts of the executive branch about the 

nature and limitation of the Reed Act distribution. 

2. Develop potential uses for the funds that balanced the desire of both 

employer and the employee communities to focus use of the funds on 

directly assisting their constituents. 

3. Develop and vet one or more formal proposals for allocating the Reed 

Act funds among possible uses. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 36

4. Present the executive branch proposal(s) to members of the state legislature and sometimes other advocacy groups. 

5. Once the funds were appropriated, a (in some instances) longer process for obligating and spending the Reed Act funds ensued. 

In general, it can be observed that it is unlikely the immediate impact of the distribution, 

was observed in the states’ economies as no funds would have been spent immediately 

that would not otherwise have been spent. Thus, to the extent the Reed Act moneys 

may have averted an immediate borrowing situation for some states, this did not impact 

the benefits paid/not paid to individuals in those states in the immediate aftermath of the 

distribution. 

Figure 2.3.2, State Unemployment Insurance Financial Data, shows data on state UI 

trust fund balances at the end of March, 2002, the Reed Act distributions on March 13, 

2002, the percent increase in state trust fund balances resulting from the Reed Act distributions, state supplemental funding for UI, the ES, and labor market information 

(LMI), and the ratio of state Reed Act distributions to state supplemental funding. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 37

Figure 2.3.2 

State Unemployment Insurance Financial Data7

 

7 NA means not applicable. 

NA1 means because the distribution exceeded the trust fund balance, no percent could be calculated. 

NA2 means there was no state supplemental funding on which to calculate a ratio.

 State 

 Supplemental Ratio of Reed 

 Trust Fund Percent Funding for Act 

Balance at End Di ib i

f

Reed Act Increase 

i

UI/ES/LMI to State 

State 1st Qtr 2002 Distribution Trust 

F d

FY 2001 Supplemental 

 ($ in millions) ($ in millions) Balance ($ in millions) Funding 

 

Alabama 372.2 110.6 42% 7.5 14.7 

Alaska 221.5 14.8 7% 1.4 10.6 

Arizona 1041.1 144.1 16% 0.4 360.3 

Arkansas 174.3 64 58% 0.9 71.1 

California 5842.2 936.9 19% 42.8 21.9 

Colorado 701.8 142.7 26% 10.4 13.7 

Connecticut 566.4 100.4 22% 6.7 15.0 

Delaware 317.2 26 9% 0.9 28.9 

District of Columbia 281.9 25.8 10% 1.5 17.2 

Florida 2000.2 449.7 29% 7.8 57.7 

Georgia 1621.2 249.7 18% 19.3 12.9 

Hawaii 301.9 30.8 11% 0.1 308.0 

Idaho 213.1 32.2 18% 3.3 9.8 

Illinois 1109 376.2 51% 6.8 55.3 

Indiana 1315.8 174.6 15% 1.6 109.1 

Iowa 759.2 82.4 12% 8.2 10.0 

Kansas 478.5 78.2 20% 0.2 391.0 

Kentucky 528.7 103.8 24% 8.3 12.5 

Louisiana 1578.2 105.5 7% 30 3.5 

Maine 424 32.5 8% 1.6 20.3 

Maryland 873.5 142.9 20% 1.8 79.4 

Massachusetts 1427 193.6 16% 3.3 58.7 

Michigan 2411.9 291.5 14% 11.9 24.5 

Minnesota 366.2 163.1 80% 3 54.4 

Mississippi 692.8 64.7 10% 0 NA2 

Missouri 294.6 161.4 121% 2.1 76.9 

Montana 189.7 18.6 11% 4 4.7 

Nebraska 165.2 48.4 41% 0 NA2 

Nevada 478.4 68.1 17% 2 34.1 

New Hampshire 330.8 38.5 13% 0 NA2 

New Jersey 2998.4 242.8 9% 7.1 34.2 

New Mexico 606.6 38.6 7% 1 38.6 

New York 166 491.3 NA1 35 14.0 

North Carolina 571.2 240.9 73% 19.5 12.4 

North Dakota 34.6 15.3 79% 0.1 153.0 

Ohio 1852.4 343.7 23% 25.1 13.7 

Oklahoma 521.6 81.4 18% 1.2 67.8 

Oregon 1415.8 98 7% 18.5 5.3 

Pennsylvania 2109 337.6 19% 14.1 23.9 

Puerto Rico 522.3 48.9 10% 0 NA2 

Rhode Island 259.5 27.1 12% 0.1 271.0 

South Carolina 633.8 108.2 21% 6.1 17.7 

South Dakota 55.5 19.1 52% 0 NA2 

Tennessee 673.6 162.6 32% 1.5 108.4 

Texas 573.4 596.4 NA1 0 NA2 

Utah 566.2 61.6 12% 0.5 123.2 

Vermont 304.5 16.4 6% 0 NA2 

Virgin Islands 64.1 2 3% 0 NA2 

Virginia 941.6 214.9 30% 0.8 268.6 

Washington 1616.9 167 12% 14.8 11.3 

West Virginia 244.4 36.2 17% 0 NA2 

Wisconsin 1456.1 166.2 13% 7.8 21.3 

Wyoming 201.4 12 6% 0 NA2 

Total 45467.4 8000.0 21% 341.0 NA 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 38

At the bottom of the third data column in figure 2.3.2, one can see the $8 billion Reed 

Act distribution increased the aggregate balance of the state accounts in the unemployment trust fund by 21 percent. Some states experienced higher or lower percentage increases depending on how high their balances were compared to total annual 

covered wages paid in the state. For example, the Reed Act distribution in Vermont increased its relatively high state account balance by only 6 percent while the Reed Act 

distribution in North Carolina increased its relatively low state account balance by 73 

percent. 

Because of state fiscal problems, some states have substituted Reed Act funds for their 

own state funds that have been supplementing their UI/ES/LMI budgets to make up for 

federal funding shortfalls. The fourth data column shows the amounts of these state 

supplements in fiscal year 2001, the latest year for which data are available. A total of 

43 states provided such own-state funds. 

The fifth column shows the ratio of Reed Act funds to state supplements in 2001. This 

gives one an idea of how many years a state could use its March 2002 Reed Act distribution to substitute for state supplements for UI/ES/LMI. For example, a state with 

relatively large supplements, such as Louisiana, could substitute for only about 3.5 

years while a state with relatively small supplements, such as Kansas, could substitute 

small amounts for many years. 

2.3.2 Short- to intermediate-term impact of the distribution 

In the short-term (6-18 months) the Reed Act distribution had a significant impact on the 

economic situation in the states. Taxes were reduced by approximately $4 billion, and 

benefits were increased, as were expenditures on some administrative functions that 

required substantial funds, such as improvement of larger technology and processing 

systems. The February 2004 NASWA survey shows that by year-end 2003 18 states 

had increased, or extended benefits. Additionally, 35 states had allocated some $843.5 

million to UI uses, and 25 states had allocated $437.6 million to ES. 

It should be noted that although these figures represent allocated funds, no figures are 

available on the actual amount that has been spent in the first 18 months after the distribution. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 39

Figure 2.3.3 

Short- to Intermediate Term Impact of Reed Act Distribution 

Short- to Intermediate Impact of Distribution 

1. Tax increase avoided in many states in both 2003 and 

2004. 

2. Tax reduction in some states in 2003 as result of 

higher Trust Fund Balance. 

3. Service enhancements (such as new service centers) 

and planned investment in IT systems. 

4. Fiscal stability through reduced borrowing or avoidance of borrowing. 

5. Calming effect on labor market as unemployment 

taxes in many states increased less than they otherwise would have. 

2.3.3 The long-term impact of the distribution 

The nature of the allowable uses of the Reed Act funds have the potential to assist the 

states in undertaking major IT renovation and capital improvement projects (such as 

automated and centralized claims handling capabilities). The research, however, also 

suggests the Reed Act distribution is not likely to have this impact evenly across the 

states. Furthermore, it can be questioned whether this is at all a function of the Reed 

Act distribution, per se, or if it is simply a function of states now having funds they have 

indicated were needed for a long time. 

Another consideration is the uneven ability of the states to use the Reed Act funds. 

Some states, for reasons this project has not delved into, were forced into insolvency 

around the same time, or shortly after the Reed Act distribution. These states have exhausted their one-time funds and cannot invest in their system, because the special 

Reed Act distribution law did not allow such states to restore Reed Act funds after they 

have been spent on benefits. 

Substantial proportion of the special Reed Act distribution of 2002 has not been obligated to-date. A number of research questions remain, that would require longitudinal 

information not available to the research team at this time. These questions include: 

 Will the states be more comfortable lowering taxes with the expectation the Federal 

government will release funds in hard economic times? 

 Will the states who already had very solvent trust funds act differently than those 

states in the intermediate and lower solvency categories, e.g., by enhancing their 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 40

employment services infrastructure, thereby, perhaps, improving their ability to 

weather a future recession? 

 Will the unstructured use of Reed Act funds for replacement and upgrading of both 

tax and service delivery systems lead to wasteful spending as insufficient plans and 

coordination exists across the states for managing the large amounts suddenly 

available for administrative improvements? 

 Will the Reed Act funds have the impact of further depressing funding for administrative operation of the UI system, and if so, how will this be shared among the 

states who have, and do not have, Reed Act funds available to backfill for lowered 

funding levels? 

These, and myriad other potential questions, will be critical in evaluating the long-term 

health of the UI system as more time elapses from this infusion of funds. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 41

SECTION III 

QUALITATIVE ANALYSIS 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 42

3.1 OVERVIEW OF QUALITATIVE ANALYSIS

The qualitative analysis presented here is the counterpart to the quantitative analysis 

conducted by the research team. In light of the number of factors (and complicated interactions of these factors) that impact the decision in each state to use Reed Act funds, 

we have undertaken a case study analysis that presents the decision process as it unfolded in nine selected states. 

It should be emphasized here that this analysis presents a snapshot of information collected from the states in June and July of 2003. As such this information should not be 

relied on for actions of the states after that time. 

The qualitative study report is divided into four sections. Section III.2.1 provides an 

overview of the process that was used for selecting the states for the case studies, and 

it also provides a general description of the approach taken to the case interviews. Sections III.3 and III.4 contain discussions of the themes and observations that the team 

identified during the case interviews. As such this represents the team's efforts to compare and contrast the activities in the states, and to present an analysis of some of the 

common factors that seemed to motivate the states in their approach to using Reed Act 

funds. 

Section III.5 contains the complete discussion of the case interviews of each of the nine 

states. Each discussion is presented in a similar manner, with a description of the 

process for developing proposals and communicating with state decision-makers; a discussion of the use of Reed Act funds to fund investment in the employment services 

and unemployment insurance systems; the use of Reed Act funds on benefits, tax reduction or solvency; and finally a discussion of the state's observations on the process 

and lessons learned from managing the Reed Act distribution. 

Attachment D provides supplemental information on the interview guide that was used. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 43

3.2 PROCESS FOR SELECTING STATES AS CASE STUDIES

The qualitative analysis was accomplished by selecting a subset of the states for further 

study. Case interviews with nine selected states were used to collect qualitative information on political, economic and budgetary factors that may have determined their use 

of Reed Act funds. The collection and analysis of qualitative information of this nature 

was considered important for several reasons: 

 It provided insight into the proposal development process for allocating the Reed Act 

funds to their uses, the political mechanism governing the states’ use of Reed Act 

funds and the involvement of local stakeholders in the process. 

 It facilitated a better understanding of the spending of funds by collecting detailed 

information on funds allocated for improvements in Employment Services, Unemployment Insurance administration and IT infrastructure. 

 It collected information on the direct or indirect impact of the Reed Act funds on 

benefits, tax rates and solvency levels. 

 It obtained feedback from the states on the usefulness of the USDOL guidance and 

other policy recommendations. 

3.2.1 State Selection Criteria 

Booz Allen and CESER met with the USDOL on April 25, 2003 to discuss the state selection process. Nine states were selected by the research team on the basis of criteria 

such as the solvency status of a state, the UI tax rate, or a combination of these and 

other variables. Additionally, information provided by the states was used in the determination. This ensured that interesting practices adopted by states were studied and 

documented. The state selection criteria are discussed below. The nine states are 

Iowa, Louisiana, Michigan, Minnesota, Montana, New Jersey, Ohio, Virginia and Washington. 

The states were selected for further study based on the following criteria: 

 Are the states interesting to study? 

− Did they increase benefits? 

− Did they lower UI tax rates? 

− What do the UI data say about them? 

− Do they perform any interesting or unique functions? 

 Solvency level: solvency measures such as the trust fund balance provide an indication of whether the states are capable of meeting financial obligations 

 Regional representation 

 Population size 

Analysts consider a state UI program relatively solvent when it has enough funds in its 

trust fund account to cover its UI benefit costs during a year in which there is an eco-
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 44

nomic recession. The “Average High Cost Multiple for the Most Recent Calendar Year” 

(AHCM) is one measure of state UI program solvency.8 An AHCM value of 1.0 suggests the state has enough funds in its trust fund account to cover UI benefit costs in 

the next 12 months comparable to the average payout for the most recent three recessions.9 Generally a higher AHCM suggests greater solvency and a lower AHCM suggests a greater risk of insolvency and a likely need to borrow to cover UI benefit costs 

during a recession. 

States were pre-selected on the basis of the first criterion, i.e., whether they were interesting to study. The states were then divided into three groups based on their Average 

High-Cost Multiple (AHCM) in the first quarter of 2002. The first group consisted of less 

solvent states with the AHCM<0.5, the second group consisted of states with the AHCM 

between 0.5 and 1 and the third group consisted of more solvent states with AHCM >1. 

Next, an attempt was made to identify states keeping in mind their geographic location 

and population sizes. The population, geographic location and the average high cost 

multiple (AHCM) of the nine states are presented in Figure 3.2.1. 

Figure 3.2.1 

Characteristics of States Selected for Qualitative Study 

Source: AHCM data were obtained from the UI Data Summary, produced by the Employment and Training Administration of the USDOL. Population estimates were obtained from the US Bureau of Census. 

 Among the states with low solvency levels, Minnesota, with an AHCM of 0.35 

was selected for further study. 

 Among the twenty states with AHCM between 0.5 and 1, Ohio, Michigan and 

Washington were selected for further study: 

 

8 The Average High Cost Multiple is defined by the U.S. Department of Labor as the calendar year reserve ratio (or trust fund 

balance as a percent of total covered wages) divided by the Average High Cost Rate. The Average High Cost Rate is the 

average of the three highest calendar year benefit cost rates in the last 20 years (or a period including three recessions, if 

longer). Benefit cost rates are benefits paid (excluding reimbursable benefits) as a percent of total wages in covered employment. See U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial Services, UI Data 

Summary, 1st Quarter CY 2002, June 2002. 

9 There is no general agreement on a standard level for a state’s AHCM at the beginning of a recession. Some analysts have 

argued for an AHCM standard as high as 1.5. 

State Region AHCM (Quarter 1, 2002) Population (Jul-2001)

Minnesota Midwest <0.5 4,972,294 

Ohio Midwest 0.5<AHCM<1.0 11,373,541 

Michigan Midwest 0.5<AHCM<1.0 9,990,817 

Washington West 0.5<AHCM<1.0 5,987,973 

New Jersey Northeast >1.0 8,484,431 

Virginia South >1.0 7,187,734 

Louisiana South >1.0 4,465,430 

Iowa Midwest >1.0 2,923,179 

Montana West >1.0 904,433 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 45

o A detailed study of states such as Ohio was to provide valuable insight in 

understanding the education, community mobilization and policy implications of state-level actions10. For example, elements such as the use of 

funds to provide additional ES (e.g., counseling, job search workshops, 

job developers) to UI claimants and keeping the local state workforce 

agency offices open within the Ohio’s one-stop delivery system were examined. 

o Michigan appropriated $213 million of its Reed Act funds on ES improvements such as investments on one-stop center operations and facilities. 

o Washington decided not to spend any Reed Act funds immediately, but 

submitted proposals for 2003-2004. It had proposed to make sweeping 

changes in UI, which would change the way employers are charged unemployment insurance taxes and how claimants qualify for benefits. 

Washington was also characterized by high unemployment rates and 

general state-level budgetary challenges. 

 Among the twenty-three states with AHCM>1, Iowa, Virginia, Louisiana, New 

Jersey and Montana were selected as case studies: 

o Iowa proposed to redesign its tax and benefit system and invest in its onestop system infrastructure. 

o Virginia was considered important to study because of the impact of the 

terrorist attacks on September 11, 2001. Virginia retained $184 million of 

its $214.9 million Reed Act distribution in its trust fund account. This 

helped the state avoid a potential 0.2 percentage point automatic increase 

in its UI tax11 rate. 

o Louisiana retained 65% of its Reed Act distribution in its trust fund and 

appropriated the rest for ES and UI administration improvements. 

o New Jersey enhanced ES delivery in its one-stops and job seeking/labor 

market capabilities. 

o Montana plans on retiring over the next five years $5.9 million in debt incurred to modernize its UI program. It appropriated $4.6 million to substitute for funds that would have derived from its Administrative Fund Tax 

(AFT) that were reallocated to various training programs12. 

The criteria for selecting these states were discussed and the list of states was 

made final with the USDOL meeting on April 25, 2003. 

3.2.2 Case Study Approach 

The objective of the case studies was to gain an understanding of the impact of the 

Reed Act distribution by interviewing key individuals at the state workforce agencies and 

 

10 Process Evaluation Design, prepared by Booz Allen Hamilton for CESER 

11 Ibid 

12 How are states using their $8 billion Reed Act Funds? Report prepared by NASWA, January 2003 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 46

other stakeholders. The case studies were conducted by having the selected states 

validate our analysis13 of their use of Reed Act funds. This validation was performed via 

telephone interviews for each of the nine states. The interviews were conducted from 

June through July of 2003.

The research team used a three-step process to ensure rigor and to reduce the likelihood of bias that a qualitative approach can introduce. In addition the team provided 

the states an opportunity to review and comment on the final case narratives. Our hope 

is that this should produce a fair and accurate representation of the issues surrounding 

the states' process for planning Reed Act spending. 

The three steps in our case study approach were as follows: 

Step 1: Establishing an information base

The first step was to establish an information base of the key individuals to be interviewed and conducting background research on each state. The specific 

tasks in Step 1 included: 

 Identifying key individuals at state workforce agencies and stakeholders. 

The individuals were identified with the help of the NASWA survey and by 

contacting the state workforce agencies 

 Conducting research on each state using publicly available information14

and analyzing the state’s use of its Reed Act funds 

 Using publicly available information, the team completed the interview 

guide developed for the telephone interview 

Step 2: Conducting the telephone interview

The second step was to collect new information from the states and have them 

validate the information that we provided. These interviews were conducted by 

telephone. The telephone interviews were held in confidence, and any information obtained through the interviewing process was treated anonymously. 

Step 3: Documenting information

The third step consisted of documenting the information obtained from the case 

studies and sending it to the states for re-verification. 

 

13 Booz Allen Hamilton and CESER’s analysis of state data based on publicly available information such as (1) the GAO 

report on Unemployment Insurance, March 2003, (2) testimonies by Louisiana and Ohio on their use of Reed Act Distributions, submitted to the Committee on Ways and Means, March 2003 and (3) the NASWA Survey on the Reed Act Distribution, January 17, 2003 

14 Publicly available information such as (1) the GAO report on Unemployment Insurance, March 2003, (2) testimonies by 

Louisiana and Ohio on their use of Reed Act Distributions, submitted to the Committee on Ways and Means, March 2003 

and (3) the NASWA Survey on the Reed Act Distribution, January 17, 2003 is used throughout this analysis 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 47

The information thus obtained was analyzed and a comparative analysis across 

states was conducted. The state level analysis includes (a) a description of how 

each state spent the Reed Act funds, (b) programs and policy variations across 

states, and (c) policy recommendations. The analysis of the case study interviews is presented in section III, and the complete case narrative in section IV. 

3.3 THEMES AND OBSERVATIONS FROM THE STATE INTERVIEWS

3.3.1 Introduction 

The purpose of this section is to highlight the themes and key observations that the 

team identified during the case interview process. As such, this section presents the 

analysis of the overall impact the Reed Act distribution had on these states. This compare and contrast approach, although it does not substitute for a thorough reading of the 

individual state narratives, provides the reader with a way of understanding the impact 

of the Reed Act distribution. 

The reader should be cautious in drawing broad conclusions from this qualitative 

evaluation about the likely impact of the Reed Act distribution in other states. However, 

the team anticipates that where there is great agreement among the states in their responses, it may indicate a general trend that the policy maker may care to consider in 

future policy formulation. 

The interviews with the nine states introduced a number of themes. In some cases, 

these themes were of interest primarily to the state involved, but some have broader 

applicability. Among the themes that we will discuss in this section, and illustrate with 

specific observations and tabular or graphic analysis, is the one-time nature of the Reed 

Act Distribution. Also, we will examine the economic stimulus impact that states considered the Reed Act Distribution to have. Other themes include an overview of how 

states have chosen to use the Reed Act funds, the process used for developing and introducing the Reed Act proposals, and the impact the distribution may have on tax 

schedules in states. For a more detailed treatment of individual states we have included the complete case narrative of each state below. 

3.3.2 Summary characteristics of the states 

The nine states interviewed represent different demographic characteristics and geographic locations. We also see a wide range of characteristics when we examine the 

states against key trust fund and other UI data. 

The Reed Act distribution the states received ranged from just under $19 million for 

Montana to $343 million for Ohio, and an average of about $181 million. The range of 

trust fund balances and AHCMs also differed significantly. Minnesota had the lowest 

AHCM of .35, while Montana had an AHCM of 1.39. Other data provide further evidence about the heterogeneity of the states interviewed. The Average Weekly Benefit 

Amount (AWBA) ranges from just under $200 in Louisiana to over $320 in Minnesota, 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 48

New Jersey and Washington. Similarly the tax rate on total wages seems to suggest a 

very considerable difference in economic situation and/or benefit structure, with the 

lowest tax rate at 0.1 percent in Virginia to a high of 1.0 percent in Washington. 

An important statistic in considering the uses of Reed Act funds is the total increase in 

the trust fund balance due to the Reed Act distribution. Other things being equal, we 

would expect some correlation between the likelihood of using the Reed Act funds now 

and the perceived solvency of the trust fund. The absolute trust fund amount and the 

AHCM both provide some insight into this solvency level, as does the percent increase 

in the trust fund that the Reed Act distribution represents. In this regard, Figure 3.3.1 

shows that Louisiana's and New Jersey's trust fund balances increased by less than 10 

percent with the Reed Act distribution, while Minnesota’s increased by 80 percent. 

Figure 3.3.1 suggests that although the qualitative analysis does not represent a statistically robust examination of the impact of the Reed Act fund use, it does provide a useful snapshot of the impact the Reed Act funds have had in the states. In particular, we 

would expect that themes and observations that cut across a substantial portion of the 

states interviewed are likely to have a wide impact among the states at large. 

Figure 3.3.1 

Summary of UI Program Data for the First Quarter of 2002 

Measure 

Iowa 

Louisiana 

Michigan 

Minnesota 

Montana 

New 

Jersey 

Ohio 

Virginia 

Washington 

Reed Act Distribution 

($ million) 82.4 105.5 291.5 163.1 18.6 242.9 343 214.9 167 

Trust Fund Balance 

($ million) 759.1 1,578.2 2,411.9 366.1 189.6 2,998.4 1,852.4 941.5 1,616.8 

Percent Increase in UI 

Account 12% 7% 14% 80% 11% 8% 23% 30% 12% 

AHCM 1.14 1.29 0.65 0.35 1.39 1.12 0.54 1.04 0.96 

Average Tax Rate on 

Total Covered Wages 0.5% 0.3% 0.6% 0.4% 0.6% 0.8% 0.3% 0.1% 1.0% 

AWBA 257.10 199.81 260.48 324.49 201.90 327.15 253.80 308.11 320.01 

Average Duration on 

UI (Weeks) 12.1 14.3 13.3 15.0 14.9 17.2 14.4 11.5 17.4 

Source: UI Data Summary produced by the Employment and Training Administration of the USDOL 

3.3 3 Individual states' experiences 

Process for Developing Proposals 

The process the states used for developing proposals for use of Reed Act funds generally had three components: initial data collection and development of proposed package 

of investments at the state administrator's office, comments and changes from key 

stakeholders (including labor and industry) and consultation with the governor's office, 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 49

presentation of legislative package to legislators (including education on allowable and 

non-allowable uses of the Reed Act distribution). 

The complexity and time used for each of these components varied considerably, and in 

some cases representatives of labor and industry were not involved in a formal sense. 

The interviewees also identified a few key themes that seemed important. These included: 

 There was very little time in the spring of 2002 to complete a legislative package 

and present to the state legislature. Some states were successful, but many had 

to wait until the next session because the legislative session was about to conclude or recess. 

 Labor and industry wanted Reed Act funds used to support their constituents, but 

were content to see it stay in the trust fund for the short-term, rather than see it 

used in a way that did not benefit their constituents. 

 In some states, the legislature convenes every other year and this could have 

had a potentially negative impact on ability to use Reed Act funds. In Montana, 

for example, a special session of the legislature on unrelated matters made it 

possible to pass the Reed Act appropriations bill, rather than wait well over a 

year. 

 Most states approached the funds as one-time funds for one-time spending. 

Given this, most states felt it was incumbent to act with some caution, and to use 

the funds in a manner that would benefit the systems’ customers in the long run. 

This may also have directed states, at least in the shorter run, away from longterm financial arrangements such as revolving funds that are authorized under 

the special Reed Act distribution. 

 Since Reed Act distributions are relatively rare, and term-limits in some states 

have reduced the average tenure of legislators, considerable effort and time was 

needed to educate both legislators and their staff on the allowable uses of the 

Reed Act funds. 

 The budget crisis in the states sometimes made it hard to get the attention of the 

governor's political leadership since so many issues needed immediate resolution. 

 It was generally understood by all stakeholders that leaving the Reed Act distribution in the trust fund would (in some cases) have an impact on unemployment 

tax rates. 

 Some states expressed desire to be able to hold the Reed Act funds separately 

and use the interest to fund ongoing requirements (such as IT investment/maintenance). The Reed Act does not allow such practices, but some 

states were able to find legal ways around this restriction. 

Uses of Reed Act Funds 

Based on information provided in the state interviews, we have summarized in Figure 

3.3.2 how states have appropriated the Reed Act distribution to-date. It is important to 

note that these do not represent actual outlays as of June 2003, but rather planned ex-
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 50

penditures (and in some cases appropriations). The obligations and outlays of funds 

may be subject to further state assembly or executive branch approval, and to the identification of a feasible vendor to deliver the planned investment. 

There are two key observations that we can draw from this summary table before delving more into the specifics of state plans. Every state plans to invest in the UI system, 

and no state plans explicit benefit enhancements as a result of the Reed Act distribution. 

When we examined more closely what states actually said about their plans, a recurring 

theme was the need to replace out-dated tax and benefit systems, which in many cases 

date back to the 1970s. The figures that can be seen in Figure 3.3.2 represent current 

planned investment in UI systems, but in addition a number of states stated that this 

represented only the first of many planned segments in the enhancement of their UI 

systems. 

Figure 3.3.2 

Summary of the Uses of the Reed Act Distribution 

(As of June 2003) 

Uses of Reed 

Act funds 

 ($ million) 

Iowa 

Louisiana 

Michigan 

Minnesota 

Montana 

New 

Jersey 

Ohio 

Virginia 

Washington 

Employment 

Services 

20.7 5.8 213 None 7.1 12 19 6.2 None 

Unemployment 

Insurance 

20 20.6 75 12 11.4 24 109 24.7 19.8 

Benefits 

Extension/ / 

Enhancement 

 

Other Uses 

 

10 3.5 

 

Trust Fund 40 68.5 

 

151.1 

 

207 216 184 147.2 

Total 80.7 104.9 291.5 163.1 18.6 242.9 343 214.9 167 

Source: Research Team Case Interviews 

Note: Numbers may not add up due to rounding errors 

In seven of the nine states the planned investment in UI is focused largely on major 

renovation or replacement of legacy information technology systems. Washington, in 

addition, is working to enhance work processes in lieu of a major investment in the UI IT 

systems at this time. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 51

Among other spending that the states are planning for UI is investments in resources to 

reform UI (WA), increases in remote claims processing and improvements in data 

cross-matching (MT, NJ), improvements in UI claimant customer service (MI) and enhancements in call centers (VA, OH) 

One state planned to use Reed Act funds to maintain staff in UI offices during severe 

state budget cuts (MI). 

There was greater variance in the planned use of Reed Act funds on ES and some 

states were still in the process of developing specific plans for how to use these funds. 

A common theme among the seven states that plan investment in ES was upgrade of 

one-stop center technology, and upgrades and/or installation of additional computers 

(LA, OH, NJ, IA). Other uses included organizing employer feedback mechanisms (LA), 

training of one-stop center staff in use of IT (OH, LA), evaluation of enhanced automation options in the one-stop system and investment in the WIA operating system (MT). 

In addition Iowa has a mechanism for using the Reed Act distribution to fund the operation of rural and satellite one-stop offices. Michigan is planning to spend $3.5 million in 

providing Internet job access in libraries. Louisiana also will invest $10 million in an IT 

backbone upgrade that will benefit state UI and ES, as well as other one-stop partners. 

That no states have explicitly enhanced benefits as a result of the Reed Act distribution 

directly addresses one of our themes: the Reed Act distribution as "one-time funds for 

one-time spending." The states uniformly said that they had emphasized to the state 

legislature the one-time nature of the funds, and cautioned legislators to be careful in 

enacting new benefits that would result in ongoing obligations against the trust fund, 

unless additional revenues were collected to off-set the new spending. Importantly, the 

states reported that at the time of the initial appropriations bill for use of Reed Act funds 

there were no amendments or separate bills voted on to either reduce taxes or to enhance benefits. Furthermore, in those states where there was direct consultation with 

labor and industry there did seem to be a general acceptance that (at least for now) 

there was little opportunity for fundamental changes in UI benefits or taxes or additions 

to ES. 

The result, as can be seen in Figure 3.3.2, is that of the nine states, seven have left a 

significant proportion of the Reed Act distribution in the trust fund to shore up balances. 

The total amount left is approximately $1 billion, or 77 percent of the total Reed Act distribution to those seven states. The two states that have plans for using substantially all 

of their Reed Act distribution have multi-year plans for doing so, with the funds being 

used over a three-year period in Michigan to fund welfare-to-work programs and for a 

variety of uses over the next six years in Montana. 

The Reed Act Distribution's Impact on Tax Schedules 

In five of the nine states (OH, MT, MN, WA and VA) automatic unemployment tax increases were avoided, or reduced, as a result of the Reed Act distribution and subsequent increase in the trust fund balance. The other four states did not report that the 

Reed Act distribution had an impact on the tax situation. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 52

The five states where taxes were impacted considered the Reed Act distribution to have 

an indirect economic stimulus effect as a result of the lower than expected tax rates. 

The total stimulus impact was believed, however, to be smaller than if the distribution 

had been spent on enhancing benefits. In Ohio the Reed Act distribution was estimated 

to have saved employers a total of $45 million in 2003. In Montana the amount was $9 

million, in Minnesota it was $80 million. In Virginia, employers saved an estimated $6 

per eligible employee, or about $19.3 million. In Washington, the savings per employee 

were estimated at $235 per employee for a total of $172 million. 

An interesting issue that relates to the timing of tax collection and the relation to the 

economic cycle arose in Minnesota. Their taxes were reduced by $80 million while at 

the same time the trust fund balances approached zero, necessitating the state's borrowing from the federal government to maintain the ability of the unemployment insurance program to pay benefits 

More detail on how each of the above issues was addressed in the states can be found 

in section IV of this report that presents the complete case narrative of the state case 

interviews. 

3.4 SPECIFIC QUESTIONS OF INTEREST

Figures 3.4.1 to 3.4.3 provide an insight into how the states responded to specific questions that surround our discussion of the themes. In Figure 3.4.1 we see that two-thirds 

of the states found the USDOL guidance to be useful. One state found it to be somewhat helpful, while two states did not know. 

Figure 3.4.1 

Value of USDOL Guidance 

01234567

Yes

Somewhat

Don't know

Number of States Responding

Source: Research Team Case Interviews

Did you find the USDOL guidance useful?

Figure 3.4.2 shows that in five states there was an explicit process for consulting labor 

and industry representatives prior to completing the legislative proposals for appropriating the Reed Act funds. Three states did not contact labor or industry, although two of 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 53

those states said that labor and industry's positions on the issues were clear and had 

been communicated informally over the months preceding the Reed Act distribution. 

Figure 3.4.2 

Consultative Legislative Environment 

0123456

Yes

No

Don't know

Number of States Responding

Source: Research Team Case Interviews

Were labor/industry consulted while the

legislative package was being developed?

Figure 3.4.3 shows how states responded specifically to the question of the economic 

stimulus effect the Reed Act distribution had in their states. Overall six of the nine 

states reported an economic stimulus impact. Five states responded that the distribution had a non-discretionary stimulating effect in that it either directly resulted in a reduced tax rate, or avoided an automatic increase in the tax rate as a result of a declining state trust fund balance. Additionally, one state (MI) considered the funds to have 

had discretionary economic stimulus impact. None of the officials of the five states 

thought the Reed Act distribution had discretionary economic stimulus impact. In addition three states said that since the Reed Act distribution did not affect the tax rate, and 

a substantial proportion of the funds were kept in the trust fund, there was no measurable stimulating impact expected from the Reed Act distribution. 

Figure 3.4.3 

Evaluation of the impact of the Reed Act funds 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 54

0123456

Yes

No

Helped avoid tax

increase

Number of States Responding

Source: Research Team Case Interviews

Did the Reed Act funds have an economic stimulus effect?

 

3.5 CONCLUSIONS OF THE QUALITATIVE STUDY

The nine states, despite some differences, were remarkably consistent in the approach 

for developing proposals for use of the Reed Act funds. Most approached the funds as 

a one-time distribution for one-time spending. Given this, most states felt it was incumbent to act with some caution, and to use the funds in a manner that would benefit the 

systems' customers over the long haul. 

Nearly all of the states are planning or have started to invest the Reed Act funds in the 

renovation of out-dated systems that are used both for UI revenue collection and administration of benefits. In addition, many states plan to use the funds to upgrade or 

enhance information technology as well as physical and operational infrastructure in the 

ES (one-stop) system. 

With only two exceptions, Michigan and Montana, the states had approved spending for 

a relatively small portion of the overall Reed Act distribution (unweighted average of 23 

percent). In the case of Montana, although the full amount has been authorized for 

spending, the planned spending actually is for the period 2003 to 2008. In the case of 

Michigan, the Reed Act funds were in essence used to alleviate a severe budget crisis 

that threatened to reduce the level of service in the state employment services system 

(particularly welfare to work). By using the Reed Act funds the state was able to avoid 

both staff reduction as well as actual reduction in the amount of services provided to 

workers. 

In addition to being consistent in what they did, the states were also consistent in what 

they did not do. No state authorized substantial enhancement of benefits (although 

Minnesota separately authorized a benefit extension for a small segment of workers affected by the events of September 11, 2001). In fact, most of the states suggested 

there had been little appetite in their state legislatures for increasing benefits given the 

fiscal climate of the states. A permanent change in the benefit level would lead to a 

permanent change in costs for the state. This is not true for a tax cut, if experience rating is applied. In states where labor and industry were involved in the development of 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 55

the proposals, it appeared that both stakeholders were, at this time, content to have the 

majority of the Reed Act funds remain in the trust fund, rather than to have it spent immediately on either benefit enhancements or discretionary tax reductions. 

Whether this comfort with having the Reed Act funds remain in the trust fund will continue is hard to estimate. Some indications are, however, that further use of the funds 

for direct investment in the system is likely. As states have started projects to upgrade/enhance/replace their unemployment insurance legacy applications, and invest in 

the technology in place in the one-stop centers, it should be considered likely that these 

projects will require additional spending authorizations before these projects are completed. In fact, some states that were interviewed were explicit in saying that the current 

authorized spending did not cover the full estimated cost of system renovation, but instead was only for an initial segment that was considered to be the greatest need. 

Additional pressures to spend the Reed Act funds can also be expected if the trust fund 

balances in the states stop their current decline as a result of improved economic conditions. In the event the trust funds become considerably more robust, pressures for tax 

reduction and/or benefit enhancements are likely to reemerge, and possibly with greater 

resonance in the state legislatures. 

Given the above conclusions, it is not surprising that the states indicated that they did 

not consider the Reed Act distribution had, per se, a substantial discretionary economic 

stimulus impact. Only Michigan (which has already appropriated its full Reed Act distribution) considered the distribution to have had a stimulating effect, outside of the indirect stimulus impact of staving off (or reducing) unemployment tax increases that was 

noted by five of the nine states. 

Another issue to consider is that it seems likely that the bulk of the Reed Act distribution 

will, instead of being spent as a counter-cyclical economic stimulus, be expended during 

years of relative solvency and stability in the trust fund. However, an unfunded policy 

goal of some standing, i.e., the funding of the UI and ES infrastructure systems, has 

been partially achieved. The tax reduction in 2003 and 2004 thus likely had a more profound and immediate stimulus impact than did discretionary (i.e., appropriated) spending of the Reed Act distribution. 

This brings us to two key considerations that the team observed from the case interviews. The first one is, the states report, that the lack of sufficient capital budgeting in 

the annual unemployment insurance administrative funding model is causing a wide 

spread lack of funding to maintain and renew the systems that are necessary to deliver 

unemployment insurance in today's environment. A consideration here, since substantially all the states used the Reed Act distribution or performance and capital improvement grants (PCIs) to fund IT system renovation, is whether the Reed Act mechanism is 

appropriate to the task of incrementally funding information technology, an item that requires ongoing evaluation, maintenance and upgrading. 

The second key consideration is how the structure of the Reed Act distribution may systematically favor tax cuts over benefit increases. This follows logically from observing 

that a cut in the base rate of unemployment taxes will only result in a temporary rate cut 

if rates go below the level needed to maintain the trust fund level (i.e., the experience 

rating mechanism will result in a gradual increase in the tax rate to maintain trust fund 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 56

balance). Moreover, there is no need to explicitly repeal the tax cut, as the schedules 

tend to adjust themselves. A benefit increase, however, is permanent and taxes will 

have to increase indefinitely to support it (either directly or through the solvency adjustment mechanism inherent in the use of escalating tax-rate tables as TFB decreases). 

Of course there are examples of temporary benefit extensions, however, based on the 

interviews with the states, there appeared to be a perception that large-scale benefit increases, even when initially intended to be temporary, rarely were repealed, or failed to 

be renewed. 

3.6 COMPLETE STATE INTERVIEWS

The following pages provide the complete case interviews of the nine states that the research team worked with. Each of these interview has been verified by the individuals 

interviewed. A copy of the interview guide can be found in Attachment D. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 57

3.6.1 Iowa 

IOWA 

A CASE ANALYSIS OF USE OF THE 

2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003 

Process for developing proposals and communicating with state decision-makers 

Iowa retained about $40 million of its $82.4 million distribution in the trust fund. The Reed 

Act Distribution added 12% to Iowa’s balance as of the end of March, 2002. At that time, 

Iowa’s unemployment insurance (UI) program was relatively solvent with an average high 

cost multiple (AHCM) of 1.14. Table 1 compares Iowa’s situation at the end of the first 

quarter of 2002 and the first quarter of 2003. 

Table 1. Summary of the Iowa UI Program Data 

for the First Quarter of 2002 and the First Quarter of 2003 

Measure 1st Quarter 

 2002 

1st Quarter 

 2003 

Reed Act Distribution $82.4 million N/A 

Trust Fund Balance $ 759.1 million $ 660.2 million 

Percent Increase in Iowa UI Account 12% N/A 

Average High Cost Multiple (AHCM) 1.14 1.12 

Average Tax Rate on Total Covered Wages 0.5% 0.7% 

AWBA $257.10 $263.03 

Average Duration on UI 12.1 weeks 13.5 Weeks 

Iowa started its planning process prior to the Reed Act distribution. The process started with 

a brainstorming session of senior staff. The initial proposals were then refined in communications with the governor's office, community colleges, business associations, small business, 

and labor representatives. 

Formal presentations to the legislature emphasized the one-time nature of the funds. The 

recommendation also indicated that since the trust fund was solvent, maximum benefit of the 

Reed Act distribution would be had by investing in long-term improvements of the UI and 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 58

ES systems. Especially, legislators were educated about the antiquated condition of the UI 

tax system (which dated back to 1971). 

A part of the communications process to business was to show how an investment in the information technology (IT) infrastructure would provide a direct interface to the new UI tax 

system and a major upgrade in the infrastructure for the claims system. 

Although there was pressure from the employer community to cut taxes, the solvency problems of the neighboring states (such as Minnesota and Missouri), discouraged the proponents 

of tax cuts from pursuing them. 

In general the guidance from USDOL was found to be appropriate and helpful, especially in 

helping focus legislators on how the Reed Act funds could be used. However, not being able 

to use the interest earned on the Reed Act dollars for an ongoing source of funding for IT was 

seen as too limiting, as such a source of revenue could help ensure IT investments were 

maintained at appropriate functionality and readiness levels. 

Use of Reed Act funds on ES and UI 

Iowa appropriated approximately $20.7 million in ES and the enhanced service to claimants. 

The thrust of the investments is to upgrade infrastructure and enhance the IT infrastructure 

for one-stops centers and labor exchange services. This includes making on-line UI claims 

possible in the one-stops and intensive services for UI claimants in the labor exchange arena. 

Funds have not yet been appropriated for the labor exchange effort. In addition, staff will be 

provided with new computers to enhance their effectiveness in assisting clients. Overall it is 

expected that this investment will increase productivity, while at the same time reduce IT 

maintenance costs. 

The Reed Act funds also served to help the state shore up funding for and maintain operation 

of 52 of its 71 satellite one-stop offices via a special funding arrangement. In essence, the 

state legislature extended a temporary employer surcharge of $7 per employee for 2 1⁄2 years 

to finance Iowa’s satellite one-stop offices until a permanent working capital fund accumulates sufficient revenue to produce the necessary interest for operation of the satellite onestop offices. Reed Act funds were used to leverage the arrangement by being placed in the 

trust fund for the payment of benefits. 

The working capital fund will not be encumbered by the rules restricting the spending of interest that govern the Reed Act funds. Iowa officials stated that this funding mechanism has 

been accepted by the USDOL. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 59

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

Area Amount Notes 

One-stops (rural/satellite) Not known at time of 

writing. 

The one-stops were funded by interest on a reserve fund. The reserve funds were obtained from a 

state tax which will be used to pay 

benefits when necessary. 

Employment Services $20.7 million General improvements in one-stop 

system infrastructure 

Unemployment Insurance 

$20 million A new tax and benefits system 

The UI investment is primarily geared towards updating the antiquated tax and benefit system. A vendor has not been selected at this point. 

Use of the Reed Act funds on benefits, tax and solvency 

The trust fund in June stood at approximately $660 million with an average high-cost multiple of 1.12. The Reed Act distribution allowed the tax rate to remain unchanged. 

Although representatives of labor and industry believed the Reed Act funds could be useful 

in fulfilling the desires of their constituents for benefit enhancements and tax reductions, respectively, the consensus was that using the one-time funds to change the benefit structure 

was no more prudent than using these funds to reduce taxes. 

Iowa does not have an alternate base year, but does provide benefits to part-time workers 

seeking part-time work. 

State observations 

The lack of an advisory council where labor and industry representatives come together with 

legislators and the executive branch was not seen as an impediment to reaching a balanced 

compromise of the use of the Reed Act funds. 

The USDOL guidance was seen as helpful and clear. However, Iowa officials considered the 

federal law on the use of the funds to create a permanent working capital fund (to provide 

long-term benefits), to be somewhat restrictive. That problem was solved, however, with the 

creation of a working capital fund separate from the Iowa trust fund. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 60

3.6.2 Louisiana 

LOUISIANA 

A CASE ANALYSIS OF THE USE 

OF THE 2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003 

Process for developing proposals and communicating with state decision-makers 

Louisiana received a $105 million Reed Act Distribution. The Reed Act Distribution added 

7% to Louisiana’s balance as of the end of March, 2002. At that time, Louisiana’s unemployment insurance (UI) program was relatively solvent, with an average high cost multiple 

(AHCM) of 1.29 and relatively low taxes. Table 1 compares Louisiana’s situation at the end 

of the first quarter of 2002 and the first quarter of 2003. 

Table 1. Summary of the Louisiana UI Program Data 

for the First Quarter of 2002 and the First Quarter of 2003 

Measure 1st Quarter 

 2002 

1st Quarter 

 2003 

Reed Act Distribution $105.5 million N/A 

Trust Fund Balance $1,578.2 million $1,512.3 million 

Percent Increase in Louisiana UI Account 7% N/A 

Average High Cost Multiple (AHCM) 1.29 1.32 

Average Tax Rate on Total Covered 

Wages 

0.3% 0.4% 

AWBA $199.81 $197.04 

Average Duration on UI 14.3 Weeks 16.1 Weeks 

In response to the Reed Act distribution the state administrator of the Louisiana Department 

of Labor held a retreat with executive staff in the end of March 2002 to discuss proposals to 

the legislature for how to use the Reed Act funds. In lieu of final guidance from USDOL, the 

group used prior Reed Act guidance to develop their proposals. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 61

Once the initial proposals were developed, the state administrator's office reached out to key 

stakeholders to vet the recommendations, and to gain insight into how the employer, employee and political stakeholders believed the Reed Act funds should be used. These sessions included representatives from Louisiana Association of Business & Industry, the AFLCIO and the regional USDOL office. The USDOL was consulted to check whether the proposal was in compliance. The state administrator's office also met with key legislators. 

A complicating factor in Louisiana was the pending appointment of a new state administrator 

on April 25th. However, the work on developing the proposals was not delayed, as staff in 

the office understood the importance of preparing a legislative package for Louisiana's 2002 

regular legislative session (meets on even numbered years). 

Once the governor's office had reviewed and agreed with the proposed legislative package, it 

was presented and passed by the legislature. The 60-day session adjourned on June 23rd, 

only a week after the final USDOL guidance on allowable uses of the Reed Act funds came 

out. The view of the interviewees was that with more time and a more favorable economic 

climate, it is likely that more heated discussion about spending of the Reed Act funds on administration would have taken place. As it was, however, there was general agreement that a 

substantial proportion of the distribution should stay in the trust fund. 

Use of the Reed Act funds on ES and UI 

A total of $10 million of the Reed Act funds was used to shore up aging technology systems. 

Projects include replacement of about 700 computer workstations in the local offices, expansion of imaging system to local offices, upgrading of interactive voice response system to be 

web enabled, and substantial network enhancements to accommodate additional traffic.15

Louisiana invested $20.6 million in UI Administration, plus a share of this $10 million IT 

backbone investment. The $20.6 million is for the first useful segment of a major tax and 

benefit system upgrade. The primary aim of this upgrade is to improve service delivery and 

accountability and to enhance functionality of a system that dates from the 1970s, and was 

last upgraded in 1985. A much anticipated improvement is increased benefit payment accuracy16. Louisiana’s proposal is to move to an “object oriented” programming environment 

and enterprise wide relational database with access through a browser or portal17. 

At the time of our interview, Louisiana was working with the Information Technology Support Center (ITSC) to develop an RFP for vendor selection of this multi-year undertaking. 

 

15 Testimony on State Use of Reed Act Distributions by Dawn Romero Watson, Secretary, Louisiana Department of Labor, 

March 20, 2003 

16 How are States Using Their $8 Billion Reed Act Funds? Survey conducted by CESER, January 17, 2003 

17 Testimony on State Use of Reed Act Distributions by Dawn Romero Watson, Secretary, Louisiana Department of Labor, 

March 20, 2003 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 62

The initial cost estimate is approximated at $20.6 million, but might reach as much as $40 

million. 

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

Area Amount Uses 

Backbone IT Investment 

$10.0 million - This amount is shared proportionally by 

the other two categories 

Employment Services $5.8 million plus 

share of 

IT investment

- Professional development of staff 

- Tracking service delivery 

- Organizing employer forums to obtain 

feedback 

- The percent of expenditures allocated to 

equipment is based on the percent allocated to ES overall 

Unemployment 

Insurance 

$20.6 million plus 

share of IT investment 

- Redesign of tax and benefit systems 

- The percent of expenditures allocated to 

equipment is based on the percent allocated to UI overall 

Investment in Employment Services totals $5.8 million, plus IT equipment investments 

which are prorated based on share of Reed Act funds used on IT related investments. The 

percent of expenditures allocated to equipment is based on the percent allocated to ES overall. 

Other investments were made directly in the enhancement of ES. These were made in response to community feedback received by the state administrator’s office. These include: 

(1) Professional development of and additional resources for staff to assist target populations. 

These include the development of workshops and materials customized to the typical needs 

of older workers, ex-offenders, “at-risk” youth and single heads of households. 

(2) To improve services to Louisiana employers, Louisiana plans to organize employer forums to gather information from the employer’s perspective on awareness and quality of services that the Louisiana Department of Labor provides.18 

Investments will also be made to track service delivery that will come directly out of the 

same $5.8 million. 

 

18 Testimony on State Use of Reed Act Distributions by Dawn Romero Watson, Secretary, Louisiana Department of Labor, 

March 20, 2003 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 63

Specific investments were also made in the labor exchange system. These included a direct 

investment in making computers and other equipment ADA19 compatible, as well as training 

staff in ADA compliance. 

Use of the Reed Act funds on benefits, tax and solvency 

Louisiana's decided to keep approximately $68.5 million of the Reed Act funds in the trust 

fund. In part this may reflect the short time for developing proposals, and in part it may reflect a desire to not cause either labor or industry to infer funds were being expended in favor 

of one stakeholder group over another. The Louisiana trust fund was robust at the time of the 

Reed Act distribution, with an AHCM of 1.29, and a balance of approximately $1.5 billion. 

However, an automatic tax increase/benefit reduction trigger is set at approximately $1.4 billion. With the annual tax compilation date for the upcoming year set for June 30, leaving 

$68.5 million of the Reed Act distribution in the trust fund provided an extra cushion for the 

coming two years to guard against an automatic tax increase or benefit cut. The state estimated that the Reed Act distribution did not have any impact on tax rates for either tax years 

2003 and 2004. 

 

State observations 

The Louisiana state administrator's office noted they would have wanted more time to plan 

their proposal, and that it required more time to think from a long-term strategic perspective. 

Louisiana also noted that there was a need to think strategically to make short or long-term 

investments with the “one-time” dollars. 

With respect to the USDOL guidance, it is important to reconsider cost allocation to IT infrastructure upgrades and the ripple effect on smaller programs. For example, small programs 

with a fixed budget may not be able to pay 'fair share' of IT costs agreed under the Memorandum of Understanding (MOU) established for participation in the one-stop. This can have 

the effect of either pushing them out of the one-stop, or forcing them to discontinue the program's service delivery 

 

19 Americans with Disabilities Act 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 64

3.6.3 Michigan 

MICHIGAN 

A CASE ANALYSIS OF THE USE OF THE 

2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003 

Process for developing proposals and communicating with state decision-makers 

Michigan received a $291.5 million Reed Act distribution. The Reed Act Distribution added 

14% to Michigan’s balance as of the end of March, 2002. At that time, Michigan’s unemployment insurance (UI) program had an average high cost multiple (AHCM) 0f 0.65. Table 

1 compares Michigan’s situation at the end of the first quarter of 2002 and the first quarter of 

2003. 

Table 1. Summary of the Michigan UI Program Data 

for the First Quarter of 2002 and the First Quarter of 2003 

Measure 1st Quarter 

 2002 

1st Quarter 

 2003 

Reed Act Distribution $291.5 million N/A 

Trust Fund Balance $2411.9 million $1,555.3 

Percent Increase in Michigan UI Account 14% N/A 

Average High Cost Multiple (AHCM) 0.65 0.53 

Average Tax Rate on Total Covered 

Wages 0.6% 

Not available 

AWBA $260.48 $290.18 

Average Duration on UI 13.3 Weeks 14.8 Weeks 

The Michigan Office of Budget examined all the Reed Act issues and the types of expenditures that would be allowable under the DOL guidance. It narrowed the list to the types of 

expenditures that could be funded as a part of a supplemental appropriation. 

Steps were taken to educate stakeholders and policy makers about Reed Act funding. The 

Governor’s representatives were provided with information from the Act as well as the DOL 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 65

guidance. There were a number of suggestions for improvements in services and discussions 

about changing the benefit structure. 

A number of legislative issues were contested. There was strong support from worker advocates to increase benefits, while the business community wanted to retain the Reed Act distribution in the trust fund to improve solvency and avoid potential tax increases. Michigan 

stated that the state budget crisis was the most influential factor in deciding how the Reed 

Act funds were appropriated. 

Uses of the Reed Act funds on ES and UI 

Michigan appropriated $213.0 million for the ES program and $75 million for the UI program. Table 1 summarizes the uses of the Reed Act funds: 

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

The $213 million appropriated for ES are to be invested on one-stop center operations, facilities, and data system improvements, welfare-to-work job search and readiness activities, an 

Internet based career search portal, and software and information technology. 

A total of $30 million of the $75 million UI funds are planned to substitute for Penalty & Interest funds. The remainder will be spent on making upgrades to benefit administration, including the installation of three call centers. A portion of the Reed Act funds will be spent 

on rehiring some staff. 

Area Amount Uses 

Employment Services 

Internet job access 

$213.0 million 

$3.5 million

One-stop center operations, 

welfare-to-work job search and 

readiness activities and information technology 

Internet job access in libraries 

Unemployment Insurance $75.0 million Updates to computer software 

to improve customer service 

for UI claimants and support 

for unemployment agency operations 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 66

Use of the Reed Act funds on benefits, tax and solvency 

The Reed Act funds did not have any effect on UI taxes. Benefits were enhanced before the 

Reed Act distribution, but the distribution did not have an impact on that action as the maximum weekly benefit amount increased in 2001. 

The state of the economy was foremost in debate because of the recession. Services to welfare recipients were expanded. A total of $182 million was used to support the welfare-towork program over 3 years. 

State observations 

Michigan found the initial DOL guidance to be useful. However, state officials observed that 

federal law limits the use of the funds that could have used for other purposes and that have 

been allowed in the past. For example, it stated that the funds should have been allowed to 

provide transportation to users of the ES and one-stop services, as they were under WagnerPeyser Act grants20. 

 

20 USDOL has provided the clarification that there is no inherent difference between Wagner-Peyser Act funds and Reed Act 

funds, and that transportation expenses are allowable only to help beneficiaries receive Wagner-Peyser services, but not for 

training or employment. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 67

3.6.4 Minnesota 

MINNESOTA 

A CASE ANALYSIS OF USE 

OF THE 2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003

Process for developing proposals and communicating with state decision-makers 

Minnesota received a $163.1 million Reed Act Distribution. The Reed Act Distribution 

added 45% to Minnesota’s balance as of the end of March, 2002. At that time, Minnesota 

had a relatively low average high cost multiple (AHCM) of 0.35. Table 1 compares Minnesota’s situation at the end of the first quarter of 2002 and the first quarter of 2003. 

Table 1. Summary of the Minnesota UI Program Data 

for the First Quarter of 2002 and First Quarter of 2003 

Measure 1st Quarter 

 2002 

1st Quarter 

 2003 

Reed Act Distribution $163.1 million N/A 

Trust Fund Balance $366.1 million $0.579 million 

Percent Increase in Minnesota UI Account 45% N/A 

Average High Cost Multiple 0.35 0.11 

Average Tax Rate on Total Covered 

Wages 

0.4% 0.6% 

AWBA $324.49 $332.62 

Average Duration on UI 15 Weeks 16.8 Weeks 

Minnesota did not plan to allocate the Reed Act funds because the UI Trust fund was projected to go into deficit in 2003. In the year prior to the Reed Act distribution, the state diverted UI tax for UI technology improvements. This amount was expected to be approximately $26-28 million over a four year period, 2002 through 2005. 

In FY 2002 and 2003, Minnesota placed $12 million of the UI technology funds into the dislocated worker training fund. Minnesota has a separate dislocated worker tax (in December 

2002, it was 0.07% of the taxable wage base [$22,000] or approximately $28 million a year). 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 68

Use of the Reed Act funds on ES and UI 

Minnesota appropriated $12 million of its Reed Act funds for reengineering its UI business 

processes using modern technology. However, Minnesota spent these funds on normal UI 

administration and substituted federal grant funds for the reengineering project. Minnesota 

made this substitution because it expected to request a loan in 2003 and had to spend any 

available Reed Act funds on benefits. Table 2 summarizes Minnesota’s use of the Reed Act 

funds. 

Table 2: Specific UI Investments Planned With Reed Act Funds 

Area Amount Uses 

Unemployment Insurance $12 million - Upgrading tax and benefit systems

In the first two years, the focus will be on improving the UI tax system. In June 2003, the 

state signed a contract to begin reengineering the UI systems. 

Use of the Reed Act funds on benefits, tax and solvency 

The remaining Reed Act funds totaling $151 million, was left in the trust fund and exhausted 

by the end of February 2003, when the trust fund went into deficit. The increase in the trust 

fund balance in 2002 helped Minnesota avert an automatic increase in UI taxes that would 

have activated at a lower trust fund balance. 

The Reed Act prevented a base tax rate increase that would have been triggered by trust fund 

levels. The tax rate for 2003 is 0.38%. The Reed Act funds caused the base tax rate in 2003 

to be two tenths percent lower than it otherwise would have been. This resulted in $80 million in lower taxes. 

The Reed Act distribution was cited as one reason why the state legislature was able to pass 

an extension of state benefits. State funded benefit extensions were funded in 2002 (the total 

benefit enhancement was less than $5 million). This benefit increase targeted mainly airline 

industry employees hit hard by the reduction in air travel after September 2001. 

State observations 

Minnesota stated that the Reed Act funds did not help stimulate the local economy, except to 

the extent that it reduced taxes on employers. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 69

3.6.5 Montana 

MONTANA 

A CASE ANALYSIS OF THE USE OF THE 

2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003 

Process for developing proposals and communicating with state decision-makers 

Montana received a $18.6 million Reed Act distribution. The Reed Act Distribution added 

11% to Montana’s balance as of the end of March, 2002. At that time, Montana’s unemployment insurance (UI) program was relatively solvent with an average high cost multiple 

(AHCM) of 1.39. Table 1 compares Montana’s situation at the end of the first quarter of 

2002 and the first quarter of 2003. 

Table 1. Summary of the Montana UI Program Data 

for the First Quarter of 2002 and the First Quarter of 2003 

Measure 1st Quarter 

 2002 

1st Quarter 

2003 

Reed Act Distribution $18.6 million N/A 

Trust Fund Balance $ 189.6 million $190.7 million 

Percent Increase in Montana UI Account 11% N/A 

Average High Cost Multiple (AHCM) 1.39 1.53 

Average Tax Rate on Total Covered 

Wages 

0.6% 0.7% 

AWBA $201.90 $200.86 

Average Duration on UI 14.9 Weeks 15.0 Weeks 

The proposal to allocate the Reed Act funds was developed by the state agency. It was then 

submitted to the Governor who modified it. Since the Montana legislature meets every alternate year, it was unable to appropriate the monies in 2002. The funds have now been appropriated. There was a special Legislative session in August of 2002 which appropriated $4.1 

million for use in FY 2003. The remaining funds were appropriated for use beginning in May 

of FY 2003. Table 3 provides a detailed account of the multi-year appropriations approach 

taken by Montana to invest the Reed Act funds strategically. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 70

Use of the Reed Act funds on ES and UI 

Montana appropriated $11.4 million for improvements in UI administration and $7.2 million 

for improvements in ES. 

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

Area Amount Uses 

Unemployment Insurance $11.4 million - Hiring additional initial claims takers 

- Providing automation funds to improve tax and benefit systems 

- Increasing remote claims processing 

- Increasing crossmatches 

Employment Services $7.2 million - Skies (local offices job match system) 

- Supplemental funds 

- Automation and research & analysis 

Table 3 provides more detail on the specific uses of the Reed Act funds from FY 2003 to 

FY 2008. 

Table 3: Specific Uses of the Reed Act Funds from FY 2003 – FY 2008 

FY 03 FY 04 FY 05 FY 06-08 Total 

Workforce Services 

Division 

 

Funding Supplement 

(AFT) 

4,111,000 600,000 609,223 5,320,223 

Skies On-line 1,156,000 83,000 1,239,000 

Research & Analysis 

Automated Systems 

 300,000 300,000 

Implementation & Support  300,000 300,000 

Unemployment Insurance 

 

Funding Shortfall 761,946 1,060,615 1,259,818 3,082,379 

Bond Payment 692,083 582,739 579,248 1,500,917 3,354,988 

Move Tax back to DLI 265,578 3,616,132 140,927 4,022,637 

Internet Claims 580,000 50,000 630,000 

Crossmatch 302,400 302,400 

Total 6,410,607 7,967,886 2,672,217 1,500,917 18,551,627 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 71

Before the Reed Act distribution, Montana experienced significant under-funding of ES and 

UI administration. For example, Montana had to suspend activities under SKIES on-line 

project (an overdue modernization of its labor exchange system) due to lack of sufficient 

funding. With the Reed Act distribution, Montana allocated $4,111,000 to ES in FY 2003 to 

maintain current levels. The department set aside $300,000 for Research and Analysis and 

$300,000 in FY 2004 for automation within the workforce services Division. 

Montana had implemented an Administrative Fund Tax (AFT) in 1983 to address federal 

funding shortfalls in ES and to maintain delivery of ES through rural Job Service offices. 

The Montana Employment Security Account (ESA) is funded by an employer tax on employees’ taxable wages of 0.13%. Through a one-time fund switch, $4,111,000 of Montana’s 

Reed Act distribution replaced ESA funds that have supported Wagner-Peyser Act activities. 

Through FY 2008, the legislature appropriated $5.3 million to substitute for funds that would 

have derived from its Administrative Fund Tax (AFT). 

Investment in UI included hiring additional initial claims takers and other staff in overpayments and integrity areas, providing automation funds to improve tax and benefit systems, 

increasing crossmatches to improve program integrity and overpayment recovery, and other 

areas to address federal funding shortfalls. The management of the tax collection system is 

in the process of being moved back to the Department of Labor and Industry (DLI). Prior to 

this, the Department of Revenue managed the UI tax collection system, and it was experiencing automation and data integrity problems. The management of the UI tax collection system 

was moved back to the DLI because of complaints from employers that the UI tax collection 

system was not functioning efficiently. 

The Reed Act distribution will be used to pay bond payments on bonds that had financed 

both benefit and tax automated reengineering efforts. This amounts to approximately $3.3 

million to be paid over the next six years. 

Use of Reed Act funds on benefits, tax and solvency 

The Reed Act funds contributed to solvency – when the bill was passed, the trust fund had a 

16.7 month reserve. Without the Reed Act, the reserves would have fallen to 15.1 months. 

Since Montana was relatively solvent at the time of the Reed Act distribution, (AHCM of 

1.39), it plans to spend the funds on other purposes over the next few years. The Reed Act 

funds improved solvency to the extent that the money will be spent over a period of five 

years thus keeping a higher trust fund level for several years. 

The Reed Act funds stalled a rate increase to Schedule 2 in Montana’s experience rating 

schedules - without the Reed Act Montana would have moved to Schedule 2 from Schedule 

1 in January 2003. The tax rate would have increased from 1.37% to 1.57%. There was a 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 72

$9 million reduction in UI taxes from $72 million to $63 million due to the Reed Act distribution. 

Montana expanded benefits (estimated cost is $5 million) before the Reed Act distribution. 

The number of maximum benefit weeks increased from 26 to 28. The benefit amount also 

increased from 63% to 66.5% of average weekly wage. This benefit increase, however, was 

not related to the Reed Act distribution. 

State observations 

Montana reported the DOL guidance gave an opportunity to educate legislators and employers about the Reed Act distribution, but there seemed to be a greater need for educating legislators specifically on the uses and restrictions of the Reed Act funds. The state also reported 

that the Governor and the legislators would have liked to spend the funds on several uses, but 

were unable to, since the funds were restricted to specific uses. In the NASWA Reed Act 

Distribution Survey,21 Montana reported that the Reed Act funds allowed states to fund 

costly, necessary automation projects that it would not be able to fund within its yearly allocations. Montana also stated that small states faced many of the same infrastructure needs 

for automation as larger states, however, without the economies of scale, and that the Reed 

Act would help address some of their automation needs. 

 

21 Conducted in September 2002 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 73

3.6.6 New Jersey 

NEW JERSEY 

A CASE ANALYSIS OF THE USE 

OF THE 2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003 

Process for developing proposals and communicating with state decision-makers 

New Jersey retained about $207 million of its $242.9 million distribution in its trust fund. 

The Reed Act Distribution added 8% to New Jersey’s balance as of the end of March, 2002. 

At that time, New Jersey’s unemployment insurance (UI) program was relatively solvent 

with an average high cost multiple of 1.12. Table 1 compares New Jersey’s situation at the 

end of the first quarter of 2002 and the first quarter of 2003. 

Table 1. Summary of the New Jersey UI Program Data 

for the First Quarter of 2002 and the First Quarter of 2003 

Measure 1st Quarter 

2002 

1st Quarter 

2003 

Reed Act Distribution $242.9 million N/A 

Trust Fund Balance $ 2,998.4 million $1,858.3 million 

Percent Increase in New Jersey UI Account 8% N/A 

Average High Cost Multiple (AHCM) 1.12 0.84 

Average Tax Rate on Total Covered Wages 0.8% 0.9% 

AWBA $327.15 $337.96 

Average Duration on UI 17.2 Weeks 18.7 Weeks

The initial proposals developed by the state administrator and the commissioners took into 

account the concerns of labor and industry. The proposals were presented to the governor, 

and later to the state Senate and House committees in charge of workforce issues. The legislature made no further changes in the proposals. 

Proposals have been prepared for the Reed Act funds in FY 2004, although appropriation actions had not been taken by the summer of 2003. These call for a total of $30 million, with 

approximately $24 million to be used for UI benefits system modernization and $5.5 million 

to pay collection agencies for collecting unpaid UI taxes. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 74

Proposals for expanding benefits have been put forward in the legislature. This would increase benefits to part-time workers. The estimated cost of these proposals is from $15-$100 

million annually (depending on economic conditions). UI taxes were cut as a health care tax 

equivalent to the UI tax cut was reinstituted. 

It was the belief of those interviewed that the USDOL guidance as well as the restrictions set 

by federal law on the use of Reed Act funds were appropriate, and helped ensure the funds 

were used towards the UI/ES part of the workforce development system, as opposed to other 

workforce related uses. 

Use of the Reed Act funds on ES and UI 

A total of $36 million was appropriated in FY 2003, and a request for a further $30 million 

was made for FY 2004. At the time of our interview, in June 2003, the appropriations bills 

had not been voted on. 

The already appropriated funds in FY 2003 will be used to enhance the ES capabilities, both 

programmatically and by investing in information technology. The UI investment segment 

in 2003 was the first of three planned segments that will renovate the benefits and tax systems. 

A total of $ 24 million is planned in FY03 for technology improvements to the UI benefit 

payment system and tax system. This will include enhancements such as remote claims 

processing technology, continued improvements of the claims reporting and certification 

telephone technology, benefit-wage new hire cross match technology, appeals technology, UI 

legacy database modernization and employer accounts systems. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 75

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

Area Amount Notes 

Employment Services 

$12 million A combination of IT and programmatic improvements to improve ES delivery in its onestops and job seeking/labor market capabilities 

Unemployment 

Insurance 

$24 million First segment of a 3-year $100 million improvement of the benefit and tax systems. 

These improvements include 

- Remote claims processing technology 

- Continued claims reporting and certification telephone 

technology 

- Benefit-wage new hire crossmatch technology 

- Appeals technology 

- UI legacy database modernization 

- Employer accounts systems 

Use of the Reed Act funds on benefits, tax and solvency 

New Jersey officials stated that the Reed Act Distribution did not impact the tax situation in 

either 2003 or 2004. The New Jersey Trust Fund was stable and highly solvent (at $1.9 billion), and New Jersey's unemployment rate has continued to be well below the national average (at 4.8% in June 2003). An unrelated change in New Jersey's UI tax occurs each year as 

the legislature changes the percent of charity care (health care) tax that is collected under the 

umbrella of UI taxes. This is done in a manner to ensure the unemployment taxes do not increase. 

As of August 2003, a proposal has been introduced, but not voted on in the general assembly, 

aimed at increasing benefits to UI recipients in New Jersey. The proposal is estimated to cost 

between $15-$100 million per year, based on the number of claims. 

State observations 

New Jersey recognized that the value of using the Reed Act distributions for upgrading its 

workforce services infrastructure, including UI infrastructure. Because there are insufficient 

resources in the regular UI and Wagner-Peyser Act grants, New Jersey would not have been 

able to make most of the improvements it was planning if it did not have the Reed Act funds. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 76

3.6.7 Ohio 

OHIO 

A CASE ANALYSIS OF THE USE 

OF THE 2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003 

Process for developing proposals and communicating with state decision-makers 

Ohio received $343 million in Reed Act funds. The Reed Act Distribution added 23% to 

Ohio’s balance as of the end of March, 2002. At that time, Ohio’s unemployment insurance 

(UI) program had an AHCM of 0.54. Table 1 compares Ohio’s situation at the end of the 

first quarter of 2002 and the first quarter of 2003. 

Table 1. Summary of the Ohio UI Program Data 

for the First Quarter of 2002 and First Quarter of 2003 

Measure 1st Quarter 

2002 

1st Quarter 

2003 

Reed Act Distribution $343 million N/A 

Trust Fund Balance $1,852.4 million $1,156.2 million 

Percent Increase in Ohio UI Account 23% N/A 

Average High Cost Multiple 0.54 0.45 

Average Tax Rate on Total Covered Wages 0.3% 0.5% 

AWBA $253.80 $253.46 

Average Duration on UI 14.4 Weeks 15.9 Weeks 

Ohio had started planning for a Reed Act distribution about four months prior to the actual 

distribution. Realizing this would be one-time money, the plans call for investing in new and 

upgraded capabilities, rather than establishing recurring expense programs. Although labor 

and industry were not specifically involved in planning the proposals, they were presented to 

the state advisory council for approval prior to sharing with the state assembly. The council's 

support was helpful in navigating the legislative process, as some members on the council are 

members of the state legislature, and the council has a good reputation with the state legislature from its work with unemployment compensation law. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 77

In general the guidance from the DOL was found to be helpful, especially in helping focus 

legislators on the authorized uses of the Reed Act funds. 

The process and proposals were to some extent geared towards using the Reed Act distribution to shore up the trust fund, and thus avoid an automatic tax increase. Ohio’s original plan 

left $216 million of the distribution unobligated within its trust fund, which helped prevent 

an increase in employer taxes for 2003 and 2004. The unobligated balance has been reduced 

to $191 million as the state dedicated $25 million towards the transition from the current local office structure to call centers and processing centers. The Reed Act helped keep the fund 

balance in 2003 at a level similar to the year before, avoiding an automatic tax rate increase 

that would have otherwise occurred. Most of the Reed Act distribution will continue to remain in the trust fund as cash and will not be withdrawn until obligations are due. This will 

maximize the solvency of the fund for tax rate purposes.

Ohio’s goal was to allocate a portion of the money to support the administration of the Unemployment Compensation and ES programs and ensure solvency. Much like other states, 

Ohio is under-funded by the federal government for the administration of UI and ES. This 

affects Ohio’s ability to operate ES and UI programs. As a result, it has been necessary for 

Ohio to use its General Revenue Fund and State penalty and Interest Fund dollars to make up 

the shortfall. 

The tax rate for the coming year is calculated based on balances as of June 30. A “Minimum 

Safe Level” (MSL) trust fund balance is determined to avoid an automatic tax increase. This 

is an annual calculation of what fund balance would be required to guarantee that the fund 

would not become insolvent in a moderate recession for one year. If the trust fund balance is 

15% below the threshold, the tax rate increases by 1/10th of a percent, avoiding a fall in the 

trust fund balance. There are rate increases for 30%, 45%, and 60% below the MSL. 

Ohio did not expect the Reed Act distribution to have a discretionary stimulating economic 

impact outside of the tax avoidance and the direct expenditure of dollars on investment in the 

system. 

Use of the Reed Act funds on ES and UI 

Table 2 summarizes the planned uses of the Reed Act funds on ES and UI. The state plan 

called for a total of $78 million to be used for UI administration over the next 3 years to offset state general revenue and penalty interest funds traditionally used to supplement the operation of the program; labor market information improvements in the amount of $3 million; 

$10 million for investment in certified one-stop centers; $30 million for a new UI Tax system; and $6 million for policy and program staff training and equipment. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 78

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

Area Amount Notes 

Employment Services $19 million $3 million of MIS, $6 million for equipment and training, $10 million for the operation of one-stops 

Unemployment Insurance 

Administration improvements 

Unemployment Insurance 

Replace penalty and interest fund 

Unemployment Insurance 

New UI Tax system 

$25 million 

$78 million 

$30 million 

Includes new call centers 

Spread out over a 3 year period 

Previously filed a PCI on this 

investment 

 

The investment in ES will primarily focus in investing in the one-stop system. Ten million 

dollars are designated for the operation of one-stops, while $3 million is tagged for improvement of labor market information systems and another $6 million for training and 

equipment purchases to support the one-stops and enhance value of IT investment. 

Of the funds designated for the UI system, as much as $54 million will reimburse the Ohio 

General Revenue Fund for UI supplemental funds that have been taken out of the penalty and 

interest funds. General fund supplements are expected to continue once Reed Act funds are 

no longer available to substitute. 

An investment in call centers and related upgrades in benefit services (to include increased 

telephone capacity later on) is estimated at $25 million. 

The remaining $30 million will be used to invest in the Unemployment Compensation Tax 

system. Ohio had previously filed a PCI for this purposes that provides details on the value 

of this effort. The old system is a cumbersome and error prone legacy system that contributes to undercollection of UI taxes 

Use of the Reed Act funds on benefits, tax and solvency 

Ohio used all of the distribution, except for the specific planned expenditures in table 2, to 

improve trust fund solvency. The Reed Act helped keep the fund balance in 2003 at a level 

similar to the year before, avoiding an automatic tax rate increase that would have otherwise 

occurred. Benefits payouts also increased dramatically and the maximum weekly benefit 

amount increased automatically under Ohio law. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 79

Ohio has had an alternate base period for some time as well as unemployment benefits for 

workers who have worked more than 20 weeks in the previous 52, or made more than $176 

per week on average for the same period. It was the consensus among the state administrator's office and stakeholders that the one-time nature of the Reed Act distribution made it infeasible to introduce new benefits or to make changes to the structure of existing benefits. 

State observations 

Ohio noted that it was necessary to communicate early in the process to the state legislature22. It also noted that the Reed Act funds were “one-time monies for one-time expenditure”. 

 

22 NASWA Reed Act Survey, conducted in September 2002. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 80

3.6.8 Virginia 

VIRGINIA 

A CASE ANALYSIS OF USE 

OF THE 2002 REED ACT DISTRIBUTION 

AS OF JUNE 2003

Process for developing proposals and communicating with state decision-makers 

Virginia received a $214.9 million Reed Act Distribution. The Reed Act Distribution added 

30% to Virginia’s balance as of the end of March, 2002. At that time, Virginia’s unemployment insurance (UI) program was relatively solvent with relatively low taxes, relatively high 

average weekly benefits, and relatively low average duration on UI. Table 1 compares Virginia’s situation at the end of the first quarter of 2002 and the first quarter of 2003. 

Table 1. Summary of the Virginia UI Program Data 

for the First Quarter of 2002 and First Quarter of 2003 

Measure 1st Quarter 

 2002 

1st Quarter 

 2003 

Reed Act Distribution $214.9 million N/A 

Trust Fund Balance $ 941.5 million $407.0 million 

Percent Increase in Virginia UI Account 30% N/A 

Average High Cost Multiple 1.04 0.69 

Average Tax Rate on Total Covered 

Wages 

0.1% 0.2% 

AWBA $308.11 $295.39 

Average Duration on UI 11.5 Weeks 14.2 Weeks 

Virginia had approximately three weeks to develop the proposals for allocating the Reed Act 

funds. The initial proposals were developed by members of the finance and field operations, 

and staff to the Virginia Employment Commission (VEC). The Virginia General Assembly 

held a special one-day “Veto” Session on April 17, 2002 during which it appropriated $6.2 

million for ES and $24.7 million for UI or about 14 percent of its Reed Act distribution for 

the UI and job service programs in the 2002-2004 biennium. The remaining $184 million 

was left in the Virginia unemployment trust fund account to improve solvency. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 81

Use of the Reed Act funds on ES and UI 

Virginia appropriated $6.2 million for ES and $24.7 million for UI administration. Table 2 

summarizes Virginia’s use of the Reed Act funds: 

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

Area Amount Uses 

Unemployment Insurance $24.7 million - Upgrading tax, benefit and accounting systems 

- Technology improvements in customer call centers 

Employment Services $6.2 million - Supporting Wagner-Peyser Act 

activities and providing basic levels of service at customer care 

centers 

A total of $7 million of the $24.7 million was used to augment basic UI functions, such as 

upgrading their tax, benefit and accounting systems. A total of $17.7 million was used for 

improvements in the customer contact projects/call centers and other technology initiatives. 

In the Employment Services area, Virginia supported Wagner-Peyser Act activities in Governor Warner’s Coordinated Economic Relief Centers, conducted operations at basic levels 

of service and transition to Customer Contact Centers while offsetting reductions in federal 

funding and increased operating costs. 

The Reed Act funds were also used to substitute for state supplemental funds that were then 

reallocated to programs other than UI/ES. In 2002, $2 million was committed from the penalty and interest fund to support UI and ES, including remote claims processing. 

Use of the Reed Act funds on benefits, tax and solvency 

The Reed Act funds helped avoid an increased tax rate. In the absence of the Reed Act, an 

average of $6 per employee increase would have been imposed to the employer tax. This 

avoidance thus saved employers in Virginia an estimated $19.3 million dollars in 2003. 

The former Governor temporarily increased benefits in response to the September 11, 2001 

terrorist attacks on the Pentagon in Northern Virginia. The deposit of $184 million into the 

UI trust fund helped to offset the cost of increased benefits to keep taxes at a lower level and 

to potentially avoid the imposition of a solvency surtax. The improved solvency might have 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 82

been a factor that lead to Virginia legislative action to eliminate the Social Security benefit 

offset and enact an alternate base period. 

State observations 

The DOL guidance was useful in explaining how the funds could be used. The VEC found it 

necessary to educate legislators on its programs and funding processes, its relationship to the 

DOL, and on the nature and implications of funding shortfalls.23 The VEC and the Virginia 

General Assembly carefully considered both the administrative needs of the VEC and the 

solvency requirements of the UI trust fund in determining the best use of the Reed Act Distribution. Higher unemployment had a significant depleting effect on the trust fund that the 

infusion of the Reed Act funds has helped to alleviate.24 The VEC emphasized that the Reed 

Act distribution, while substantial, was not a source of limitless funding that lessens their 

need to continue to request adequate administrative funding and to carefully budget for its 

use.25

 

23 Reed Act Distribution Survey conducted by NASWA, September, 2002 

24 Ibid. 

25 Ibid. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 83

3.6.9 Washington 

WASHINGTON 

A CASE ANALYSIS OF THE 

2002 REED ACT DISTRIBUTION

AS OF JUNE 2003

Process for developing proposals and communicating with state decision-makers 

Washington received a $167 million Reed Act distribution. The Reed Act Distribution added 

12% to Washington’s balance as of the end of March, 2002. At that time, Washington’s unemployment insurance (UI) program was relatively solvent with an average high cost multiple (AHCM) of 0.96. Table 1 compares Washington’s situation at the end of the first quarter 

of 2002 and the first quarter of 2003. 

Table 1. Summary of the Washington UI Program Data 

for the First Quarter of 2002 and the First Quarter of 2003 

Measure 1st Quarter, 

2002 

1st Quarter 

 2003 

Reed Act Distribution 167 million N/A 

Trust Fund Balance 1,616.8 million $1,012.0 million 

Percent Increase in Washington UI Account 12% N/A 

Average High Cost Multiple (AHCM) 0.96 0.73 

Average Tax Rate on Total Covered Wages 1.0% 1.5% 

AWBA $320.01 $317.93 

Average Duration on UI 17.4 Weeks 19.2 Weeks

Proposals for the use of the Reed Act funds were generated within the agency and cleared 

through the Governor’s office before being submitted to the legislature. Stakeholders such 

as the UI Advisory Council were active in reviewing the proposal for the use of Reed Act 

funds and key members of the UI Advisory council played an active role in policy formulation as the legislative negotiations proceeded. Steps were taken to educate the stakeholders 

about the Reed Act funding and detailed briefings were given to the Governor’s Policy and 

Budget personnel, legislative staff and legislators. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 84

Decisions on the use of Reed Act funds for the state biennium (July 2003-June 2005) were 

made final on June 11, 2003 as the legislature completed its work. An amount of $8.3 million is appropriated for UI Administration and $11.5 million is appropriated for the cost of 

implementing sweeping unemployment insurance legislative changes, for a total of $19.8 

million. The remainder of the $167 million distribution is retained in the trust fund to contribute to the solvency of the fund. 

Use of the Reed Act funds on ES and UI 

Table 2 provides a breakout of the planned uses of the Reed Act funds. 

Table 2: Specific UI and ES Investments Planned With Reed Act Funds 

Area Amount Notes 

UI administration $8.3 million - Improved data collection process for initial claims 

- Electronic data management system (imaging) 

- Staff retention in WorkSource offices 

UI Legislative Changes $11.5 million - New calculation rates for benefits 

- New employer tax mechanism 

- New penalties for delinquent tax reports 

ES None 

No Reed Act resources were appropriated for ES. Washington had a proposal to expand a 

state-owned WorkSource Office’s infrastructure (for a building constructed with Reed Act 

funds), but this proposal was not adopted. 

During FY 2003, Washington State suffered a $14 million reduction in UI funding from the 

federal government as a result of the US Department of Labor implementing a new way of 

allocating administrative funds26. Washington’s Reed Act proposals are strategic investments for their UI claims telecenter operations, which are designed to not only improve customer service, but to position the agency to “weather the storm” of inadequate funding. 

Washington will receive $8,283,000 for UI Administration and $11.5 million to implement 

legislative changes in the UI system. The investments in UI include: 

 

26 The model referred to here is the “Resource Justification Model”, or RJM. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 85

1) Improved and timely eligibility decisions through an electronic data management system 

(imaging) for adjudicators. The cost of this investment is $1,881,345 and it will be amortized 

using funds from future UI administration grants. 

2) Improved initial claim process via collecting information from the claimant, whether on the 

phone or via their internet claim and passing this information to Washington’s benefit system. The benefit system will have text-based screens converted to a modern graphical user 

interface (GUI), so that screen data collected from the claimant can be interfaced with the 

automated system. The cost of this investment is $2,065,117 and it will be amortized using 

funds from future UI administration grants. 

3) A low-income adult initiative was proposed to improve labor market outcomes, leading to 

improved wage progression and job stability, at a cost of $6.5 million. The legislature did 

not appropriate funds for this activity and instead appropriated $4,337,000 for the purpose of 

retaining staff in our WorkSource Offices who assist UI claimants – who otherwise would 

have been subject to reduction because of the funding shortfall caused by the lack of federal 

UI administrative funds nationally, and the implementation of the RJM. 

4) A total $11.5 million has been appropriated for the two year biennium to cover the cost of 

implementing Second Substitute Senate Bill 6097, which makes sweeping changes in the 

way employers are charged unemployment insurance taxes and how claimants qualify for 

benefits. The combination of reduced employer taxes and benefit cuts for workers are designed to make Washington State more “business friendly” by reducing the costs of the unemployment insurance system to employers. 

a) The Second Substitute Engrossed Bill 6097 passed the legislature and was signed by the 

Governor on June 20, 2003. Changes that immediately affect claimants and employers 

include:27

i) New calculation rates for benefits effective January 2004: The maximum weekly unemployment benefit payment increases from $496 to $510 for new claims filed between July 6, 2003 and January 3, 2004, then returns to $496 thereafter 

ii) New employer benefit charges: Benefits paid to claimants with irregular earnings will 

now be included in the employer tax calculations 

iii) Certain alien workers no longer covered by UI: Employers are no longer required to 

report wages or pay unemployment taxes for certain temporary workers from other 

countries 

iv) New penalties for delinquent tax reports: Employers who fail to file timely and complete UI tax reports can be charged a penalty of up to $250 

b) Other substantial changes to the unemployment program required by the new legislation 

will be implemented next year. 

 

27 http://www.wa.gov/esd/AgencyInfo/newsreleases/nr071703.pdf 
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Center for Employment Security Education and Research 86

Use of the Reed Act funds on benefits, tax and solvency 

The $167 million Reed Act distribution was key in avoiding the movement to a higher tax 

schedule for employer taxes. Thus, the Reed Act distribution contributed to the solvency and 

Washington employers saved an estimated $172 million in unemployment taxes in 2003. 

The lower tax rates were the result of the automatic application of current statutes. In 2003, 

the average employer tax rate increased to 2.51% (Schedule B) on a wage base of $29,700 

(escalates based on average annual wages) from Schedule A in 2002, when the average employer tax rate was 2.27% on a wage base of $28,500. Table 3 illustrates the change in the 

average employer taxes paid in 2002 and 2003. 

Table 3: Employer UI taxes in 2002 and 2003 

Schedule A 

(In effect 2002) 

Schedule C 

(In effect 2003, 

without the Reed 

Act Distribution) 

Schedule B 

(In effect 2003) 

Average employer tax 

rate 

2.27% 2.97%. 2.51% 

Wage base $28,500 $29,700 $29,700 

Average employer tax 

per employee 

$646.95 $882.09 $745.47 

The average employer paid 2.27% on $28,500 or $646.95 per employee under Schedule A in 

2002. In 2003 (Schedule B), the employer pays 2.51% on $29,700 or $745.47 per employee, 

an increase of 15.2% from 2002 (a combination of the rate increase and the higher salary 

base). 

Without the Reed Act distribution, Washington would have been in Schedule C, with an average employer tax rate of 2.97%. If Washington had gone to Schedule C, the employer 

would have paid 2.97% on $29,700, or $882.09 per employee, an increase of $235.14 per 

employee or 36.34% over 2002. 

State observations 

A few key lessons were learned by the Washington’s state administrator's office: 

• State officials reported that it was important to educate the stakeholders and authorizing environment concerning the opportunities available through the Reed Act distribution.
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 87

• State officials reported they may have underestimated the level of support they could 

garner from the authorizing environment for Reed Act investments in UI and ES 

The funds were appropriated for a two-year period. Washington has no current plans for proposals beyond that time frame. 
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SECTION IV 

QUANTITATIVE ANALYSIS 
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Center for Employment Security Education and Research 90

4.1 INTRODUCTION TO QUANTITATIVE ANALYSIS

4.1.1 Background and Purpose 

The quantitative analysis presented here is consistent with the process evaluation design presented jointly by CESER and Booz Allen to USDOL in the fall of 2002. The 

purpose was described in the process evaluation: 

“This process evaluation analyzes the spending of [Reed Act] funds by the states 

and the factors that drive this spending. 

The purpose of the process evaluation is to study the states’ implementation, 

policies, institutional outcomes and individual state outcomes (from existing data) 

and to glean federal policy consequences. The process evaluation consists of 

data collection, quantitative and qualitative analysis of the use of funds and 

documentation.” 

The quantitative analysis presented here shows a combination of analysis the team 

conducted to gain an understanding of the issues that could potentially influence states’ 

decisions of to use/not use the Reed Act funds. This included both an evaluation of key 

trends, testing of specific hypotheses, as well as evaluation of survey data collected by 

NASWA in two separate studies completed in January 2003 and February 2004. 

The quantitative analysis complements the case studies presented above, to provide a 

picture of the apparent motivations and political and economic issues that influence the 

decisions at the state level on how Reed Act funds are used. 

The analysis was conducted using data sets that reached back to the first quarter of 

1999, and, in most cases, through the second quarter of 2003. In general there is approximately 2-3 quarter lag in the availability of the data. The team therefore decided to 

complete the analysis once the data for the second quarter of 2003 were available in 

the late fall of 2003. The bulk of the quantitative analysis was thus completed in the 

fourth quarter of 2003 and first quarter of 2004, with some additional fact checking and 

validation in the early part of the second quarter of 2004. 

4.1.2 Quantitative Analysis Approach 

The quantitative analysis was accomplished in three broad steps: 

1. Establish hypotheses 

2. Explore available primary and secondary data 

3. Test hypotheses 

The hypotheses to be tested were established in cooperation with the USDOL and were 

as follows: 
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Center for Employment Security Education and Research 91

Hypothesis 1: High unemployment rates will lead the states to improve their 

solvency, rather than committing their Reed Act funds to specific 

uses. 

Hypothesis 2: States with a high percent of labor force unionization are more 

likely to increase benefit payments. 

Hypothesis 3: States with a higher per capita GDP and low unemployment 

rates are more likely to increase benefit payments. 

Hypothesis 4: States that are more solvent are likely to spend their Reed Act 

funds on benefit expansions. States that have low solvency levels will not spend their Reed Act funds on benefit expansions. 

Hypothesis 5: States that are more solvent are likely to spend their Reed Act 

funds on tax cuts. States that have low solvency levels will not 

spend their Reed Act funds on tax cuts. 

Hypothesis 6: States with higher unemployment rates, lower GDP and higher 

high cost multiples are more likely to extend benefit duration or 

expand eligibility. 

Prior to testing these hypotheses the team examined a broad array of primary and secondary data that were available. This included data provided by NASWA from the surveys completed in the fall of 2002 and winter of 2004. It also included status reports on 

state spending that were produced as part of this research effort. Other secondary 

sources included economic and labor statistics from both the Bureau of Labor Statistics 

at USDOL and the Bureau of Economic Analysis at the Department of Commerce. 

Other research is cited as used in the analysis. 

The informal examination of economic variables included both charting of variables 

such as the Trust Fund Balance (TFB), AWBA, the unemployment rate, and evaluation 

of these among the groupings of states into three AHCM groups. 

The third step of the quantitative analysis, to formally test the hypotheses, was initially 

to be accomplished through multiple regression models of economic indicator data. 

Upon further evaluation, and after attempting to structure data sets that provided sufficient fidelity for hypothesis testing, the team abandoned this approach in favor of a 

more limited, but ultimately more successful, approach. This second phase of the hypothesis testing involved grouping states by a relevant variable, and then examining the 

difference of these groupings on the variable to be tested. The process of testing is explained in more detail in section IV.4.2. 

The information in this quantitative section follows the approach used by the team, although the information presented here is shown in summary form. 

4.1.3 Data limitations and other challenges 
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Center for Employment Security Education and Research 92

As has been alluded to in the above sections, the research team faced a number of limitations in the analysis. In general these can be categorized as follows: 

1. Limitations in availability of data 

2. Limitations in available data 

3. Consideration of the use of standard statistical techniques as the sample 

used represents a census of the states 

4. Lag in data availability 

5. Complexity of motivations and factors influencing states’ decisions 

6. The effect being measured is small compared to overall economic forces 

7. Small population and/or sample, and small number of observation in each 

grouping (i.e., small cell sizes) 

8. Changes in baseline variables over time and the choice of base period 

Each of the first three limitations are inherent in the data sources being used and cannot 

easily be eliminated. Thus data that have not been collected and data that have been 

collected, but not in a usable format are of limited value. The fact that the sample is the 

same as the population means we must be careful in interpreting the results of the hypothesis testing, although the correlation of certain groupings should be considered very 

sound. 

The remaining five challenges can and have to a certain extent be mitigated. We have 

for example avoided the lag complexities and the co-linearity of variables inherent in 

multiple regression analysis by grouping the states according to one of the variable to 

be tested and then comparing the groups. This approach helps mitigate the small population effect, but can increase the challenges with small sample and cell sizes. The latter was on occasion dealt with by combining cells to ensure the tests yielded significant 

results. One issue emerges as groups are compared over time has to do with the use 

of moving group definitions. For example, once a threshold has been established 

based on a variable in a given year/quarter, a state may move from one group to another over time as the value of this variable changes over time. The operational approach has been to allow the groupings to change to reflect most accurately what the 

grouping is, as opposed to what states are in each group. This definition is consistent 

with the testing of hypothesis about groups, as opposed to testing hypothesis about the 

behavior of individual states. 

4.1.4 Definitions of terms used in the quantitative analysis 

The quantitative analysis uses a number of terms that are explained below: 

Hypotheses testing: The process of systematically testing predicted relationships 

using common statistical methods. This study uses two 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 93

main tests: 1) t-test of the mean assuming unequal variances, and 2) z-test of two proportions. 

AHCM Groups: The Average High Cost Multiple (AHCM) has been defined 

in this paper, but the use of groups based on the AHCM is a 

further enhancement, whereby certain relationships are 

tested by grouping the states by their AHCM (as a proxy for 

solvency). This grouping method allows the research to employ the statistical tests necessary for hypothesis testing. 

Average of AWBA: The AWBA has been defined in the text. The Average of the 

AWBA is simply the average across states that have been 

grouped together, and over a period of time (e.g., a quarter). 

This is an unweighted average. 

Months in Reserve: Similar to the AHCM, but the Months in Reserve, refers to 

the number of months a state has in reserves based on the 

revenue and expenses of the Trust Fund in that particular 

quarter. 

TFB: Trust Fund Balance. Refers to a part the USDOL UI Summary publication of quarterly TFB and related measures for 

each state and territory. 

Unemployment Rate: The unemployment rate for all non-farm civilian workers (defined and calculated by the Bureau of Labor Statistics). 

Covered employment: The number of workers covered by UI Laws. 

Per capita income: The mean income computed for every man, woman, and 

child in a geographic area. It is derived by dividing the total 

income of all people 15 years old and over in a geographic 

area by the total population in that area.28

4.2 TRENDS OF EMPLOYMENT RELATED VARIABLES FOR SELECT STATES

To gain insight into the similarities and differences in how key economic variables 

moved over time in different states and across the country, the team started out by 

charting certain key variables for the data set. The graphics presented here are demonstrative of the type of graphics the team evaluated. The graphs shown here help 

illustrate two data artifacts that must be considered in the hypotheses testing: 

 

28 Note: Income is not collected for people under 15 years old even though those people are included in the denominator of per 

capita income. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 94

1. Unemployment trends vary greatly across the country both in absolute and 

relative terms 

2. The relationship between unemployment and the trust fund balances, although always an inverse, is not equal among the states 

The charts are presented below for the nine states examined in the qualitative study: 

Iowa, Louisiana, Michigan, Minnesota, Montana, New Jersey, Ohio, Virginia, and Washington. Please note that all of the charts use the same left and right hand axis scale to 

ease of visual comparison. The source for all the graphs is the UI Data summary. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 95

4.2.1 Trends in Trust Fund Balances 

Figure 4.2.1 

Trends in Trust Fund Balances for selected states 1999.1 to 2003.2 

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in Louisiana

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis)

Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in Iowa

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis)

Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)

Source for all graphs is the USDOL ETA UI Data Summary 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 96

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in Michigan

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis)

Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in Minnesota

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis)

Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 97

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in New Jersey

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis) Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in Ohio

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis)

Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 98

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in Virginia

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis)

Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)

Trust Fund Balance per 1000 covered employment 

and Total Unemployment Rate in Washington

1999 - 2003

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

TFB per 1000 Covered TFB per 1000 w/o Reed Act Unemployment Rate

Unemployment Rate

Special Reed Act 

Distribution Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

TFB Per 1000 Covered

($000s)

Trust Fund Balance Per 1000 Covered 

(000s - Left Axis)

Unemployment Rate

(Percent - Right Axis)

Trust Fund Balance Per 1000 Covered 

Without Reed Act Distribution

(000s - Left Axis)
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 99

4.3. TRUST FUND MEASURES AND DESCRIPTIVE STATISTICS29

4.3.1 Introduction 

This section provides a number of charts and tables that display the relationship of economic and trust fund variables. Some of these graphs use the definition of the Average 

High Cost Multiple (AHCM) as the basis for grouping the states, and then evaluating differences among the AHCM groupings. 

Analysts consider a state UI program relatively solvent when it has enough funds in its 

trust fund account to cover its UI benefit costs during a year in which there is an economic recession. The “Average High Cost Multiple for the Most Recent Calendar Year” 

(AHCM) is one measure of state UI program solvency.30 An AHCM value of 1.0 suggests the state has enough funds in its trust fund account to cover UI benefit costs in 

the next 12 months comparable to the average payout for the most recent three recessions.31 Generally a higher AHCM suggests greater solvency and a lower AHCM suggests a greater risk of insolvency and a likely need to borrow to cover UI benefit costs 

during a recession. Figure 4.3.1, “States Grouped by the Average High Cost Multiple,” 

shows which states were relatively solvent and which states were at a greater risk of 

insolvency at the end of March, 2002, shortly after states received their Reed Act Distributions. The first column shows states with an AHCM below 0.5. Other things being 

equal, these states face the greatest risk of insolvency during 2002 and early 2003. In 

fact, by the end of Q2 2003, New York already had borrowed from the federal government to cover UI benefit costs and Texas probably would have borrowed if it had not 

received the Reed Act distribution in March 2002. The second group of states with 

AHCMs from 0.5 to 1.0 is at some risk of insolvency if high unemployment continues. 

The third group of states with AHCMs at 1.0 or greater faces little risk of insolvency as 

long as the recession is not too severe or too long. 

This examination of the AHCM shows that although some changes occur in the grouping over time, the grouping is relatively stable with only seven states moving down from 

one grouping to the next below over the period. 

The AHCM groupings indicated some trends in UI related variables are correlated with 

the trust fund balance as measured by the AHCM. However, these trends are somewhat masked by potential for counterweighing factors within each of the grouping that 

 

29 Source for all graphs in this section, unless otherwise noted, is: U.S. Department of Labor, Office of Workforce Security, 

Division of Fiscal and Actuarial Services, UI Data Summary. 

30 The Average High Cost Multiple is defined by the U.S. Department of Labor as the calendar year reserve ratio (or trust fund 

balance as a percent of total covered wages) divided by the Average High Cost Rate. The Average High Cost Rate is the 

average of the three highest calendar year benefit cost rates in the last 20 years (or a period including three recessions, if 

longer). Benefit cost rates are benefits paid (excluding reimbursable benefits) as a percent of total wages in covered employment. See U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial Services, UI Data 

Summary, 1st Quarter CY 2002, June 2002. 

31 There is no general agreement on a standard level for a state’s AHCM at the beginning of a recession. Some analysts have 

argued for an AHCM standard as high as 1.5. 
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Center for Employment Security Education and Research 100

may act to reduce the strength of these trends. To examine some of these trends in 

more depth, the team completed charts for select states on key UI related variables. 

Figure 4.3.1 

States Grouped by the Average High Cost Multiple 

(Comparison of the End of First Quarter, 2002 and End of Second Quarter 2003) 

Low Group 

Less than 0.5 

Medium Group 

0.5 to 1.0 

High Group 

1.0 or greater 

Q1-2002 

(End) 

Q2-2003 

(End) 

Q1-2002 

(End) 

Q2-2003 

(End) 

Q1-2002 

(End) 

Q2-2003 

(End) 

Arkansas Arkansas Alabama Alabama Alaska Arizona 

Illinois Illinois Alaska Arizona 

 Massachusetts California California Delaware Delaware 

Minnesota Minnesota Colorado Colorado District of Col. District of Col. 

Missouri Missouri Connecticut Connecticut Florida Florida 

New York New York Idaho Idaho Georgia Georgia 

North Carolina North Carolina Kansas Kansas Hawaii Hawaii 

North Dakota North Dakota Kentucky Kentucky Indiana Indiana 

 Ohio Maryland Maryland Iowa Iowa 

 Pennsylvania Massachusetts Louisiana Louisiana 

Texas Texas Michigan Michigan Maine Maine 

 Nebraska Nebraska Mississippi Mississippi 

 Nevada Nevada Montana Montana 

 New Jersey New Hampsh. New Hampsh. 

 Ohio New Jersey 

 Pennsylvania New Mexico New Mexico 

 Rhode Island Rhode Island Oklahoma Oklahoma 

 South Carolina Oregon Oregon 

 South Dakota South Dakota Puerto Rico Puerto Rico 

 Tennessee Tennessee South Carolina 

 Virginia Utah Utah 

 Washington Washington Vermont Vermont 

 West Virginia West Virginia Virgin Islands Virgin Islands 

 Wisconsin Wisconsin Virginia 

 Wyoming Wyoming 

Source: U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial Services, UI Data Summary, 1st Quarter CY 2002 and 2nd Quarter CY 2003. 

A few of the graphs also show comparison of the AHCM to other measures created to 

evaluate variables that provide a standardized measure across the states (i.e., comparison of benefit and tax measures per 1000 covered employment as a means of simplifying comparison between large/small states.) 

This informal analysis, although initially undertaken to deepen the team’s understanding 

of the data sets, proved to be extremely valuable in attempting to structure a modified 

approach for formally testing the study’s hypotheses. Additional graphs used for hypothesis testing are included in section IV.4 that deals with the hypotheses testing. 

These include: employment trends, unionization, unemployment, taxation and other 

variables.
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Center for Employment Security Education and Research 101

4.3.2 Summary of Trust Fund Measures and the Average High Cost Multiple 

In order to understand the relationship between key trust fund measures (in particular 

the AHCM) the team conducted an initial exploration of the data sets using descriptive 

statistics and charts. The following graphs were compiled using the following procedure: For each quarter of data available, all jurisdictions were (re)grouped based on the 

AHCM calculated in that quarter. The three groups (A/B/C) were defined as A: AHCM 

less than .5, B: AHCM greater than or equal to.5 and smaller than 1.0, and C: greater 

than 1.0. 

Figure 4.3.2 shows a summary of tests run on the differences of the AHCM groups. All 

the information in the table represents statistically significant differences. The bold text 

in the table shows those effects that contribute to a lower AHCM. What we observe is 

that the ‘low’ ACHM has four bolded areas, while the ‘mid’ and ‘high’ AHCM each have 

two, but not the same two. 

The table was compiled in a three steps, with the fourth allowing the team to analyze 

the results: 

1. For each quarter a state was assigned to a AHCM group. Thus, the states in 

the groups may change a little over time, although the definition of the group 

is stable. 

2. Calculate statistics that could be applied to the groups regardless of the population in the states’ workforce, thus the use of rates per 1000 covered employment. 

3. Compare the means of the groups to see if they are statistically different from 

one another (two sample t-test assuming unequal variances, α= 0.05) 

4. Examine what patterns may explain the differences in the groups’ AHCM 

Figure 4.3.2 

Statistically Tested Relationships Across AHCM Groups 1999.1-2003.2 

Source: The associations tested are drawn from data sources referenced in the bibliography. 

Note: All relationships have been tested as significant with a t-test of the means assuming unequal 

variances. 

Bold text indicates effects that contribute to lower AHCM. 

AHCM Group A: Low 

<0.5 

B: Medium 

0.5-1.0 

C: High 

>1.0 

Weeks compensated per 1000 covered 

employment More Less More 

Duration as unemployed Longer Shorter Shorter 

AWBA Higher Higher Lower 

Tax revenue per 1000 covered employment Lower Higher Lower 

Workers compensated per 1000 covered 

employment Fewer More Fewer 

Unemployment Rate Same Same Same 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 102

The result is that the A group differs from the C group primarily in a negative direction 

from a Trust Fund Balance standpoint, with longer duration of unemployment and higher 

AWBA. The B group differs from the C group in both a negative and positive direction, 

when considering the Trust Fund Balance. The positive strength of the B group, compared to the C group is that it has fewer average weeks of unemployment compensated 

and fewer weeks per 1000 covered. In the negative direction the B group when compared to the C group: collects less tax revenue per 1000 covered, pays a higher AWBA, 

and compensates more per 1000 covered than both the A and C group. 

4.3.3 Detail of Trust Fund Measures and the Average High Cost Multiple 

Figures 4.3.3 to 4.3.7 show detailed charts of the relationship based on the AHCM results that are shown in Figure 4.3.2. Each one is accompanied with short text explaining how the graph was compiled and what conclusions might be drawn from the information. 

Figure 4.3.3 

Months of Current Quarter’s Unemployment Benefits in Trust Fund 

Months of Current Quarter's Unemployment Benefits in Trust Fund

0

10

20

30

40

50

60

70

80

90

1999.1 2000.1 2001.1 2002.1 2003.1 1999.1 2000.1 2001.1 2002.1 2003.1 1999.1 2000.1 2001.1 2002.1 2003.1

ABC

Quarter/AHCM Grouping

Months

Source: U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial 

Services, UI Data Summary, 1st Quarter CY 2002 and 2nd Quarter CY 2003. 

Figure 4.3.3 shows the number of current months in reserve, based on current quarter's 

benefit payment. The information is provided for the first quarter in each of the years 

1999-2003. So, if for example in the first quarter of 2000 a state pays 300 in benefits 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 103

while 1000 is in the trust fund, the months in current quarter reserves is then calculated 

as: TFB / (Quarterly Benefits/3 months), or in the example: 1000 / (300/3) = 10 months 

(available in TF). 

The graphic shows (as could be expected based on the definition of the AHCM) that 

there is a dramatic difference in the number of months in reserve between the three 

groups, with the ‘high’ group reaching over 80 months in trust fund reserve (on average 

for the states in the AHCM group) during the height of the economic expansion. However, we also see that the average in the ‘low’ grouping is lower than the lowest level in 

the B group (2003.1), and the average in the ‘mid’ group is less than the lowest level in 

the C group (2003.1). The graphic also shows that the economic cycle manifests itself 

in each of the groupings, although at different trust fund reserve levels. 

Figure 4.3.4 shows another measure that we have produced to enable comparison 

across states and groups32. This measure, the 'Quarterly Unemployment Compensation per 1000 covered employment' is presented for each of the AHCM groups by (select) quarter. In contrast to the divergence in the previous graphic, we see on this graph 

that there is much less difference from grouping to grouping. In effect the ‘low’ and ‘mid’ 

groups are identical, with the ‘high’ group at a somewhat lower level of benefits paid per 

1000 covered employment. 

Figure 4.3.4 

Quarterly unemployment compensation per 1000 covered employment 

(1999-2003) 

Quarterly Unemployment Compensastion per 1000 covered

--Five year 1st Quarter Data Grouped by AHCM--

$0

$20

$40

$60

$80

$100

$120

ABC

Thousands

AHCM Grouping

1999.1

2000.1

2001.1

2002.1

2003.1

2003.2

Source: U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial Services, UI Data Summary, 1st Quarter CY 2002 and 2nd Quarter CY 2003. 

 

32 The reason for using an index based on 1000 covered employment is that simple averages of the states will give disproportionate impact of small states in the AHCM groups that are being used as an analytical basis. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 104

Figure 4.3.5 presents a combination graph, presenting both the average benefit amount 

paid per 1000 covered for each quarter in the data set, but also the average of the 

AWBA for each state in the AHCM grouping. The data demonstrate an important difference between the ‘high’ group and the (nearly identical) ‘low’ and ‘mid’ groups. During 

the economic downturn, the average benefit amount paid by the ‘high’ group states rose 

more slowly than it did for the ‘low’ and ‘mid’ groups. This may account for some part of 

the historical reason that ‘high’ states have higher AHCMs than the ‘low’ and ‘mid’ 

states. 

Figure 4.3.5 

Average benefits paid per 1000 covered employment 

over time by AHCM group 

$0

$50

$100

$150

$200

$250

$300

ABCABC

Average of Benpaid/1000 Average of AWBA

Measure by AHCM Grouping

1999.1

1999.2

1999.3

1999.4

2000.1

2000.2

2000.3

2000.4

2001.1

2001.2

2001.3

2001.4

2002.1

2002.2

2002.3

2002.4

2003.1

2003.2

Source: U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial Services, UI Data Summary, 1st Quarter CY 2002 and 2nd Quarter CY 2003. 

There are at least two possible explanations for this difference in the AWBA: the first is 

the composition of the workforce in the states in this group is both more homogeneous 

and has lower income. Thus as unemployment rises higher AWBA claimants do not 

account for a higher proportion of new claimants (i.e., as the downturn gets broader, 

AWBA does not rise as much when the second wave of claimants becomes unemployed). 

The second reason is that these states have structurally lower unemployment rates during recession times. Although a historical analysis of these factors is outside the scope 

of this project, we present the unemployment data for the period under study in figure 

4.3.6. This chart shows the average number of unemployed per 1000 in the labor force. 

This comparison of the unemployment levels shows that there is no statistically detectible difference between the AHCM groups. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 105

Figure 4.3.6 

Number of unemployed per 1000 in Labor Force by AHCM Grouping 

Average number of Unemployed per 1000 in Labor Force

0

10

20

30

40

50

60

70

ABC

AHCM Grouping

Number of Unemployed per 1000

1999.1

1999.2

1999.3

1999.4

2000.1

2000.2

2000.3

2000.4

2001.1

2001.2

2001.3

2001.4

2002.1

2002.2

2002.3

2002.4

2003.1

2003.2

Source: U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial Services, UI Data Summary, 1st Quarter CY 2002 and 2nd Quarter CY 2003. 

Figure 4.3.7 shows the tax collected per 1000 covered employment. It can be seen that 

during the expansion period, the states in the ‘low’ group collected about the same as 

the ‘high’ group. The ‘mid’ group, however, collected more than the other two groups 

(on average). During the economic downturn, possibly as a result of the Reed Act distribution, the states in the ‘high’ group reduced their revenue collection substantially 

compared to the other states – by almost $75 per 1000 employees per quarter in Q2 of 

2003, and by $25-30 in Q1 of 2003. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 106

Figure 4.3.7 

Revenue per 1000 in Covered Employment by AHCM Grouping 

Trust Fund Revenue per 1000 Covered Employment

$0

$50

$100

$150

$200

$250

ABC

AHCM Grouping

Quarterly Revenue

1999.1

1999.2

1999.3

1999.4

2000.1

2000.2

2000.3

2000.4

2001.1

2001.2

2001.3

2001.4

2002.1

2002.2

2002.3

2002.4

2003.1

2003.2

Source: U.S. Department of Labor, Office of Workforce Security, Division of Fiscal and Actuarial Services, UI Data Summary, 1st Quarter CY 2002 and 2nd Quarter CY 2003. 

4.3.4 Analysis of NASWA Surveys on states' use of Reed Act funds 

In the period since the distribution of the Reed Act funds in March of 2002, NASWA 

conducted two surveys of member states to gauge the issues relating to use of Reed 

Act funds. 

The more detailed first survey, completed in the fall of 2002, provided insight into a 

number of issues that influenced the states’ proposed and expected use of Reed Act 

funds. The questions in that survey became the basis of both the GAO’s survey of the 

states that was conducted in the fall of 2002, and of a subsequent interview guide developed by the research team for this project in the spring of 2003. The second study, 

conducted in January and February of 2004, provided follow-up answers to key questions relating to how states were using the Reed Act funds. References for how to find 

the complete text of both the NASWA surveys as well as the GAO report can be found 

in the bibliography. 

In addition to the analysis already completed by NASWA and which is included in their 

reports, the research team wanted to examine what changes might have occurred over 

time in the responses of the states. These changes could occur for a variety of reasons, such as insufficient time to appropriate funds immediately after the Reed Act distribution, change in policy, and necessity forcing the use of funds to shore up the Trust 

Fund. The NASWA survey results provide a narrative that explains some of these 

changes, but here we will focus on providing a graphical display of any changes that 

might have occurred. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 107

Figure 4.3.8 shows a comparison of how many states indicated that they had increased 

benefits in the aftermath of the Reed Act distribution33 in the fall of 2002 and January of 

2004. As the graphic shows, an additional 10 states had increased benefits in the period between the studies. 

Figure 4.3.8 

States’ increases in UI benefits (all programs) 

Has or will increase benefits

0

5

10

15

20

25

30

35

40

45

50

No Yes

Response

Count of States

2002

2004

Source: National Association of State Workforce Agencies. “State Use of the $8 Billion Reed 

Act Distribution.” April 2004 

A similar comparison of the remaining Reed Act funds in the trust fund indicates a similar change occurred, with more states having appropriated/spent some of their Reed Act 

funds by the end of the second survey than at the time of the first. Figure 4.3.9 demonstrates this shift. It must be noted, however, that some states were forced to spend 

their Reed Act funds as a result of depleting their trust fund and entering a borrowing 

situation, and this accounts for some of the change. 

 

33 It is important to note that in some cases benefits might have been increased without the Reed Act distribution. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 108

Figure 4.3.9 

Reed Act funds remaining in the Trust Fund (by quartile) 

0

5

10

15

20

25

30

35

40

45

50

0-24 25-49 50-74 75-100

Share of Reed Act Distribution Remaining (Quartiles)

Number of States

2002 2004

Source: National Association of State Workforce Agencies. “State Use of the $8 Billion Reed 

Act Distribution.” April 2004 

A similar comparison of the number of states whose taxes were lower, or whose taxes 

did not increase as a result of the Reed Act distribution is not possible since the question was asked in a manner that makes comparison impossible. 

4.4 SPECIFIC HYPOTHESES ABOUT USE OF REED ACT FUNDS34

4.4.1 Introduction 

A major complicating factor in attempting to devise testable hypotheses is the availability of data that are not compromised by the complexity of interaction among economic 

variables. For example, changes in the aggregate amount of paid benefits is a function 

of the number of claimants and the composition of claimants (e.g., more/fewer getting 

unemployed and newly unemployed workers may have higher/lower covered wages 

than those previously unemployed). 

From time-to-time there may also be major or minor changes in policy that affect benefits paid (in either aggregate or AWBA). These policy changes may include expansion 

of the number of eligible claimants, extension of benefit period, increase in the base 

 

34 Source for all graphs in this section, unless otherwise noted, is: U.S. Department of Labor, Office of Workforce Security, 

Division of Fiscal and Actuarial Services, UI Data Summary, 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 109

used for calculating the benefit amount, direct increase in the benefit amount, or a combination of these. 

The official data collected on the number of claimants, aggregate paid benefits, AWBA 

and the alike do not necessarily indicate changes in policy (i.e., in eligibility requirements and duration). Thus supplemental information on the actual changes in policy 

would be required (in addition to a model of the relationship of claims to unemployment 

rates) to attempt to understand the reasons for changes in the underlying data. 

A robust statistical test of the hypotheses about the impact the Reed Act distribution had 

on benefit payments or tax structure is thus a complicated matter. In lieu of robust statistical tests, it is possible to compile a table of changes planned or enacted by the 

states. Thus policy changes in the benefit structure would be tracked, indicating 

whether there was an increase or decrease. This, approach while feasible is compromised by the fact that it is hard to ascertain the true reasoning behind a policy change. 

While it is certainly plausible that given a substantial Reed Act distribution a state might 

be more likely to change benefits structure by increasing benefits or expanding eligibility 

during an economic downturn, it is impossible to say how much of an impact the Reed 

Act distribution had. This is necessarily so since some states might have expanded 

benefits even if there was no Reed Act distribution. With this in mind we have conducted the broad case studies in the qualitative section, and provided a number of 

graphs of a descriptive nature here in this quantitative section. The actual task of testing the hypotheses is presented below, with an explanation of the approach, challenges 

and results of each hypothesis. 

4.4.2 Testing process 

The available data for this hypothesis testing effort are limited in several respects. First, 

there is a considerable lag between the time when the decision to spend the Reed Act 

funds is made and the time when the Reed Act funds are reflected in the data. Second, 

the amount of data and its timeliness may sometimes be an issue. Third, a large number of macroeconomic variables impact the analytical environment and cannot all be incorporated in the analysis. Fourth, state-federal relationships are complex and difficult 

to capture. Fifth, the periodic nature of UI data collection and sixth, the general change 

in the business cycle that has occurred after the long expansionary period of the 1990s 

need to be considered. Finally, a further potentially complicating factor is the change in 

the composition of political officeholders in the 2000 elections, and the impact new political leadership may have had directly or indirectly on policies adopted in the period 

leading up to the Reed Act distribution. All these factors limit the ability of the researcher to discern patterns in the data. Given these limitations, we will attempt to test 

the hypotheses in a manner that is as robust as possible. When we cannot state with 

certainty that a hypothesis is proven, it will be rejected as stated and tested, or the evidence will be deemed insufficient to make a determination. 

Initially the team had planned to use regression analysis to test the relationships of key 

variables. After some initial efforts to construct the appropriate data sets and applying 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 110

statistical tests to those, it was determined that the data did not support that approach 

for testing. The multiple regression approach was thus abandoned, and a more limited 

test of means of groups was attempted. 

For each of the hypotheses the following 5 steps were followed: 

1) Establish the base grouping of states (e.g., AHCM, unionization, unemployment) 

2) Establish the statistical test to be used (two sample t-test of means assuming 

unequal variances or two sample z-test of proportions). 

3) Calculate the movement of change variable over time (absolute values) and the 

change in the change variable over time (relative change), as appropriate. 

4) Compare the means of the absolute and relative changes of the change variable 

using the chosen statistical test. 

5) Determine if the test provides evidence for accepting or rejecting the hypothesis 

as stated and tested, or if there is insufficient evidence. 

The testing of correlations does not, as is usual, indicate that there is a necessary 

causal relationship, but only that a move in one variable is correlated with a move in the 

other, without any ability to determine that one causes the other, as both may in fact be 

caused by some other variable(s) not tested. 

For each of the hypotheses we present the stated hypothesis, the rationale for evaluating it and the variables evaluated. We also provide a graphical reference of the underlying data and the conclusion of the test. 

4.4.3 Summary Results of Hypothesis Testing 

We present the complete results of the testing of each of the hypotheses below. Figure 

4.4.1 is intended to provide the reader with a brief overview of the results that are presented below. In summary, hypotheses 4 and 5 are accepted as stated and tested. 

Hypothesis 1 is rejected as stated and tested, although the reverse relationship of what 

was expected is found to exist and be statistically significant. Hypotheses 2 and 3 are 

rejected. Hypothesis 2 shows little indication to be true, while hypothesis 3 is less clear, 

and information exists that supports the hypothesis as stated and tested. 

 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 111

Figure 4.4.0 

Summary of Hypothesis Testing 

Hypothesis Result Comment 

Hypothesis 1: 

High unemployment rates will 

lead the states to improve solvency, rather than committing 

Reed Act funds to specific uses. 

 H0 (the hypothesis tested) that the mean of 

the change in the unemployment rates 

across the three groups examined are the 

same, is rejected, but correlation has opposite sign from hypothesis 1 (p=0.000) 

Evidence is that lower unemployment change is more 

consistent with not using the 

Reed Act funds 

Hypothesis 2 

States with a high percent of labor force unionization are more 

likely to increase benefit payments 

H0, that the change in the mean in the 

AWBA for the three unionization groups is 

the same, is accepted. There is no difference in the rate of change of AWBA or 

other benefit increases (p=0.22) 

The high, medium, low 

groupings of unionization 

show that the absolute 

AWBA levels are different for 

each of the three groups, but 

the rate of change is not 

Hypothesis 3 

States with higher per capita 

GDP and low unemployment are 

more likely to increase benefit 

payments 

H0, that there is no difference in the mean 

benefit increases among the groupings of 

states based on GDP and unemployment, 

is accepted (p=0.11) 

There is some indication that 

states with lower unemployment and higher income are 

more likely to increase benefits. 

Hypothesis 4 

States that are more solvent are 

likely to spend their Reed Act 

funds on benefit expansions... 

H0, that proportion of states increasing 

benefits in all three AHCM is the same, is 

rejected. There is strong evidence that 

states with highest AHCM are more likely 

to increase benefits (p=0.02) 

The test of the AWBA 

amount showed no difference, but the NASWA survey 

data are deemed more relevant, and used as the basis 

for the test. 

Hypothesis 5a 

States that are more solvent are 

more likely to spend their Reed 

Act funds on tax cuts. 

Hypothesis 5b 

States that are more solvent are 

more likely to spend their Reed 

Act funds on tax cuts. 

 H0a, that the change in tax collected per 

1000 covered employment is the same 

across each of the three AHCM groups 

tested is the same, is rejected 

(5a—p=0.001 on the high/low AHCM 

grouping comparison) 

H0b, that the proportion of states lowering 

taxes is the same in each of the AHCM 

groups, is rejected. 

(5b—p=0.04) 

Both tests indicate that 

states with highest AHCM 

are more likely to have lower 

unemployment taxes. Care 

must be taken since much of 

these tax decreases may 

occur automatically because 

of how tax schedules are 

determined. 

Hypothesis 6 

States with higher unemployment taxes, lower GDP and 

higher AHCM are more likely to 

extend benefit duration or expand eligibility 

N/A 

The combined requirements 

for the groupings of states 

left an empty set 

Source: Research Team Analysis. 

V

U

9Hypothesis Accepted

Hypothesis Rejected

Questions exist about hypothesis 

9

U

U

V

V

9
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 112

4.4.4 Results of Testing Hypothesis 1 

The first hypothesis was stated as thus in the research plan: 

 High unemployment rates will lead the states to improve their solvency, 

rather than committing their Reed Act funds to specific uses 

A formal approach for testing this hypothesis would include an attempt to demonstrate a 

statistically valid correlation between the unemployment level in states and their propensity to actively commit Reed Act funds to improving solvency. For example, we 

would have expected states that had higher absolute unemployment, or which had 

faster growth in unemployment to exhibit a tendency to not distribute the Reed Act 

funds, e.g., in the form of benefits. 

Figure 4.4.1 

Covered unemployment rates in 2003.2 by Remaining Reed Act Distribution 

Unemployment 

Rate

(%)

Nominal Increase 

in Unemployment 

Rate

Unemployment 

Rate

(%)

Nominal Increase 

in Unemployment 

Rate

Unemployment 

Rate

(%)

Nominal Increase 

in Unemployment 

Rate

States 2003.Q2 99.Q2 to '03.Q2 States 2003.Q2 99.Q2 to '03.Q2 States 2003.Q2 99.Q2 to '03.Q2

Michigan 3.4% 1.8% Oregon 5.0% 2.2% Wisconsin 3.2% 1.5%

North Carolina * 2.8% 1.6% Indiana 2.2% 1.3% Pennsylvania 3.9% 1.4%

Illinois * 3.1% 1.4% Colorado 2.1% 1.3% Kansas 2.5% 1.4%

Massachusetts 3.4% 1.3% Ohio 2.4% 1.2% Connecticut 3.2% 1.3%

Minnesota * 2.4% 1.3% Vermont 3.0% 1.0% South Carolina 2.7% 1.3%

Missouri * 2.5% 1.1% Arkansas 3.2% 0.9% Arizona 2.4% 1.2%

California 3.8% 1.1% Louisiana 2.0% 0.5% Washington 4.4% 1.2%

Delaware 2.3% 1.0% New Mexico 2.2% 0.3% Oklahoma 2.2% 1.1%

New York * 2.9% 0.9% Average 2.8% 1.1% Iowa 2.1% 1.1%

Texas * 2.2% 0.7% Idaho 3.4% 1.1%

Wyoming 1.8% 0.4% Georgia 1.9% 1.0%

Average 2.8% 1.1% Virgin Islands 2.7% 1.0%

New Hampshire 1.6% 0.9%

Average Excluding Virginia 1.6% 0.9%

Borrowing States 2.9% 1.1% Nebraska 1.6% 0.9%

Kentucky 2.4% 0.9%

New Jersey 3.3% 0.8%

Utah 1.8% 0.8%

Mississippi 2.5% 0.8%

Maryland 2.1% 0.7%

Alabama 2.2% 0.7%

Nevada 2.7% 0.7%

Tennessee 2.2% 0.7%

Maine 2.4% 0.6%

Florida 1.7% 0.6%

South Dakota 0.9% 0.4%

West Virginia 2.7% 0.3%

Montana 2.5% 0.3%

Rhode Island 2.9% 0.2%

District of Columbia 1.7% 0.1%

North Dakota 1.2% 0.0%

Hawaii 2.1% -0.2%

Alaska 6.2% -0.4%

Puerto Rico 4.6% -1.0%

Average 2.6% 0.7%

* Trust Fund depleted forcing Reed Act funds to be used

States Grouped By Remaining Trust Fund Balance (Feb 2004)

Covered unemployment rate in Q2 2003, and change from Q2 1999 to Q3 2003

Reed Act Funds Remaining 

34 to 68%

Reed Act Funds Remaining 

68 to 100%

Reed Act Funds Remaining

0 to 34%

Source: Research Team Analysis, and US DOL UI Data Summary. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 113

A number of factors complicate the testing of this hypothesis, and as such, each can 

create ‘noise’ in the data that could mask an actual trend. First, the effect of the Reed 

Act distribution could be overwhelmed by other external factors. An example of this is 

that many states were forced to spend their Reed Act distribution as the Trust Fund was 

depleted. Also, the number of observations is small, with only 53 jurisdictions and about 

12 quarters of data. Further, there are timing considerations inherent in the data. An 

effect may not be known at the time the decision maker is forced to make a determination on how to use the Reed Act funds, but instead relies on a forecast of likely outcomes for each of the unemployment variables. Thus, a pessimistic forecast that 

causes law makers and the executive branch to be very careful in their use of the Reed 

Act funds, but one which actually turns out to be wrong will work to skew the results. 

Testing 

Two variables are considered: the share of the Reed Act funds left in the trust fund, and 

the unemployment level in the state. Grouping of the states for both variables was 

tested, although the grouping of states by unemployment leads to problems as states 

with zero Reed Act funds remaining in the trust fund can skew the mean in their group. 

The preferred grouping by trust fund balance is presented. 

A two-sample t-test with assumed unequal variances is used. The change in the unemployment rate between 1999.2 and 2003.2 is calculated for each state in each of the 

groupings. The test then examines if the mean of each of the groups is the same (the 

null hypothesis). If the calculated test statistic is higher than the test statistic for the appropriate degrees of freedom (based on number of observations) the null hypothesis is 

rejected and the means are concluded not to be the same. The test was conducted 

with a two-tail risk of Type I error at α = 0.05. 

The unemployment rate in 2003.2 and the nominal change in the unemployment rate 

from 1999.2 to 2003.2 are shown in figure 4.4.1 for each of the three groups: Reed Act 

funding remaining 0-33.3%, 33.3% to 66.6% remaining, and 66.6% to 100% remaining. 

The states whose trust funds were depleted by 2003.2 are shown with an asterisk in the 

first column. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 114

Figure 4.4.2 

Nominal Change in the Unemployment Rate 1999.2 to 2003.2 

States Grouped by Percent of Reed Act Funds Remaining in Trust Fund 

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Michigan 

North Carolina 

Illinois 

Massachusetts 

Minnesota 

Missouri 

California 

Delaware 

New York 

Texas 

Wyoming 

Oregon 

Indiana 

Colorado 

Ohio 

Vermont 

Arkansas 

Louisiana 

New Mexico 

Wisconsin 

Pennsylvania 

Kansas 

Connecticut 

South Carolina 

Arizona 

Washington 

Oklahoma 

Iowa 

Idaho 

Georgia 

Virgin Islands 

New Hampshire 

Virginia 

Nebraska 

Kentucky 

New Jersey 

Utah 

Mississippi 

Maryland 

Alabama 

Nevada 

Tennessee 

Maine 

Florida 

South Dakota 

West Virginia 

Montana 

Rhode Island 

District of Columbia 

North Dakota 

Hawaii 

Alaska 

Puerto Rico 

0% to 33.3% 33.3% to 66.6% 66.6% to 100%

Grouping of States by Remaining Reed Act Funds (percent)

Nominal Change in the Unemployment Rate (1999.2 to 2003.2)

Source: Research Team Analysis, and US DOL UI Data Summary. 

Figure 4.4.2 shows the 53 jurisdictions grouped by the share of the Reed Act distribution that remained in the Trust Fund in February 2004 (x-axis). The y-axis shows the 

change in covered unemployment rate over the period 1999.Q2 and 2003.Q2. The 

states are sorted in descending order of unemployment for visual comparison. 

Results 

Hypothesis 1 suggested states with a high unemployment rate were more likely to improve solvency. The operational definitions of unemployment rates tested were both 

the unemployment rate in 2003.2, and also the nominal change of the unemployment 

rate from 1999.2 to 2003.2. 

When we evaluate the level of unemployment in the three groups, statistical testing 

showed no significant difference among the remaining Reed Act groups in terms of the 

level of the unemployment rate (p=0.39 for the low/high Reed Act distribution remaining 

grouping’s comparison) 

The second test, examining the change of the unemployment rate based on the same 

grouping showed that the states with the lowest share of Reed Act funds remaining in 

the trust fund, had greater average increase in unemployment than did the states that 

had the largest share left in the trust fund (p=0.01). The two lower groups did not test 

different from one another. A final test, combining the lower two groups and comparing 

to the group with the highest share of the Reed Act distribution left, showed again that 

the difference was statistically significant (p=0.007) 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 115

To ensure that states that had depleted their trust funds were not unduly biasing the 

testing, the last test was rerun, excluding the six states that had depleted their trust 

funds and been forced to use the Reed Act distribution. The testing remained significant (p=0.038) 

In conclusion, there is evidence to reject the null hypothesis tested here, that the mean 

of the change in the unemployment rates across the three groups are the same. However, the testing shows that the correlation is in the opposite direction of what was 

stated in the process evaluation, with lower remaining Reed Act funds consistent with 

greater change in unemployment rate. The test of the level of unemployment in 2003.2 

showed no difference in the three groups. 

Hypothesis 1 must thus be rejected as stated and tested and concluded that although 

the relationship has been shown, the stated hypothesis suggest the opposite correlation. More detail on the statistical tests can be found in Attachment C. 

4.4.5 Results of Testing Hypothesis 2 

The second hypothesis was stated thus in the research plan: 

 States with a high percent of labor force unionization are more likely to increase benefit payments 

A formal approach for testing this hypothesis would include an attempt to demonstrate a 

statistically valid correlation between the two variables named in the hypothesis. In addition to the general comments highlighted in the conversation regarding hypothesis 1, 

the particularities of unionization may well skew the attempts to test this hypothesis. In 

the first place, states with higher unionization are more likely to employ a workforce in 

certain, union-strong, occupations that may be affected disproportionally by an economic downturn. Secondly, the average level of unionization is less than 14% percent, 

and thus these jobs represent only a relatively small part of the economy and the impact 

may not be fully measurable. 

Testing 

Two variables are considered: the level of unionization (Estimates of Union Density by 

State. Monthly Labor Review, July 2001) in 2000, and the change in benefit payment. 

The second variable is considered both by evaluating the change in the AWBA, and by 

using the NASWA survey data that reports if states have increased benefits. Grouping 

of the states by unionization was accomplished by taking all 51 jurisdictions for which 

unionization data are available (Puerto Rico and Virgin Islands are excluded) and dividing it by thirds, for a total of 17 in each of the groups (defined as ‘high’, ‘medium’ and 

‘low’ levels of unionization). 

For testing the absolute and relative (change in) level of the AWBA a two-sample t-test 

with assumed unequal variances was used. The change in the AWBA between 2001.2 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 116

and 2003.2 is calculated for each state in each of the groupings. The test then examines if the mean of each of the groups is the same (the null hypothesis). If the calculated test statistic is higher than the test statistic for the appropriate degrees of freedom 

(based on number of observations) the null hypothesis is rejected and the means are 

concluded not to be the same. The test was conducted with the one-tail risk of type I 

error at α = 0.05. 

The unionization groupings are shown in figure 4.4.3, showing the range for each 

grouping, the states in each group, and the average unionization level in the group. 

Figure 4.4.3 

Characteristics of Unionization Groupings 

High Medium Low

Alaska Arizona Alabama 

California Arkansas Colorado 

Connecticut Florida Delaware 

Hawaii Georgia District of Columbia 

Illinois Idaho Iowa 

Indiana Louisiana Kansas 

Michigan Mississippi Kentucky 

Minnesota New Mexico Maine 

Nevada North Carolina Maryland 

New Jersey North Dakota Massachusetts 

New York Oklahoma Missouri 

Ohio South Carolina Montana 

Oregon South Dakota Nebraska 

Pennsylvania Texas New Hampshire 

Rhode Island Utah Tennessee 

Washington Virginia Vermont 

Wisconsin Wyoming West Virginia 

Range 15.7 to 25.7% 8.6 to 14.7% 3.7 to 8.5%

Mean 19.0% 12.1% 6.5%

Source: Estimates of Union Density by State. Monthly Labor 

Review, July 2001 

Figure 4.4.4 shows the trends of the AWBA by the unionization groupings in Figure 

4.4.3. As can be seen, the rate of change does not appear to vary greatly from one 

grouping to another, although the absolute level of AWBA appears (and is shown) to 

differ among the groups. The graph indicates that the AWBA continue to increase in the 

‘low’ and ‘medium’ states, while it was slightly lower in the ‘high’ states over the period. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 117

Figure 4.4.4 

Trend of Average Weekly Benefit Amount’ by Level of Unionization 

$0

$50

$100

$150

$200

$250

$300

1. High (>15.7%) 2. Medium (8.6% to 15.75) 3. Low (< 8.6%)

Degree of Unionization (by thirds)

Average Weekly Benefit Amount (Dollars)

1999.2

2000.2

2001.2

2002.2

2003.2

Source: Estimates of Union Density by State. Monthly Labor Review, July 2001 

UI Data Summary, US Department of Labor 

Figure 4.4.5 shows the number of states that did/did not increase benefits for each of 

the unionization level groupings. 

Figure 4.4.5 

Number of States Reporting Benefit Changes in 2003 

(by level of unionization) 

0

2

4

6

8

10

12

14

1. High 2. Medium 3. Low

Unionization Grouping

Increased Benefits in 2003 (Number of States)

No

Yes

Source: Estimates of Union Density by State. Monthly Labor Review, July 2001 

 UI Data Summary, US Department of Labor 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 118

Results 

The trend in AWBA and the level of unionization are shown in figure 4.4.4 for each of 

the three levels of unionization (‘low’ less than 8.6%, ‘medium’ 8.6% to 15.7%, and 

‘high’ greater than 15.7%). The average amount of AWBA in the ‘high’ unionization 

group is different from each of the other groups (p=0.014 ‘high’ to ‘medium’ and p=0.000 

‘high’ to ‘low’). The ‘low’ and ‘medium’ groups are not statistically different from one another at α=0.05, but are at α=0.10 (p= 0.076), using the t-test assuming unequal variances. Using the same general test, but pooling the variances of the two tests, the 

groups are found to have a statistical significant difference in their means (p=0.014). 

Statistical tests to examine if the rate of change from 2001.2 to 2003.2 was different for 

any of the three groups showed no difference in the rate of change (p=0.216), and this 

did not change when outlier states were removed, and the variance was pooled 

(p=0.25). 

In addition to testing the change in the AWBA against the unionization groupings, the 

team also tested responses in the NASWA survey of February 2004. The tally of answers is provided in figure 4.4.5. 

A two-sample z-test of proportions combining the ‘medium’ and ‘low’ groups and comparing to the ‘high’ group, showed that the null hypothesis that the proportions come 

from the same population should be accepted (p=0.73). 

In conclusion, it can be stated that the research team found no statistical evidence suggesting that the level of unionization had an impact on the likelihood of increasing benefits, or the rate of change of the AWBA after the Reed Act distribution. The hypothesis 

is rejected as stated and tested. 

4.4.6 Results of Testing Hypothesis 3 

The third hypothesis was thus stated in the research plan: 

 States with a higher per capita GDP and low unemployment rates are more 

likely to increase benefit payments 

Testing 

Three variables are considered: per capita income in 2002 (2003 figures were still preliminary at the time of testing), covered unemployment rate, number of states increasing 

benefits (NASWA survey 2003). Grouping of the states was done by joining states that 

had both low covered unemployment (less than 2.8%, the national average) and high 

per capita income (higher than the national median). Puerto Rico and Virgin Islands are 

excluded from the analysis as no per capita income data were available. 

A two sample z-test for proportions is used. The test is done by pooling the variance of 

the two ratio samples, and then calculating a statistic to evaluate the likelihood that the 

two ratios represent the same population. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 119

Figure 4.4.6 

Low Unemployment Rate and High Per Capita Income Group 

Compared with the Alternative 

6 6

12

27

0

5

10

15

20

25

30

Yes Benefit Increase No benefit increase Yes Benefit Increase No benefit increase

Both Low Unemployment Rate and High Per Capita Income Not both Low Unemployment Rate and High Per Capita Income

Groupings Based on Hypothesis 3

Number of States

Source: State Per Capita Information, US Department of Commerce 

UI Data Summary, US Department of Labor 

Figure 4.4.6 shows the states grouped by the conditions of the hypothesis. It shows the 

states grouped first on the assumption to be tested in the hypothesis. The two left columns show the states with both low unemployment and high per capita income (below 

the national average in Q2, 2002 which stood at 2.8%) and which had per capita income 

that was above the median for all states ($29,18235). Six states increased benefits and 

six did not. In the other grouping there are all the other states for which the first assumption was not true. Among those states, 12 increased benefits while 27 did not. 

Results 

The null hypothesis, that here is no difference among the groups, must be accepted 

(p=0.11). Thus we cannot accept hypothesis 3, that states with lower unemployment 

and higher per capita income are more likely to increase benefits. 

In addition to the test statistic not supporting the hypothesis, there are problems with the 

use of the test selected. First, when the combined sample equals the population it is 

drawn from, it becomes hard to determine what validity standard statistical tests have. 

For example, the z-test for proportions assumes the two samples are independent. It is 

however, hard to see how two samples that combine to account for the whole popula-

 

35 Data from Department of Commerce, Bureau of Economic Analysis. Available upon request, or from 

http://www.bea.doc.gov/bea/newsrelarchive/2004/spi0404.xls 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 120

tion can ever be regarded as independent, even if each observation (one state’s decision) is clearly independent of another observation. Further, the test is intended for 

samples that are randomly drawn from sufficiently ‘larger’ population, this is not the 

case here. A separate issue is that the test comes close to violating the sampling distribution requirements, and thus is on the border in applicability. Attachment C provides 

more detail on the test and estimates of its validity. 

4.4.7 Results of Testing Hypothesis 4 

The fourth hypothesis was thus stated in the research plan: 

 States that are more solvent are likely to spend their Reed Act funds on 

benefit expansions. States that have low solvency levels (AHCM) will not 

spend their Reed Act funds on benefit expansions 

The qualitative study, as well as the NASWA surveys, have shown that most states 

chose to retain a substantial amount of their Reed Act distribution in the Trust Fund, at 

least initially, to trigger automatic reductions (or avoid automatic increases) in the state’s 

UI tax schedule. In addition as the research team learned from the interviews with the 

states in the qualitative section, there was a common perception the Reed Act distribution was ‘one time funding for one time needs.’ Many states voiced a concern, both in 

their executive branch and their legislatures, about increasing benefits as such increases, although initially passed as temporary measures, were rarely temporary in effect. 

Testing 

The chart shown in Figure 4.4.7 displays the number of states that had, and had not, 

expanded benefits in some form by February 2004, grouped by the AHCM level in Q2 of 

2003. A total of 18 states had increased benefits to some degree (see detail in the 

NASWA Reed Act study of February 2004.). 

Two variables are considered: AHCM and number of states increasing benefits in 2003 

(NASWA survey February 2004). Grouping of the states was done by joining states in 

the two lower AHCM and comparing with the highest AHCM group. 

A two sample z-test for proportions is used. The test is done by pooling the variance of 

the two ratio samples, and then calculating a statistic to evaluate the likelihood that the 

two ratios represent the same population. 

Results 

The null hypothesis that the two proportions come from the same population is rejected, 

i.e., there is a statistically measurable difference between the two groups tested 

(p=0.02). 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 121

Figure 4.4.7 

Number of States Increasing/Not Increasing Benefits grouped by AHCM 

6

12

11

15

9

0

2

4

6

8

10

12

14

16

18

20

1. Low AHCM 2. Mid AHCM 3. High AHCM

AHCM Group

Number of States Increasing/Not Increasing Benefits

Benefits Increase No Benefit Increase

Source: National Association of State Workforce Agencies. “State Use of the $8 Billion Reed 

Act Distribution.” April 2004 

It must be cautioned, however, that the test may only show that states that are more 

solvent are more likely to increase benefits in an economic downturn, by either increasing the benefit amount, or expanding eligibility criteria. To the extent that the Reed Act 

distribution helped states be more solvent, it may thus have impacted this more general 

tendency. 

An additional approach for testing the hypothesis, examining the changes in AWBA was 

also explored. Figure 4.4.8 shows the data that were evaluated. T-tests of the means 

of the three groups indicated that they null hypothesis, that the means are the same, 

should be accepted in all instances, and thus that there was no difference in AWBA 

based on solvency. In addition to the statistical results, the value of this approach is 

however very much in doubt, as the AWBA as a proxy for a deliberate effort to increase/expand/extend benefits is of limited value. This is so since the composition of 

claimants changes over time, thus impacting the AWBA, even when no policy change 

has occurred. 

Based on the two statistical tests, and the more direct evidence of actual changes in 

benefit structure in the NASWA survey, we conclude that there is sufficient evidence to 

state that the highest AHCM is different from the lower groups in its propensity to increase benefits in the period after the Reed Act distribution. Hypothesis 4 is accepted 

as stated and tested. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 122

Figure 4.4.8 

Change in the AWBA Grouped by AHCM 

-$50

-$40

-$30

-$20

-$10

$0

$10

$20

$30

$40

Arkansas 

Minnesota 

Texas 

Pennsylvania 

Missouri 

Illinois 

North Dakota 

Ohio 

North Carolina 

Massachusetts 

New York 

California 

Michigan 

Maryland 

Alabama 

Nebraska 

South Carolina 

West Virginia 

South Dakota 

Rhode Island 

Alaska 

Nevada 

Idaho 

Connecticut 

New Jersey 

Kansas 

Kentucky 

Tennessee 

Colorado 

Washington 

Virginia 

Montana 

Hawaii 

Indiana 

Virgin Islands 

Iowa 

Vermont 

New Mexico 

Maine 

Mississippi 

Georgia 

New Hampshire 

Puerto Rico 

Florida 

Delaware 

Louisiana 

Oklahoma 

Arizona 

Utah 

Oregon 

District of Columbia 

1. Low AHCM (<0.5) 2. Medium AHCM (0.5 to 1.0) 3. High AHCM (>1.0)

AHCM Grouping

Change in AWBA (2002.2 to 2003.2)

Source: UI Data Summary, US Department of Labor 

4.4.8 Results of Testing Hypothesis 5 

The fifth hypothesis was thus stated in the research plan: 

 States that are more solvent are likely to spend their Reed Act funds on tax 

cuts. States that have low solvency levels (AHCM) will not spend their Reed 

Act funds on tax cuts 

The qualitative analysis and the NASWA survey have shown that many states wanted 

to ensure the Trust Fund balances remained high immediately after the Reed Act distribution, if this would help contribute to a lower unemployment tax rate in the tax year 

2003, by influencing the Trust Fund based used in late summer 2002 for the tax calculation. This general tendency is likely to influence the decision above the single dimension of the actual solvency level. Thus, the states that are most solvent may see a 

greater reduction in taxes collected, but the states in the low AHCM group may nonethe-less have avoided even greater tax increases. 

Testing 

Two separate statistical tests on two data sets were conducted. For the first test, two 

variables, tax revenue collected per 1000 covered employment and AHCM level are 

considered. The absolute level of taxation in 2003.2 is tested, as is the change in taxation between 2002.2 and 2003.2. Grouping of the states was accomplished by level of 

solvency as determined by the AHCM in 2003.2, with ‘low’ being less than 0.5, ‘medium’ 

being 0.5 to 1.0, and ‘high’ being above 1.0. Puerto Rico and Virgin Islands are ex-
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 123

cluded from the analysis as tax revenue data was not available. For the second test the 

same grouping approach was used, but instead of the tax levels, a question from the 

NASWA survey of February 2004, about changes in tax levels in 2003 is used. 

The first was a two-sample t-test of the means assuming unequal variance. The test 

examines if the mean of each of the groups is the same (the null hypothesis). If the calculated test statistic is higher than the test statistic for the appropriate degrees of freedom (based on number of observations) the null hypothesis is rejected and the means 

are concluded not to be the same. The test was conducted with the one-tail risk of type 

I error at α = 0.05. 

The second test was a two-sample z-test of proportions. The testing proceeds in a similar fashion as for the first test, with proportions for those states whose taxes were reduced and not reduced calculated for each of the AHCM groups. 

Figure 4.4.9 shows the change in tax revenue collected per 1000 covered employment 

between 2002.2 and 2003.3. As can be seen each state in the ‘low’ AHCM experiences 

a higher tax rate, while three states in each other group actually reduce their tax revenue over the period. 

Figure 4.4.9 

Change in Quarterly Tax Revenue per 1000 Covered Employment 2002.2 to 2003.2 

(Grouped by AHCM) 

-$60

-$40

-$20

$0

$20

$40

$60

$80

$100

North Carolina 

Illinois 

New York 

Arkansas 

Minnesota 

Texas 

Pennsylvania 

Missouri 

North Dakota 

Massachusetts 

Ohio 

Connecticut 

Washington 

Tennessee 

Michigan 

Kansas 

Idaho 

Nebraska 

California 

Virginia 

Kentucky 

Wisconsin 

South Carolina 

Alabama 

Colorado 

Maryland 

Nevada 

Rhode Island 

South Dakota 

West Virginia 

Alaska 

New Jersey 

Oregon 

Hawaii 

Oklahoma 

Indiana 

Iowa 

District of Columbia 

Utah 

Mississippi 

Florida 

Louisiana 

Montana 

New Mexico 

Georgia 

New Hampshire 

Arizona 

Vermont 

Delaware 

Wyoming 

Maine 

1. Low AHCM (<0.5) 2. Medium AHCM (0.5 to 1.0) 3. High AHCM (>1.0)

AHCM Groupings

Change in Tax Collected 

Per 1000 Covered Employment ($000s) 

Source: UI Data Summary, US Department of Labor 

Results 

The null hypothesis, that the change in tax collected per 1000 covered employment is 

the same across the three AHCM was tested for each of the pairs of the groups. The 

‘low’ AHCM was found to be different from the other two groups (p=0.001 for the ‘low’ to 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 124

‘high’ and p=0.032 for the ‘low’ to ‘medium’ comparison). The ‘medium’ and ‘high’ 

groups were not significantly different from one another (p=0.146). More detailed results of the statistical tests are provided in Attachment C. 

Based on this analysis, there is evidence to support hypothesis 5, that states with lower 

AHCM (solvency level) are less likely to reduce taxes. The reason for this is in part because of the automatic schedule change for unemployment taxes calculated shortly after the Reed Act distribution. This does somewhat reduce the meaning of the test conducted here. 

Figure 4.4.10 provide a different approach for evaluating this hypothesis. The chart 

shows the change in quarterly tax revenue per 1000 covered employment broken down 

by the percentage of the Reed Act distribution that still remains in the trust fund (as reported in February 2004, NASWA Survey) and by the AHCM group. Thus the first 

grouping shows the states that had less than 33.3% of their Reed Act distribution remaining; the first column in the group shows the ‘low’ AHCM group, the second the ‘mid’ 

and the third the ‘high’ AHCM. As can be seen, the increase in tax collection is greater 

in the lowest AHCM column than in the other two columns. This additional information, 

although not statistically tested, seems to bolster the hypothesis further. 

Figure 4.4.10 

Change in Quarterly Tax Revenue per 1000 Covered Employment 2002.2 to 2003.2 

(Grouped by Percent of Reed Act Remaining in Trust Fund and AHCM) 

-$20

-$10

$0

$10

$20

$30

$40

0 to 33.3% 33.3% to 66.6% 66.6% to 100%

Reed Act Distribution Remaining in Trust Fund

Changes in Quarterly Tax Collected per 1000 Covered 

(2002.2 to 2003.2 000s)

1. Low AHCM (<0.5) 2. Medium AHCM (0.5 to 1.0) 3. High AHCM (>1.0)

The final examination of this hypothesis comes from the NASWA survey completed in 

February 2004. The NASWA survey asked states: “Were state unemployment taxes 

lower in 2003 as a result of the Reed Act distribution increasing your state’s trust fund 

account balance?” All 53 jurisdictions provided an answer.
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 125

Figure 4.4.11 shows the results of that survey based on the AHCM grouping in 2003.2. 

In the ‘low’ ACHM group, 4 of 11 states reported lower taxes, in the ‘mid’ AHCM 8 of 21 

states reported lower taxes. In the ‘high’ AHCM group, however, 13 of 21 states reported taxes being lower in 2003 than they would have been had it not been for the 

Reed Act. 

Although the question as asked is simply an inquiry into the effect the Reed Act distribution had on the states tax collection, regardless of policy decisions, we attempted to test 

if the most solvent states were statistically different from the ‘low’ and ‘mid’ AHCM 

groups. 

A two-sample z-test for proportions is used (note the same methodological issues apply 

as in the comments with hypothesis 3). The two samples represent a combination of 

the two less solvent AHCM groups, compared to the highest AHCM group. Based on 

this approach the null hypothesis, that these two sample proportions are drawn from the 

same population is rejected (p=0.041). Based on this test, there is statistical evidence 

to support that the most solvent states are more likely to have had their taxes reduced 

as a result of the Reed Act, than are less solvent states. 

Figure 4.4.11 

Did the Reed Act Distribution Contribute to Lowered Unemployment taxes in 2003 

NASWA Survey Question by AHCM 

7

13

8

4

8

13

0

2

4

6

8

10

12

14

1. Low AHCM 2. Mid AHCM 3. High AHCM

AHCM Group

Number of States Reducing/Not Reducing Taxes

No

Yes

In conclusion, there is evidence to accept hypothesis 5 as stated and tested. However, 

it should also be observed that the Reed Act distribution did also have the impact of reducing the overall tax burden in some states with lower solvency levels. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 126

4.4.9 Results of Testing Hypothesis 6 

The sixth hypothesis was thus stated in the research plan: 

 States with higher unemployment rates, lower GDP and higher high cost 

multiples are more likely to extend benefit duration or expand eligibility 

The general contention that is being tested is that in states where the general economic 

conditions are worse, and where workers on average have lower incomes, the state will 

be more inclined to intervene by extending benefit duration or eligibility. As before, a 

number of methodological issues arise. First, it must be noted that since the cost of living fluctuates to a certain extent from one state to another, per capita income rates (the 

intent behind the GDP statistic) are not a perfect measure of workers relative affluence. 

Secondly, the double contingent nature of the hypothesis as stated makes it hard to test 

except with a multiple regression model, that although the direction of the relationship 

may be validated, the strength of the association may not be accurately reflected in the 

coefficient of produced by the regression model (as the model will not come close to 

explaining the reasons for the actual movement of the dependent variable). 

When the research team attempted to test this hypothesis by combining all the conditions a further complication arose. Each of the variables excludes a set of the population (in this case only the 50 states and the District of Columbia), until only a single state 

remained, Oregon, that met each of the three criteria of high unemployment (above average for the U.S.) low income per capita (less than median) and high AHCM (Group 

“C” with ACHM greater than 1). This effect persisted when the team relaxed the assumption on the AHCM by including both Groups “C” and “B”. At this point the testing of 

this hypothesis stopped since it would require broadening the definitions to where high 

unemployment included unemployment that was below average, and where low GDP 

included states that were above the median. 

4.5 CONCLUSIONS OF THE QUANTITATIVE STUDY

The quantitative study provides insight into the similarity and differences in the impact 

the Reed Act distribution had on the states. As a complement to the qualitative analysis, it can provide valuable information about the broader implications of the distribution 

has had across the U.S. 

A number of approaches were attempted in order to provide a picture of how the states 

responded to the distribution. In some instances the response was the result of an explicit policy choice, in other states it may have been the result of other forces, such as 

insufficient time to develop concrete proposals for how best to use the funds. A few 

states also had previously planned benefit or tax changes, or were forced to use the 

Reed Act distribution as the trust fund was depleted. The economic and fiscal situation 

in the states also must be considered, although this is of course not a trivial matter to 

establish in a manner that can be evaluated in the statistical models. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 127

The broadest impact of the distribution is without a doubt on the immediate unemployment taxes collected in 2003, and in some instances in 2004. As NASWA has clearly 

laid out in its study of February 2004, the overall tax reduction impact of the $8 billion 

distribution in 2003 and 2004, most likely exceeded $4 billion. This is so as many states 

either moved to a lower schedule, or avoided moving to a higher tax schedule, that 

would have been in effect had the Reed Act distribution not occurred. 

This study further showed (hypothesis 5) that this reduction in unemployment taxes was 

more likely in states that were more solvent, although many states that were less solvent experienced lower unemployment taxes as well. 

The descriptive statistics provide an interesting insight as well into apparent causes for 

the difference in the AHCM among the states. Figure 4.3.2 showed compelling evidence about the differences in a number of variables. The lowest AHCM states appear 

to have more factors (4 of the 6 evaluated) that work to reduce the trust fund balances 

than the other two groups, and most notably have longer unemployment duration 

among the insured population. 

The ‘medium’ and ‘high’ AHCM each have 2 (out of 6) factors against them, but not the 

same ones. The ‘medium’ states have higher AWBA and compensate a higher share of 

workers, whereas the ‘high’ group compensates more weeks per 1000 covered workers 

and collects less tax per 1000 covered workers. One could infer from this the relative 

importance of each of these factors in determining a state’s future fiscal position, although such inference has not been attempted here. 

The testing of hypotheses is also of considerable interest. Hypothesis 4, that more solvent states are more likely to expand benefits, and hypothesis 5, that more solvent 

states are more likely to reduce taxes, are of course logical in their presentation, but 

have now been tested and supported using fairly robust statistical tests. 

Hypothesis 1, that higher unemployment rates would correspond with greater likelihood 

of retaining Reed Act funds in the trust fund, was not only refuted, but it was also shown 

that the correlation is the opposite of the hypothesis, with higher unemployment being 

consistent with less Reed Act funds remaining in the trust fund. The results of the hypothesis testing have been summarized in figure 4.5.1 
Assessment of the Impact of the 20

Center for Employment Security Edu

Figure 4.5.1 

Detailed Information Summarizing Hypothesis Testing 

Hypothesis Test(s) Result 

Hypothesis 1: High unemployment rates will lead the states to improve solvency, rather than committing Reed Act funds to specific uses. 

Two sample t-test on the rate of change of unemployment against groupings of Reed Act funds remaining H0: Means are the same 

H1. Means are not the same 

H0 is rejected, but 

correlation has opposite sign from hypothesis 1 (p=0.000) Eviden

ment cwith no

Hypothesis 2 States with a high percent of labor force unionization are more likely to increase benefit payments 

Two sample t-test of the change in AWBA by groupings of unionization H0: Means are the same 

H1: Greater increase in AWBA for higher unionization states (one-tail) 

H0 is accepted, there 

is no difference in the rate of change of AWBA or other benefit increases (p=0.22) 

The higof uniolute AWeach of rate of 

Hypothesis 3 States with higher per capita GDP and low unemployment are more likely to increase benefit payments 

Two sample z-test for proportions comparing low unemployment and higher per capita income states to the other states H0: Ratios are from same population 

H1: Alternate states increase benefits less (one-tail) 

H0 is accepted 

(p=0.11) 

There ilower uincome benefitsnot be 

Hypothesis 4 States that are more solvent are likely to spend their Reed Act funds on benefit expansions... 

Two sample z-test for proportions comparing benefit increases in the highest AHCM grouping to combined two lower groupings. H0: Ratios are from same population 

H01: Highest AHCM increases benefits more (one-tail) 

H0 is rejected. There 

is strong evidence that states with highest AHCM are more likely to increase benefits (p=0.02) 

The tesshowed NASWA more rebasis fo

Hypothesis 5a States that are more solvent are more likely to spend their Reed Act funds on tax cuts. 

Two sample t-test comparing AHCM groupings and tax revenue per 1000 covered after Reed Act distribution H0: Means are the same 

H1: Greater increase in AWBA for higher unionization states (one-tail) 

Hypothesis 5b States that are more solvent are more likely to spend their Reed Act funds on tax cuts. 

Two sample z-test for proportions comparing highest AHCM to lower two on reduction in unemployment taxes resulting from Reed Act distribution. H0: Ratios are from same population 

H1: Highest AHCM will decrease taxes more (one-tail) 

H0 is rejected 

(5a—p=0.001 on the high/low AHCM grouping comparison) (5b—p=0.04) 

Both tehighest have loCare mthese taautomaschedu

Hypothesis 6 States with higher unemployment taxes, lower GDP and higher AHCM are more likely to extend benefit duration or expand eligibility 

This hypothesis could not be tested N/A 

The cogroupinset 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 129

SECTION V 

LIST OF FIGURES 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 130

FIGURE TITLE PAGE

Figure ES.1 Direct Impact of Reed Act Distribution (as of February 2004) ..............12

Figure ES.2 Themes and Observations form the Reed Act Study............................14

Figure ES.3 Average High Cost Multiple Groups’ Characteristics............................15

Figure ES.4 Summary Advantages and Potential Disadvantages of the Reed 

Act Distribution.....................................................................................16

Figure 2.2.1 Summary of Research Findings ...........................................................32

Figure 2.2.2 Key Findings of Qualitative Study.........................................................33

Figure 2.2.3 Key Findings of Quantitative Study.......................................................34

Figure 2.3.1 Common States’ Response Immediately Following Reed Act 

Distribution ...........................................................................................35

Figure 2.3.2 State Unemployment Insurance Financial Data ...................................37

Figure 2.3.3 Short- to Intermediate Term Impact of Reed Act Distribution ...............39

Figure 3.2.1 Characteristics of States Selected for Qualitative Study.......................44

Figure 3.3.1 Summary of UI Program Data for the First Quarter of 2002 .................48

Figure 3.3.2 Summary of the Uses of the Reed Act Distribution (As of June 

2003)....................................................................................................50

Figure 3.4.1 Value of USDOL Guidance...................................................................52

Figure 3.4.2 Consultative Legislative Environment...................................................53

Figure 3.4.3 Evaluation of the impact of the Reed Act funds....................................53

Figure 4.2.1 Trends in Trust Fund Balances for selected states 1999.1 to 

2003.2 ..................................................................................................95

Figure 4.3.1 States Grouped by the Average High Cost Multiple ...........................100

Figure 4.3.2 Statistically Tested Relationships Across AHCM Groups 1999.1-

2003.2 ................................................................................................101

Figure 4.3.3 Months of Current Quarter’s Unemployment Benefits in Trust 

Fund...................................................................................................102

Figure 4.3.4 Quarterly unemployment compensation per 1000 covered 

employment (1999-2003) ..................................................................103

Figure 4.3.5 Average benefits paid per 1000 covered employment over time 

by AHCM group..................................................................................104

Figure 4.3.6 Number of unemployed per 1000 in Labor Force by AHCM 

Grouping ............................................................................................105

Figure 4.3.7 Revenue per 1000 in Covered Employment by AHCM Grouping.......106

Figure 4.3.8 States’ increases in UI benefits (all programs) ...................................107
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 131

Figure 4.3.9 Reed Act funds remaining in the Trust Fund (by quartile) ..................108

Figure 4.4.0 Summary of Hypothesis Testing.........................................................111

Figure 4.4.1 Covered unemployment rates in 2003.2 by Remaining Reed Act 

Distribution .........................................................................................112

Figure 4.4.2 Nominal Change in the Unemployment Rate 1999.2 to 2003.2 

States Grouped by Percent of Reed Act Funds Remaining in 

Trust Fund..........................................................................................114

Figure 4.4.3 Characteristics of Unionization Groupings..........................................116

Figure 4.4.4 Trend of Average Weekly Benefit Amount’ by Level of 

Unionization .......................................................................................117

Figure 4.4.5 Number of States Reporting Benefit Changes in 2003 (by level of 

unionization).......................................................................................117

Figure 4.4.6 Low Unemployment Rate and High Per Capita Income Group 

Compared with the Alternative ...........................................................119

Figure 4.4.7 Number of States Increasing/Not Increasing Benefits grouped by 

AHCM ................................................................................................121

Figure 4.4.8 Change in the AWBA Grouped by AHCM ..........................................122

Figure 4.4.9 Change in Quarterly Tax Revenue per 1000 Covered Employment 

2002.2 to 2003.2 (Grouped by AHCM)...............................................123

Figure 4.4.10 Change in Quarterly Tax Revenue per 1000 Covered Employment 

2002.2 to 2003.2 (Grouped by Percent of Reed Act Remaining in 

Trust Fund and AHCM) ......................................................................124

Figure 4.4.11 Did the Reed Act Distribution Contribute to Lowered 

Unemployment taxes in 2003 NASWA Survey Question by AHCM...125

Figure 4.5.1 Detailed Information Summarizing Hypothesis Testing ......................128
Assessment of the Impact of the 2002 Reed Act Distribution 

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SECTION VI 

BIBLIOGRAPHY 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 134

6.1 GOVERNMENT REPORTS

General Accounting Office 

Unemployment Insurance: States’ Use of the 2002 Reed Act Distribution, March 2003. 

(GAO-03-496) 

http://www.gao.gov/new.items/d03496.pdf 

Bureau of Labor Statistics (BLS) 

Estimates of Union Density by State. Monthly Labor Review, July 2001. 

http://www.bls.gov/opub/mlr/2001/07/ressum2.pdf 

6.2 NASWA SOURCES

NASWA Member Surveys 

”State Use of the $8 Billion Reed Act Distribution.” April 2004 

”How Are States Using Their $8 Billion Reed Act Funds?” January 2003 

Other NASWA Sources 

Strengthening the UI Safety Net with $8 Billion in New Federal Reed Act Funding: 

State Findings & Recommendations. Presented at the UI Safety Net Conference, November 22-23, 2002, Washington, DC 

The $8 Billion Reed Act Distribution in March 2002: How Have States Used the 

Funds?, Richard A. Hobbie and Curt Harris, March 2002 (unpublished) 

6.3 GOVERNMENT SOURCES

Association of State Legislatures (composition information) 

Composition of State Legislatures and Governorships 

Department of Commerce Bureau of Economic Analysis 

State Per Capita Income information 

http://www.bea.gov/bea/regional/statelocal.htm 

United States Congress 

Committee on Ways and Means, U.S. House of Representatives. February 18, 1982. 

Background Material and Data on Major Programs within the Jurisdiction of the Committee on Ways and Means, 1982 Edition. Washington, DC. 

Committee on Ways and Means, U.S. House of Representatives. March 3, 1986. 

Background Material and Data on Major Programs within the Jurisdiction of the Committee on Ways and Means, 1986 edition. Washington, DC. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 135

Committee on Ways and Means, U.S. House of Representatives. March 24, 1988. 

Background Material and Data on Major Programs within the Jurisdiction of the Committee on Ways and Means, 1988 edition. Washington, DC. 

Committee on Ways and Means, U.S. House of Representatives. March 7, 1991. 

Background Material and Data on Major Programs within the Jurisdiction of the Committee on Ways and Means, 1991 edition. Washington, DC. 

Committee on Ways and Means, U.S. House of Representatives. May 15, 1992. 

Background Material and Data on Major Programs within the Jurisdiction of the Committee on Ways and Means, 1992 edition. Washington, DC. 

Transcripts of Congressional Testimony 

Testimony on State Use of Reed Act Distributions by Dawn Romero Watson, Secretary, Louisiana Department of Labor, March 20, 2003 

Testimony on State Use of Reed Act Distributions by Melissa DeLisio, Assistant Director, Ohio Department of Job and Family Services, March 20, 2003 

Trust Fund Overview. Presented to the joint subcommittee studying the funding requirements of the Virginia Unemployment trust fund. December 19, 2002. 

http://www.wa.gov/esd/AgencyInfo/newsreleases/nr071703.pdf 

United States Department of Labor 

Chao, Secretary Elaine. Letter toThe Honorable Richard B. Cheney, President of the 

Senate, October 1, 2001. U.S. Department of Labor, 2001. 

Training and Employment Guidance Letter (TEGL) 18-01 Regarding the Reed Act: 

http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=1377 

Training and Employment Guidance Letter (TEGL) 18-01 Regarding the Reed Act 

(Q&A): 

http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=1466 

UI Data Summary, published by the Employment and Training Administration of the 

US Department of Labor 

U.S. Department of Labor. 2001. Comparison of State Unemployment Insurance 

Laws. Washington, D.C. Employment and Training Administration. 

U.S. Department of Labor. 1986. Fifty Years of Unemployment Insurance -- A Legislative History: 1935 - 1985. Washington, DC. Employment and Training Administration. 

U.S. Department of Labor. May 8, 2002. Suggested Uses of Reed Act Distribution for 

Administrative Purposes, Training and Employment Guidance Letter No. 24-01. 

Washington, DC. Employment and Training Administration. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 136

U. S. Department of Labor. September 12, 1997. The Reed Act Provisions of Title IX 

of the Social Security Act, Unemployment Insurance Program Letter 39-97. Washington, DC. Employment and Training Administration. 

U.S. Department of Labor. February 4, 2002. U.S. Department of Labor’s ETA 2003 

Budget Fact Sheet. Washington, DC. Employment and Training Administration. 

Other U.S. Department of Labor References 

Telephone conversation with Lynne Webb, May 2003 

Other Government Sources 

National Commission on Unemployment Compensation. July 1980. Unemployment 

Compensation: Final Report. Washington, DC. 

Sundquist, Governor Don and O’Bannon, Governor Frank. Letter to The Honorable 

William M. Thomas, Chairman, House Ways and Means Committee, October 4, 2001. 

National Governors’ Association, 2001. 

New Jersey Labor Commissioner Outlines Department’s Priorities for the Upcoming 

Year. http://www.state.nj.us/labor/press/0430SenateSpeech.htm

Michigan Unemployment Insurance at a Glance. Published by the National Employment Law Project, November 2001 

Record Employment Triggers Adjustment in UI Rate. 

www.iowaworkforce.org/news/2002/08312002.pdf

6.4 OTHER NON-GOVERNMENT SOURCES

National Bureau of Economic Research 

Information on the Business Cycle and Economic Recessions 

http://www.nber.org/cycles.html/ 

History of the Reed Act 

Downey, Kirstin. January 30, 2003. “States Used Jobless Funds to Cut Employer 

Taxes.” The Washington Post, p. E2. Washington, DC. 

Haber, William and Merrill G. Murray. 1966. Unemployment Insurance in the American Economy. Homewood, IL: Richard D. Irwin. 

Henle, Peter. July 1980. “The Federal Budget: Removal of State Unemployment 

Trust Funds.” In Unemployment Compensation: Studies and Research, Vol. 2, National Commission on Unemployment Compensation, Washington, DC. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 137

SECTION VII 

ATTACHMENTS 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 138

ATTACHMENT A – PROCESS FOR CONDUCTING STATISTICAL ANALYSIS

The quantitative analysis depended on both primary and secondary data sources. The 

primary data sources included surveys conducted by NASWA, as well as information 

and lessons learned from interviews with the nine states in the qualitative analysis. The 

secondary data sources came primarily from the Bureau of Labor Statistics, and from 

other UI data published by the Employment Training Administration. The Bureau of 

Economic Analysis also provided information on general economic conditions and the 

definition of an economic recession. The data included: 

TYPE OF DATA SOURCE PERIOD COVERED

Primary Data Sources 

Use of Reed Act funds NASWA Surveys Fall 2003 and Winter 

2004 

Process for obligating 

Reed Act funds Research Team Interviews with nine states June-July 2003 

Secondary Data 

Sources 

Wage Information Bureau of Labor Statistics 1999.1 to 2003.3 

Labor Force Bureau of Labor Statistics 1999.1 to 2003.3 

Financial Information 

about State Trust 

Funds 

ETA. UI Data Summary website and unpublished 

Trust Fund Balance data provided directly to 

CESER/Booz Allen/Decern Research Team 

1999.1 to 2003.3 

Unionization Data Monthly Labor Review 

(http://www.bls.gov/opub/mlr/2001/07/ressum2.pdf) Estimate for 2000 

Employment Situation Bureau of Labor Statistics 1999.1 to 2003.3 

Per Capita Income Bureau of Economic Analysis at the Department of 

Commerce 

2000 (2002 was in estimate only) 

General Economic 

Conditions 

National Bureau of Economic Research 

(www.nber.org) 

Information about recent 

recessions, including 

the 2001 period. 

The quantitative analysis proceeded along the following 7 steps: 

1. Establish hypotheses to be tested (given in the process evaluation design) 

2. Collect, compile and verify data 

3. Link disparate time-series data using unique identifiers and groupings (such 

as the AHCM) 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 139

4. Produce pivot tables and graphs to examine relationships 

5. Conduct one or more statistical tests on data sets to examine if statistical correlations were identified 

6. Reexamine data be excluding outlier data and/or by combining cells with few 

observations with larger cells 

7. Write up the findings and produce a ‘lab report’ (Attachment C) of the hypothesis testing 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 140

ATTACHMENT B – NASWA SURVEYS

B.1 Winter 2004 Survey 

State Use of the $8 Billion Reed Act Distribution36

Background

The “Reed Act” is a provision of the Social Security Act (SSA). Until recently, it had activated 

only in the late 1950s. It provides for the distribution of federal unemployment tax funds to state 

unemployment insurance (UI) and employment service programs in the seemingly unlikely event 

the federal government collected excess unemployment tax revenue. As the federal government 

approached a balanced budget in the late 1990s, Reed Act distributions occurred in five consecutive years beginning in fiscal year 1999 with a $16 million distribution and culminating in a massive $8 billion distribution in March 2002. 

In August, 2002, The National Association of State Workforce Agencies (NASWA) conducted a 

survey of state actions using the $8 billion Reed Act distribution from the federal government. 

The results of this survey were posted on the National Association of State Workforce Agencies’ 

website, the Workforce ATM, in a paper entitled, “How Are States Using Their $8 Billion Reed 

Act Funds?” About half of the states believed they were not solvent enough to authorize discretionary tax cuts or to initiate new spending, or they were planning to submit proposals to state 

legislatures in 2003. The other half of the states used some Reed Act funds in 2002 to allow cuts 

in unemployment taxes on employers. A few states used the funds to enhance UI benefits, and 

about one in five states used the funds to improve employment services or UI administration. 

However, the U.S. General Accounting Office reported states had spent only about 17 percent of 

the $8 billion by the end of November, 2002.37 

Policy makers still are asking how states used their allocations from the $8 billion Reed Act distribution. Indeed, some Members of Congress have even suggested states are “sitting on the 

funds.” The Administration has said states could use the remaining Reed Act funds to extend 

benefits in lieu of another extension of Temporary Extended Unemployment Compensation 

(TEUC) program. Others have suggested states ought to stop asking for increased appropriations 

 

36 This study was completed in February of 2004. At that time, it appeared that the economic stimulus from the benefit spending was largely due to new and increased benefit expenditures. Subsequent detailed analysis of available data suggest, 

however, that most of this $2.9 billion in spending occurred in states that were forced to use the Reed Act funds on normal 

benefits prior to borrowing to remain their trust fun’s solvency. Subsequently, the majority of the estimated economic stimulus should not be categorized as such. The main report, of which this is an appendix, presents the later finding. 

37 U.S. General Accounting Office, Unemployment Insurance: States’ Use of the 2002 Reed Act Distribution, GAO-03-496, 

March 2003. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 141

and use remaining Reed Act funds to fill in for insufficient federal funding of employment services and UI administration. 

In response to the continuing questions, NASWA conducted another survey on February 18, 

2004, to determine if states were “sitting on Reed Act funds.” All 53 state and territorial workforce agencies responded. The results of the survey show not only are states not “sitting on Reed 

Act funds,” but they are using the funds effectively to stimulate the economy and to improve the 

UI and employment service programs. In fact, states have taken a balanced approach to stimulating the economy with the $8 billion by cutting employer-paid unemployment payroll taxes by 

about $4 billion and by spending over $4 billion on benefits38 and generally improving the UI 

and employment service programs. 

The Survey

The February 18, 2004 NASWA survey asked states the following questions: 

1. Were state unemployment taxes lower in 2003 as a result of the Reed Act distribution increasing your state’s trust fund account balance? If so, by how much in total dollars were 

state unemployment taxes estimated to be lower in 2003 than they would have been without the Reed Act distribution? 

2. Are state unemployment taxes lower in 2004 as a result of the Reed Act distribution increasing your state’s trust fund account balance? If so, by how much in total dollars were 

state unemployment taxes estimated to be lower in 2004 than they would have been without the Reed Act distribution? 

3. In 2003, did your state expand coverage or eligibility, increase weekly benefits, or extend 

potential duration of benefits? If so, please describe these changes and indicate if this resulted from the availability of Reed Act funds? 

4. In 2003, did your state legislature appropriate Reed Act funds for administration of the 

Unemployment Insurance program? If so, please provide the amount of the appropriation 

for each year and describe on what the appropriations will be spent. 

5. In 2003, did your state legislature appropriate Reed Act funds for employment services? 

If so, please provide the amount of the appropriation for each year and describe on what 

these appropriations will be spent. 

6. Does your state have an outstanding loan to cover the cost of unemployment benefits? If 

so, what is the dollar amount of the outstanding balance? When was the loan obtained? 

Was the loan from the federal government or other source? What were the terms of the 

loan? 

7. Does your state plan to borrow again in 2004 to cover the cost of benefits? If so, what is 

the estimated dollar amount? When do you estimate your state would need to borrow 

 

38 See comment in footnote 36. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 142

these funds? Do you plan to borrow from the federal government or another source? 

(We understand if you have not made an official request to borrow, you might not be able 

to share this information.) 

Survey Results

Table 1, Estimated State UI Tax Reductions, provides state-by-state data on the $8 billion Reed 

Act distribution in 2002 and its estimated impact on state unemployment taxes in 2003 and 2004. 

In the aggregate, states estimated cuts in state unemployment taxes at over $4 billion as a result 

of higher balances augmented by the Reed Act distribution States estimated state unemployment tax cuts of about $2.6 billion, or nearly 10 percent in 2003. In 2004, the tax reduction was 

estimated at about $1.5 billion. Ten states had tax cuts exceeding 20 percent of estimated annual 

revenue, with Georgia at 61 percent, New Hampshire at 46 percent, Maryland at 32 percent, and 

Utah at 30 percent. 

Table 2, State Reed Act Spending and Combined State Tax Reductions, shows estimated state 

spending of the $8 billion Reed Act distribution as of February 27, 2004 in the last column. 

States spent an estimated $4.2 billion of the $8 billion Reed Act distribution. Table 2 also shows 

the combined 2003/2004 estimated state tax reductions totaling $4.1 billion in the fifth column. 

Clearly, states are not “sitting on the funds.” Instead, states have provided substantial economic 

stimulus of about $8.3 billion. 

The estimate of the $8 billion Reed Act distribution providing more economic stimulus than $8 

billion seems incredible, but it is possible. Certainly, states could have spent all of the $8 billion 

in the first year and that would have been the amount of economic stimulus. However, states 

only spent about half of these funds and retained the other half in state unemployment trust fund 

accounts. This does not mean they were “sitting on the funds.” Instead, the effect has not only 

improved unemployment trust fund solvency, but also has activated automatically lower tax rates 

under current state unemployment tax laws that lead to lower unemployment taxes on employers. 

Depending on the relationship between the trust fund balances that activate lower tax rates and 

the taxes collected under these tax rates, the estimated tax cuts can vary and could exceed the 

amount of the Reed Act distribution retained in the trust fund account. In fact, the estimated 

stimulus of $8.3 billion could grow beyond the year 2004 because unemployment taxes might 

continue to be lower than they would have been without the Reed Act distribution. 

Table 3, Expanding UI Benefits, shows 8 states increased weekly benefit amounts, 17 states expanded coverage or eligibility, 1 stated increased the wage replacement rate, and 2 states increased weeks of benefits. Four states enacted alternate base periods to help low-wage workers 

become eligible for UI; three states provided benefits to part-time workers seeking part-time 

work, and three states added benefits for victims of domestic violence. 

Table 4, UI Administration Purposes, shows the rich array of state spending totaling $844 million on improving UI administration. This includes spending on a new tax accounting system in 

Alaska, a fraud overpayment collection program in California, a tax system and upgraded computer equipment in Idaho, modernized automated benefit and tax systems in Indiana and Wyoming, new telephone claims technology in Michigan, a new tax system in Ohio, and much more. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 143

Table 5, Employment Service Purposes, shows spending totaling $438 million on employment 

services. This includes spending on upgrading of computer equipment in 23 one-stop career centers in Alaska, added reemployment services in Florida, welfare-to-work services in Michigan, 

upgraded information technology infrastructure in one-stop career centers in New Jersey, Americans with Disabilities Act (ADA) accommodations in Tennessee, labor exchange services in 

Utah, Economic Relief Center services in Virginia, and upgrades in an autodialer computer system in Wyoming. 

Table 6, State UI Trust Fund Loans, shows seven states currently [as of April 2004] have a total 

of $4.4 billion in outstanding loans, five of which are from the federal unemployment trust fund 

loan account. States with federal loans are Illinois at $893 million, Minnesota at $256 million, 

Missouri at $196 million, New York at $936 million, and North Carolina $250 million (partly 

funded by revenue bonds). In addition, Pennsylvania borrowed $300 million from a motor vehicle license fund and Texas borrowed $1.6 billion in the bond market. In addition, eight states 

said they might borrow amounts summing to $2.1 billion in 2004. This includes California at 

$1.145 billion, Massachusetts at $160 million, Minnesota at $200 million, Missouri at $325 million, and North Carolina at $285 million. 

Additional Reed Act funds could help states needing loans to avoid borrowing and perhaps avoid 

raising taxes higher than might occur with another Reed Act distribution. However, states who 

borrow from the federal government must repay voluntarily within a two- or three-year period, 

or their federal unemployment taxes will rise automatically to repay their debts. Either way, 

these states probably face benefit cuts or tax increases in the near future to restore balances in 

their unemployment trust fund accounts. 

Conclusion

The February 2004 NASWA survey shows: 

• States are not “sitting on the funds.” The funds have been used for their intended purposes - economic stimulus, improved UI benefits and administration, and employment 

services. 

• The $8 billion Reed Act distribution has provided effective economic stimulus through 

not only state spending of about $4 billion on benefits, UI administration, and employment services, but also on substantial state unemployment payroll tax cuts for employers 

exceeding $4 billion. 

• The $8 billion Reed Act distribution has improved state unemployment trust fund solvency, but many states are in need of loans or will be in need of loans if they do not raise 

taxes, cut benefits, or receive another Reed Act distribution. 

• Another substantial Reed Act distribution probably would stimulate further the economy 

by increasing spending on benefits, employment services, and UI administration and 

would increase employment by cutting unemployment taxes on employer payrolls. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 144

Table 1 

Estimated UI Tax Reduction (April 2004) 

Revenue Estimated Estimated 

Reed Act Trust Fund Trust Fund Collected State UI Taxes Percent State UI Taxes

Distribution Balance at End of Balance at End of Past 12 months Reductions Tax Reductions 

March 2002 1st Qtr 2002 4th Qtr 2003 4th Qtr 2003 2003 Reduction 2004 

 State ($ in millions) ($ in millions) ($ in millions) ($ in millions) ($ in millions) 2003 ($ in millions)

Alabama 110.6 372.2 253.4 239.6 0.0  0% 0.0

Alaska 14.8 221.5 193.0 117.6 0.0  0% 0.0

Arizona 144.1 1,041.1 749.7 154.1 32.0 17% 32.0

Arkansas 64.0 174.3 61.1 236.9 0.0 0% 0.0

California 936.9 5,842.2 961.7 3,343.7 300.0 8% 0.0

Colorado 142.7 701.8 132.0 220.1 60.0 21% 92.0

Connecticut 100.4 566.4 413.2 584.2 0.0 0% 0.0

Delaware 26.0 317.2 239.4 60.4 3.3 5% 3.3

District of Columbia 25.8 281.9 287.0 97.9 0.1 0% 0.0

Florida 449.7 2,000.2 1,373.5 712.9 175.1 20% 47.2

Georgia 249.7 1,621.2 702.9 157.6 250.0 61% 250.0

Hawaii 30.8 301.9 347.2 159.2 0.0 0% 47.0

Idaho 32.2 213.1 127.3 110.9 0.0 0% 0.0

Illinois 376.2 1,109.0 5.0 1,425.0 0.0  0% 0.0

Indiana 174.6 1,315.8 758.3 360.4 55.0 13% 135.0

Iowa 82.4 759.2 705.6 275.9 0.0 0% 0.0

Kansas 78.2 478.5 293.9 233.3 33.6 13% 32.0

Kentucky 103.8 528.7 340.0 308.1 0.0 0% 61.8

Louisiana 105.5 1,578.2 1,494.2 157.0 0.0 0% 0.0

Maine 32.5 424.0 438.3 89.2 26.2 23% 13.5

Maryland 142.9 873.5 584.0 299.8 141.4 32% 42.0

Massachusetts 193.6 1,402.3 55.2 928.4 0.0  0% 0.0

Michigan 291.5 2,411.9 1,247.8 1,158.3 0.0 0% 0.0

Minnesota 163.1 366.2 0.0 540.7 73.5 12% 0.0

Mississippi 64.7 692.8 647.7 122.6 21.0 15% 57.0

Missouri 161.4 294.6 3.7 353.0 0.0 0% 0.0

Montana 18.6 189.7 196.1 65.3 0.0 0% 0.0

Nebraska 48.4 165.2 142.0 116.3 14.0 11% 0.0

Nevada 68.1 478.4 428.6 247.6 0.0  0% 0.0

New Hampshire 38.5 330.8 226.5 40.8 34.5 46% 11.3

New Jersey 242.8 2,998.4 1,513.3 1,271.9 0.0 0% 0.0

New Mexico 38.6 606.6 588.8 89.1 0.0 0% 26.0

New York 491.3 166.0 6.6 2,674.0 0.0 0% 0.0

North Carolina 240.9 571.2 10.4 778.6 0.0 0% 0.0

North Dakota 15.3 34.6 55.5 53.8 0.0 0% 0.0

Ohio 343.7 1,852.4 882.6 749.3 252.0 25% 268.0

Oklahoma 81.4 521.6 352.8 169.5 50.5 23% 0.0

Oregon 98.0 1,415.8 1,017.2 589.3 67.8 10% 0.0

Pennsylvania " 337.6 2,109.0 761.9 1,687.7 91.0 5% 73.0

Puerto Rico 48.9 522.3 512.3 184.9 0.0 0% 0.0

Rhode Island 27.1 259.5 203.3 146.6 0.0 0% 0.0

South Carolina 108.2 633.8 373.2 238.4 0.0 0% 0.0

South Dakota 19.1 55.5 38.2 16.3 0.0  0% 15.0

Tennessee 162.6 673.6 499.0 448.4 97.0 18% 63.0

Texas 596.4 573.4 771.8 3,086.0 ** 596.4 16% 0.0

Utah 61.6 566.2 368.2 97.0 41.0 30% 12.5

Vermont 16.4 304.5 248.2 45.0 7.5 14% 0.0

Virgin Islands 2.0 64.1 36.5 2.0 0.0 0% 0.0

Virginia 214.9 941.6 226.3 255.3 19.3 7% 0.0

Washington 167.0 1,616.9 972.4 1,184.8 172.0 13% 189.2

West Virginia 36.2 244.4 207.6 128.9 0.0  0% 0.0

Wisconsin 166.2 1,456.1 961.7 537.9 0.0  0% 0.0

Wyoming 12.0 201.4 177.6 18.1 0.0  0% 0.0

Total 8,000.0 $ 45,442.7 $ 24,193.7 $ 27,369.6 $ 2,614.2 $ 9% $ 1,470.8

* States gave ambiguous answers to the survey by saying their tax employer rates stayed the same.

** The $3,086 million includes $1,379.8 million in bond state proceeds

" Pennsylvania states a $59 million benefit reduction was prevented in 2004.
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 145

Table 2 

State Reed Act Spending and Combined State UI Tax Reductions (April 2004) 

Combined Estimated

Reed Act Available 2003/2004 State

Distribution Appropriated Expended Balance * Estimated Tax Spending +

March 2002 as of 2/27/2004 as of 2/27/2004 as of 2/27/2004 Reductions as of 2/27/2004

State ($ in millions) ($ in millions) ($ in millions) ($ in millions) ($ in millions) ($ in millions)

Alabama 110.6 16.65 0.00 93.95 0.0 16.7

Alaska 14.8 2.50 1.47 12.30 0.0 2.5

Arizona 144.1 0.00 0.00 144.10 64.0 0.0

Arkansas 64.0 2.17 32.68 31.32 0.0 32.7

California 936.9 822.20 483.08 114.70 300.0 822.2

Colorado 142.7 18.08 74.19 68.51 152.0 74.2

Connecticut 100.4 9.00 4.13 91.40 0.0 9.0

Delaware 26.0 0.00 26.02 0.00 6.6 26.0

District of Columbia 25.8 6.00 3.51 19.80 0.1 6.0

Florida 449.7 15.80 15.77 433.90 222.3 15.8

Georgia 249.7 49.30 0.00 200.40 500.0 49.3

Hawaii 30.8 0.00 0.00 30.80 47.0 0.0

Idaho 32.2 7.00 7.00 25.20 0.0 7.0

Illinois 376.2 0.00 376.24 0.00 0.0 376.2

Indiana 174.6 72.20 3.98 102.40 190.0 72.2

Iowa 82.4 3.66 6.14 76.26 0.0 6.1

Kansas 78.2 1.27 11.37 66.83 65.6 11.4

Kentucky 103.8 1.53 1.66 102.14 61.8 1.7

Louisiana 105.5 36.50 5.26 69.00 0.0 36.5

Maine 32.5 9.76 0.56 22.74 39.7 9.8

Maryland 142.9 0.00 0.00 142.90 183.4 0.0

Massachusetts 193.6 14.16 187.75 5.85 0.0 187.8

Michigan 291.5 291.50 165.12 0.00 0.0 291.5

Minnesota 163.1 12.00 163.06 0.00 73.5 163.1

Mississippi 64.7 19.32 9.77 45.38 78.0 19.3

Missouri 161.4 0.00 161.43 0.00 0.0 161.4

Montana 18.6 18.60 5.87 12.68 0.0 5.9

Nebraska 48.4 6.80 0.00 41.60 14.0 6.8

Nevada 68.1 12.00 1.08 56.10 0.0 12.0

New Hampshire 38.5 0.00 6.58 31.92 45.8 6.6

New Jersey 242.8 67.00 14.27 175.80 0.0 67.0

New Mexico 38.6 24.98 2.42 13.62 26.0 25.0

New York 491.3 17.20 491.34 0.00 0.0 491.3

North Carolina 240.9 0.00 240.88 0.00 0.0 240.9

North Dakota 15.3 0.00 0.23 15.07 0.0 0.2

Ohio 343.7 152.00 19.34 191.70 520.0 152.0

Oklahoma 81.4 8.22 3.12 73.18 50.5 8.2

Oregon 98.0 36.40 5.88 61.60 67.8 36.4

Pennsylvania 337.6 30.00 22.98 307.60 164.0 30.0

Puerto Rico 48.9 0.00 6.75 42.15 0.0 6.8

Rhode Island 27.1 2.60 3.15 23.95 0.0 3.1

South Carolina 108.2 10.96 1.99 97.24 0.0 11.0

South Dakota 19.1 0.00 0.00 19.10 15.0 0.0

Tennessee 162.6 7.40 2.45 155.20 160.0 7.4

Texas 596.4 0.00 596.45 0.00 596.4 596.4

Utah 61.6 4.69 19.42 42.18 53.5 19.4

Vermont 16.4 6.00 5.96 10.40 7.5 6.0

Virgin Islands 2.0 0.00 0.00 2.00 0.0 0.0

Virginia 214.9 30.91 59.05 155.85 19.3 59.0

Washington 167.0 19.78 1.44 147.22 361.2 19.8

West Virginia 36.2 4.26 1.45 31.94 0.0 4.3

Wisconsin 166.2 0.00 0.00 166.20 0.0 0.0

Wyoming 12.0 12.04 0.18 0.00 0.0 12.0

Total 8,000.0 $ 1,882.4 $ 3,252.5 $ 3,774.2 $ 4,085.0 $ 4,225.8

* USDOL "Available Balance" definition is the Reed Act Distribution minus the greater of Appropriated or Expended (this is an approximation). +

 The estimated amount of state spending is the difference between the Reed Act Distribution column and "Available Balance" column.

Note: States commented that the "Available Balance" USDOL lists is incorrect since funds have been

appropriated by legislation for specific purposes. Many felt the amount should be "zero".

Sources: First four columns are from a USDOL spreadsheet dated March 12, 2004 and the fifth column is from

NASWA March 2004 Reed Act survey
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 146

Table 3 

States Expanding UI Benefits (April 2004) 

Increased

Increase Eligibility Wage benefits by

Wkly Benefit Amount (WBA) coverage replacement (n) wks/cost

to expanded to rates for TEUC

State ($) include increased exhaustees

Alabama 210 (from $190)

Alaska

Arizona

Arkansas

California 370 (from $330) Part time workers 50% (from 45%)

Colorado

Connecticut Alternate Base Period

Delaware

District of Columbia Alternate Base Period

Florida

Georgia Alternate Base Period

Hawaii Alternate Base Period

Idaho

Illinois ** victims of domestic violence

Indiana 348 (in 04 from $336); ($369 in 05 and $390 in 06)

Iowa

Kansas 2 $11 million

Kentucky

Louisiana

Maine Part time workers

Maryland 310 (from $280)

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana increased benefits and duration

Nebraska

Nevada

New Hampshire 372 (from $331)

New Jersey ** Part time workers

New Mexico attending school; part time workers; victims of domestic violence; ABP

New York

North Carolina

North Dakota

Ohio * disaster but not eligible for DUA

Oklahoma

Oregon Emergency benefits - 19.5 extra wks

Pennsylvania

Puerto Rico

Rhode Island

South Carolina

South Dakota ** victims of domestic violence

Tennessee

Texas ** increased benefits victims of domestic violence or stalking

Utah 5 $16.2 million

Vermont increased benefits plus added $18 a week to all payable claims as a supplemental benefit

Virgin Islands ** from 60% to 85% of the average weekly wage

Virginia improved customer contact projects; call centers; other technology initiatives

Washington

West Virginia

Wisconsin

Wyoming removed waiting week requirement; eliminated cap on max WBA

* Ohio increased Max WBA from $315 to $323, no dependents; $382 to $392, 1-2 dependents; $424 to $436, 3 or more.

** Indicated change would have happened without distribution.
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 147

Table 4 

UI Administration Purposes (April 2004) 

Funds for

UI Admn 

Purposes

2003 State legislature appropriated Reed Act funds for administration of the UI program

State ($ in millions)

Alabama 14.4 Appropriated for UI and ES future needs and state to establish a plan to spend the funds over a 4-5 year time period

Alaska 2.0 used for a new tax accounting system for employer quarterly taxes and wages

Arizona

Arkansas 77.6 Biennium - UI benefits, facility lease and upgrade costs, salaries, employee benefits, and staff training

California 144.9 Fraud overpayment collection program, salary needs, maintain current operating levels, enhance UI anti-fraud measures, & automation

Colorado 4.6 Construction costs to house all of UI operations

Connecticut 0.5 Alternate Base Period implementation, automation and network upgrades; $2.7 million has been set aside for FY2004

Delaware Delaware spent all its Reed Act funds on UI benefit payments

District of Columbia 7.6 Contractual services to maintain and enhance UC benefit system and the automated tax system; hiring of IT staff

Florida

Georgia 49.3 Facility needs, improve service delivery systems, staff training, improve information system, improve technology and upgrade equip 

Hawaii

Idaho 7.0 Tax system upgrade, upgrade computer equipment, staff distance learning project, and invested in information technology

Illinois

Indiana 39.9 Modernize the UI tax and UI benefit computer system. A 10 year appropriation and approximately $400,000 has been spent so far.

Iowa 20.0 Appropriated for technology upgrades for the UI tax and benefit systems. Authority to spend the funds over a 4-5 yr time period.

Kansas 2.4 Additional staff to handle the workload in the UI operations; Treasurer Office fee of $.4 million for UI warrants. To be used for FY2004

Kentucky 7.5 Appropriated through 2004. Expenditures are authorized for UI & ES; expect funds to be applied to UI only for program administration costs

Louisiana 20.6 Detail use of funds was not given.

Maine 9.8 IT one-time projects to improve operations and integrity, facility needs, toll-free telephone access, funds appropriated over a 5-7 time period

Maryland None of the Reed Act funds have been requested or approved for administration of UI. Funds may be requested in the future.

Massachusetts

Michigan 75.0 Implement technology for telephone filed claims ($13M); administration ($30M); IT modernization projects ($32M)

Minnesota 12.0 Appropriated for UI administration

Mississippi 19.3 Facility needs - new state office building

Missouri

Montana 10.8 Moving tax program from Revenue to Labor, bond payments, IT staff for internet claims; $4.5 of $10.8 marked for 2004 & 2005

Nebraska 6.8 Write a new benefit payment computer system over the next 2 years

Nevada 15.0 Construction of an administration office building to be built between 2004 and 2007

New Hampshire

New Jersey 24.0 Upgrading benefit payment system

New Mexico 19.1 Authority to spend funds thru 2007, Administer expanded coverage of benefits, Facility and equip upgrades, AS&T costs, UI automation

New York

North Carolina

North Dakota 0.2 Authorized business case study on modernizing the UI claims and tax automated systems

Ohio 129.0 UI tax system, staff training, local office transition, and supplement federal shortfalls. Appropriated thru 2005.

Oklahoma 3.9 Supplemented UI program budget shortfalls through June 2004

Oregon 14.5 Administration of UI program; for both normal program administration and also to allow the implementation of customer contact centers

Pennsylvania 8.0 $15 million was appropriated for UI and ES uses; funds were expended for UI technology system modernization efforts.

Puerto Rico 23.2 For direct deposit, banking verification system, internet app, staff training, facility and equip upgrades, and AS&T costs

Rhode Island Appropriated for UI and ES administration use (expect to expend total appropriation for ES purposes by June 2004)

South Carolina 9.7 Acquisition of land and construction of 5 local office facilities over the next 3 to 5 years

South Dakota

Tennessee 5.8 For facility and equip upgrades, telephone claims centers, supplement funding shortfalls, staff training, ADA requirements, pay raises

Texas

Utah

Vermont

Virgin Islands

Virginia 24.7 Augment basic UI functions, improve customer contact/call centers and technology, and UI transition to customer contact centers 

Washington 19.6 Imaging system, improve initial claim process, staff training, implementing employment security law changes, funds marked thru 2005

West Virginia 4.7 Appropriated thru 2004; facility & computer equip upgrades, and relocation to One-Stop shops; prevented staff layoffs and office closures

Wisconsin Legislation is currently pending for $5 million thru 2005 to design, build, and implement a new UI benefit system

Wyoming 10.1 Rewrite UI benefits and tax computer systems, implement the Wyoming Workforce Informer system (public LMI access)

Total 843.5 $ 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 148

Table 5 

Employment Services Purposes (April 2004) 

Funds for

Employment Service

Purposes

2003 State legislature appropriated Reed Act funds for employment services

State ($ in millions)

Alabama 2.2 Appropriated for UI and ES future needs; state is to establish a plan to spend the funds over a 4-5 year time period

Alaska 0.5 Upgrade computer equipment for 23 One-Stops across the state; equip replacement plan may extend into 2005

Arizona

Arkansas

California 33.7 Used to supplement federal Employment Services (ES) allocation

Colorado 7.0 Appropriated for administrative costs of the One-Stop system to assist unemployed workers over a 3 year period

Connecticut 3.7 Create CT Works Business system, ES operation and staff costs and network upgrades; anticipate spending $1 million more in 2004

Delaware

District of Columbia

Florida 15.8 Appropriated for reemployment services to be provided through Florida's One-Stop system

Georgia The $49.3 million listed in question 4 was designated for UI and ES; no breakdown was given between the two programs

Hawaii

Idaho The $7 million listed in question 4 was designated for UI and ES; no breakdown was given between the two programs

Illinois

Indiana 33.0 Appropriated over five years; $25 for Indiana@Work targeting industries and $8 to the WIBs for administration of the one-stop offices

Iowa The $20 million listed in question 4 also was designated for ES; no breakdown was given between the two programs

Kansas

Kentucky

Louisiana 5.7 Detail use of appropriated funds was not given

Maine The $9.8 million listed in question 4 will be used for some ES functions; no breakdown was given between the two programs

Maryland

Massachusetts 11.7 Support ES activities at the One-Stop centers, employment assistance for Department of Transitional, and targeted client population

Michigan 217.0 Appropriated thru FY2005; $7 for ES agency; $182 for Welfare to Work activities, $24 to local area WIA One-Stop Oper.; $4M libraries

Minnesota

Mississippi The $19.3 million listed in question 4 will be used only to the extend ES staff will use accommodations at the new state building

Missouri

Montana 7.7 Administration of ES program and upgrading computer program; appropriated through June 2005

Nebraska

Nevada The $15 million listed in question 4 will include a one-stop center

New Hampshire

New Jersey 6.0 Upgrading information technology infrastructure and development of one-stop offices throughout the state

New Mexico 5.7 ES Administration, facility and equip upgrades, AS&T costs, and for High School Career Centers

New York

North Carolina

North Dakota

Ohio 25.7 One-Stop assistance, LMI use, staff training, local office transition, and supplement federal shortfalls; appropriated thru 2005

Oklahoma 2.3 Supplemented ES program budget and shared one-stop cost shortfalls through June 2004

Oregon 20.5 Administration of the employment services and will be used to replace state funds redirected to other state programs

Pennsylvania 7.0 $15 million was appropriated for UI and ES uses; ES appropriation were for ES operating and personnel costs

Puerto Rico 8.8 For administrative needs, staff training, computer equipment upgrades, establishing a one-stop, and capital & facility needs

Rhode Island 4.0 Appropriated for UI and ES administration use; expect to use total appropriation for ES purposes through June 2004

South Carolina The $9.7 million listed in question 4 is for acquisition of land and construction of 5 local office facilities over the next 3 to 5 years

South Dakota

Tennessee 1.6 For facility and equip upgrades, local office furniture, staff training, ADA accommodations, and staff equity pay raises

Texas

Utah 6.5 Appropriated over a 3 year period to support labor exchange activities in the state regions

Vermont

Virgin Islands

Virginia 6.2 Appropriated for the 02-04 biennium for federal funding offsets, placement activities in Economic Relief centers; $7.5 million for 04-06 biennium

Washington

West Virginia 2.4 Appropriated thru 2004; improved automation systems and computer equipment upgrades; believe upgrades improved services to public 

Wisconsin 1.0 Appropriated $1 million per year for the apprenticeship program 

Wyoming 1.9 Used to upgrade Wyoming Job Network (WJN), upgrade autodialer computer systems, and ES administration if any funds remain

Total 437.6 $ 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 149

Table 6 

State UI Trust Fund Loans (April 2004) 

 Outstanding Trust Fund loans and plans for 2004 borrowing to cover the cost of unemployment benefits

Outstanding Plan to Borrow

Trust Fund (or already have)

Loan in 2004

($ in millions) ($ in millions)

State YES NO YES NO

Alabama X X

Alaska X X

Arizona X X

Arkansas X X 20.0 April 2004; from the federal government (Title XII)

California X X 1,145.0 March 2004; federal loan or other financing

Colorado X X

Connecticut X X

Delaware X X

District of Columbia X X

Florida X X

Georgia X X

Hawaii X X

Idaho X X

Illinois X 893.0 federal government (Title XII) X Authority to $1.4 billion; Title XII advances & revenue bonds

Indiana X X

Iowa X X

Kansas X X

Kentucky X X

Louisiana X X

Maine X X

Maryland X X

Massachusetts X X 160.4 Anticipate need for Title XII advances for 2004 is $475.1

Michigan X X

Minnesota X 256.0 Title XII advances X 200.0 Title XII advances; ongoing, as needed.

Mississippi X X

Missouri X 195.7 Title XII; $42.3m repaid in June 2003 X 324.7 State law only allows Title XII advances

Montana X X

Nebraska X X

Nevada X X

New Hampshire X X

New Jersey X X

New Mexico X X

New York X 935.5 Title XII; YTD advances since Jun 2003 X a request loan is currently being prepared thru May 2004

North Carolina X 250.0 Title XII and other revenue bonds X 285.0 Dec 2004 estimate; Title XII advances and bonds

North Dakota X X

Ohio X X borrowing plan a possibility this year

Oklahoma X X

Oregon X X

Pennsylvania X 300.0 loan from Motor Vehicle License fund; interest 4% X not planning any additional cash flow loans

Puerto Rico X X

Rhode Island X X

South Carolina X X

South Dakota X X

Tennessee X X

Texas X 1,600.0 public bond offering; bond debt service @ $320m per year X

Utah X X

Vermont X X

Virgin Islands X X

Virginia X without the Reed Act funds, would have X

Washington X X

West Virginia X X

Wisconsin X X

Wyoming X X

Total 4,430.2 $ $ 2,135.1
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 150

B.2 Fall 2003 Survey 

General State Responses to Reed Act Distribution Survey 

(Fall 2002) In Alphabetical Order 

State/Distribution State Action 

Alabama 

$110.6 million 

Enacted legislation allowing 15% or about $16.6 million to be used for 

ES and UI administration and 85% or about $94 million to be used for 

increasing benefits and solvency. The 15% will be used for transition 

from local claims offices to telephone claims call centers. Effective 

7/1/02, the weekly benefit amount was increased by $20. 

Alaska 

$14.8 million 

Unemployment taxes will be cut by an estimated $6.5 million in 2003. 

UI employer tax rates will be as much as 10 percent lower in 2003 due to 

the distribution. Appropriated $3 million for an Internet based labor exchange system. Next year, state will propose two capital projects: (1) 

Spend $405,000 to replace outmoded equipment in 23 ES offices; and (2) 

Spend $2 million on redesigning the UI tax system. The new UI tax system is scheduled to be completed by the end of 2003. 

Arizona 

$144.1 million 

Submitted FY04 proposals of $4.2 million for enhancements of ES staffing and services; $2.2 million of ES automation; and $6.9 million for UI 

administration aimed at improving non-monetary timeliness, quality, and 

overpayment and fraud detection. 

Arkansas 

$64 million 

All funds used for improving solvency. 

California 

$936.9 million 

About $896.3 million or 96% was used for improved solvency. Of this 

amount, $600 million has been appropriated for the payment of unemployment compensation and for ensuring trust fund solvency. Some $0.5 

million was appropriated for Employment Tax Systems Review, and 

$40.1 million was substituted for state supplemental funding. The Reed 

Act distribution was received in March 2002 after the Governor’s Budget 

was presented for consideration by the state legislature in January 2002. 

This timing did not allow for complete development and review of infrastructure, information technology, and other project proposals. During 

the upcoming budget cycle, the state anticipates that a number of proposals will be considered that would be funded by Reed Act funds. 

Colorado All funds remain in the trust fund. As a result, will avoid activating a 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 151

$142.7 million 

solvency tax in 2003. Action to spend some Reed Act funds might occur 

in 2003 legislative session. 

Connecticut 

$100.4 million 

About $91.4 million or 91 percent used for improving solvency. It is 

possible 2003 UI taxes will be lower as a result. While not earmarked 

specifically, about $9 million will be used to cover the cost of benefits 

under the new alternate base period from 2003 to 2005. About $405,000 

will be used to cover the start up costs of administering the alternate base 

period. About $2.1 million will be used to improve UI administration, 

including program integrity, tax collections, non-monetary quality, and 

appeals timeliness. About $4 million will be used to avoid cuts in employment services, saving 45 jobs. About $1.2 million will be used for 

employment services technology and infrastructure. 

Delaware 

$26 million 

All funds used for improving solvency. As a result, will avoid activating 

a higher tax. 

District of Columbia 

$25.8 million 

Alternative base period was enacted. Appropriated $460,000 to cover 

implementation costs. Appropriated $7.6 million to improve UI administration. Will contract for and hire technology staff, develop and implement direct deposit of UI benefits, improve integrity and reduce overpayments, and fund overdue civil service raises. About two-thirds remains in trust fund, but agency plans further proposals to improve ES and 

UI administration next year. 

Florida 

$449.7 million 

About 96.5% or $433.9 million used for improving solvency now and to 

avoid higher taxes. Appropriated $15.8 million for one-stop career centers. Same amount will be requested again next year. 

Georgia 

$1,621.2 

Retained all of its distribution in its trust fund account, but also enacted 

an alternate base period. 

Kansas 

$78.2 million 

Anticipates requesting about $4 million for UI Administration. This 

would cover increasing staffing, upgrading computers, and enhancing 

telephone call center technology. 

Kentucky Reed Act distribution prevented activation of a higher tax rate on em-
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 152

$103.8 million 

ployers. Might request some funds for UI and ES administration, but 

most funds will be used to improve solvency. 

Idaho 

$32.2 million 

About $25.2 million remains in trust fund. Appropriated a total of $7 

million for ES and UI administration. Appropriated $1 million for employment services of which $0.7 million was spent on upgrading customer self-service workstations. Appropriated $3.5 million for UI administration. Appropriated $2.5 million to substitute for funds normally 

used for administration from the administrative tax. Administrative taxes 

will be allowed to accumulate in reserve for coverage of implementation 

costs of UI/ES reform when enacted. 

Illinois 

$376.2 million 

All funds used for improving solvency, which will delay borrowing from 

federal government. Waiting for economic recovery and new Governor 

before considering proposals. 

Indiana 

$174.6 million 

Governor proposed a package, but legislature did not act. Governor will 

propose again in 2003. The proposal will have $50 million for the “21st

Century JOBS initiative; $50 million for UI modernization; $60 million 

for an extended benefits program; and $10 million for a short-time compensation program. 

Iowa 

$82.4 million 

About 62.4 million or 76 percent remained in the trust fund for solvency. 

Appropriated $20 million for UI administration. Funds will be spent on 

telephone call center operations and redesigning tax systems. Much of 

funds will be spent on information technology and capital equipment, 

such as computers. Plans to make more proposals to legislature in 2003. 

Louisiana 

$105.5 million 

About 65% or about $69 million remained in the trust fund for solvency. 

Appropriated a total of $36.5 million for ES and UI administration improvements. Projected costs for a UI Tax and Benefit Redesign over 3 to 

5 years were $20.6 million. Investments in infrastructure (such as imaging equipment, computers, and network enhancements) were estimated to 

cost $10.0 million. Employment Service improvements (such as expansion of reemployment services, employer forums, and expansion of income growth strategies for single parents) were estimated to cost $5.7 

million. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 153

Maine 

$32.5 million 

Funds remain in trust fund. State plans to propose spending in 2003. 

Maryland 

$142.9 million 

Funds remain in trust fund. Surcharge of 0.8 percent will not take effect 

in 2003 as a result. With the avoidance of the 0.8 percent surcharge came 

a $30 increase in the maximum weekly benefit amount. In other words, 

without the Reed Act funds, there would have been no benefit increase. 

Massachusetts 

$193.6 million 

Almost 99% or $191.2 million remains in the trust fund. Appropriated 

about $2.4 million for employment services. Tax schedule already is set 

by state legislature below what existing law would trigger. Additional 

Reed Act funds likely will keep taxes lower than they might be otherwise. Will spend $300,000 on a biannual job vacancy survey; $925,000 

on New Perspectives program to help workers changing careers, 

$400,000 on integration of performance management systems in one stop 

employment system, and $800,000 on building a data base for the one 

stop employment system and functionality for workers and employers. 

Plans no more spending on ES and UI administration. 

Michigan 

$291.5 million 

Appropriated $213.0 million for the ES program and $75 million for the 

UI program. The ES funds were invested on one-stop center operations, 

facilities, and data system improvements, welfare-to-work job search and 

readiness activities, an Internet based career search portal, and software 

and information technology. UI investments were not yet determined. 

Minnesota 

$163.1 million 

About 93% or about $151 million remains in trust fund for improving 

solvency and lowering taxes. Reed Act funds were cited as a reason why 

legislature could pass a state extended benefits program. Appropriated 

$12 million for UI technology improvements. 

Mississippi About 75% or $48 million remains in trust fund for improving solvency 

and lowering taxes. About $16 million or 25% was appropriated for the 

construction of a new state headquarters office building. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 154

$64.7 million 

Missouri 

$161.4 million 

All funds used for improving solvency. 

Montana 

$18.6 million 

Funds improved solvency and delayed a tax increase. Plans on retiring 

$5.9 million UI debt incurred to modernize its UI program and spending 

on Employment Services and UI administration over the next 5 or 6 

years. Appropriated $4.1 million to substitute for funds that would have 

come from an Administrative Fund Tax (AFT). The AFT funds were reallocated to various training programs. Appropriated $12.6 million for 

UI administrative improvements. Appropriated about $280,000 to pay 

off part of a bond issuance used to finance UI modernization. 

Nebraska 

$48.4 million 

Funds remain in trust fund. Will propose some ES and UI improvements 

in 2003. 

Nevada 

$68.1 million 

Funds remain in trust fund to improve solvency and avoid a tax increase. 

Legislature meets only once every two years and did not meet in 2002. 

Might make a proposal to spend some funds on a building in 2003. 

New Hampshire 

$38.5 million 

Funds left in trust fund to improve solvency. Funds helped avoid a 1.5 

percentage point increase in employer tax rate and enabled the legislature 

to pass a significant increase in weekly benefits. 

New Jersey 

$242.8 million 

About 85% or about $207 million remains in the trust fund. The UI tax 

rate dropped as a result of reintroduction of the Health Care tax on employers and equivalent cut in UI taxes. The cut in UI taxes was discretionary. Appropriated about $36 million for ES and UI administration. 

New Mexico 

$38.6 million 

All funds remain in trust fund. Plans to submit proposal to state legislature. Draft proposal would spend around $21 million and leave about 

45% or about $17 million of Reed Act funds in trust fund. Spending 

would be on such items as computer equipment, an imaging system, telecommunications systems to reduce long-distance phone call costs, a fictitious employer detection system, and capital improvements. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 155

New York 

$491.3 million 

New York was required under the Reed Act to repay a $188.9 million 

loan from the federal government. The remainder of its $491.3 million 

Reed Act distribution improved its solvency. 

North Carolina 

$240.9 million 

All funds devoted to improving solvency. 

North Dakota 

$15.3 million. 

All funds remain in trust fund. Legislature does not meet until 2003. 

Studying a large technology proposal to modernize UI tax and benefit 

systems. 

Ohio 

$343.7 million 

About 63% or $216 million remains in trust fund for improving solvency. 

Automatic solvency tax increases in 2003 likely were avoided. The state 

plan called for a total of $78 million to be used for UI administration over 

the next 3 years to offset state general revenue and penalty interest funds 

traditionally used to supplement the operation of the program; Labor 

Market information improvements in the amount of $3 million; $10 million for investment in certified one stop centers; $30 million for a new UI 

Tax system; and $6 million for policy and program staff training and 

equipment. 

Oklahoma 

$81.4 million 

Nearly 98% or about $79 million retained in trust fund for improving 

solvency. Availability of Reed Act funds gave impetus to enactment of 

an alternate base period to improve access to UI for low-wage workers. 

Appropriated $1.7 million to make up the federal shortfall in funding and 

to maintain current employment services. This helped avoid office closings and layoffs of 25 employees. The agency proposed an additional $1 

million to expand employment services, but the legislature did not want 

to appropriate these funds because it had frozen all other state employment. The agency has proposed $2 million in each of the next two years 

to maintain current employment services. 

Oregon 

All funds still in trust fund for improving solvency. No actions taken as 

yet. Reduced UI taxes and increased weekly benefit amount in last two 

calendar quarters of 2002 with the understanding that Reed Act funds 

would prevent an automatic increase in taxes. Some penalty and interest 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 156

$98 million funds were used for the Child Care program, but UI and ES still received 

$18.7 million for UI and ES in the 2001-2003 biennium. In fiscal year 

2001, state had used $19.5 million for employment services. State expects more substitution of Reed Act funds for state supplemental funds in 

next biennium. 

Pennsylvania 

$337.6 million 

All funds still in trust fund to improve solvency. Solvency taxes will increase by less than they would have without the Reed Act distribution. 

Overall, taxes will rise by $98 million less than they would have in 2003. 

Employer taxes will be about $57 million lower and employee taxes will 

be about $41 million lower than they would have been. State plans to 

propose appropriating amounts equal to the amounts earned in interest on 

the balance of the distribution. Legislature approved a $15 million appropriation to be spent only after the interest has been credited to the trust 

fund. Spending will be on improvements to UI information processing 

and telecommunications, staff and related costs for reemployment services, and enhancements to the ES and Team PA CareerLink system. 

Reed Act funds will substitute for $2 million in state supplemental funds 

previously appropriated for ES. Up to $5 million in penalty and interest 

funds till will be used to cover federal funding shortfalls for ES and UI 

administration. 

Puerto Rico 

$48.9 million 

Almost $42 million remains in trust fund. Will use $2 million to cover 

the shortfall in federal funding for UI administration. Will spend $1.6 

million on office equipment and computer hardware and $3.7 million on 

information technology and software. Will submit further proposal 

Rhode Island 

$27.1 million 

About $24 million remains in trust fund. Appropriated $1.7 million for 

Rapid Job Entry Program. About $0.9 million was substituted for state 

supplemental funds. Likely to propose improvements to one-stop career 

center infrastructure. 

South Carolina 

$108.2 million 

Funds used in trust fund to calculate 2003 tax rates. Increase in unemployment taxes will be lower as a result. Appropriated about $9.8 million 

to purchase land and construct local office facilities over the next 3-5 

years. The cost of these investments will be amortized and used again 

through a revolving fund. Next year plans to propose: a new benefit 

payment system; information technology for labor market information 

reporting; upgrades of systems network and equipment; land purchases of 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 157

land and construction of additional local office facilities. 

South Dakota 

$19.1 million 

Funds remain in trust fund. State legislature adjourned before distribution was made to trust fund. 

Tennessee 

$162.6 million 

About 96 percent of funds remain in trust fund. Taxes were reduced beginning in the third quarter of 2002. Appropriated $7 million for UI and 

ES administration as needed. 

Texas 

$596.4 million 

All funds were used to improve solvency and to avoid borrowing from 

the federal government to cover the cost of regular state benefits. As a 

result of the Reed Act distribution, unemployment taxes will be lower in 

2003. 

Utah 

$61.6 million 

About $56 million remains in trust fund. In a special session, state legislature appropriated $6 million over 3 years for ES staffing. This will 

fund 32 positions for 3 years. State advisory council has suggested enacting an alternate base period to increase access to UI for low-wage workers. It also suggested using half of the distribution to improve solvency. 

Vermont 

$16.4 million 

Legislature allocated $7.5 million to prevent an automatic increase in UI 

taxes. The remaining amount was used to increase temporarily weekly 

benefits by $18 per week this year and to increase the maximum benefit 

by 7 percent. 

Virgin Islands 

$2 million 

Plans to spend all funds over two years on improving ES and UI administration. Committed $1.1 million to computer software and information 

technology for the ES program. Will spend about $400,000 on UI administration, which is about 25% of its federal funding shortfall. 

Virginia A total of $184 million remains in the trust fund. These funds potentially 

averted a 0.2 percentage point fund building increase in UI taxes. Appropriated $30.9 million for ES and UI administration. Governor unsuc-
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 158

$214.9 million cessfully proposed an extension beyond 2002 through July 2003 of the 

temporary 37.3% increase in benefits that would have cost about $59.9 

million. Appropriated $6.2 million for the ES and $24.7 million for UI 

administration in the 2003/2004 biennium. Used $2 million from penalty and interest in 2002 to support ES and UI operations, but it is hoped 

the Reed Act distribution will substitute for these funds so that these 

funds can be used to build up a maintenance and capital building fund. 

Washington 

$167 million 

All funds remain in the trust fund. State legislature adjourned the day 

after the Reed Act distribution was deposited in the trust fund. Submitted 

four proposals for the 2003-2004 biennial budget. All costs will be amortized using portions of federal grants for UI administration. The proposals are: (1) imaging to speed adjudication of claims costing $1.9 million; 

(2) software to pass information collected from claimants over the telephone or internet to the benefit system costing $2.1 million; (3) a program to help low-income adults move up to higher-paying and more stable jobs costing $6.5 million; and (5) building of a training/meeting room 

addition to a state-owned facility. 

West Virginia 

$36.2 million 

About $32.4 million remains in the trust fund. Appropriated about $3.8 

million for ES and UI administration in the 2003-2004 biennial budget. 

About $1.4 million will be used to make up for the federal funding shortfall for the ES program. About $2.4 million was appropriated for UI administration. Funds will also be spent to implement a toll-free number 

for filing continued claims, to improve the integrated voice response 

(IVR) system for continued claims, to develop a new automated system 

for one-stop career centers. 

Wisconsin 

$166.2 million 

All funds remain in trust fund to improve solvency. Watching economy 

to determine if all funds will be needed to pay benefits. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 159

Wyoming 

$12 million 

All funds remain in trust fund. Plans to rewrite UI computer system at a 

cost of $10.5 million. Also plans to invest $1.1 million in an Internet application for labor market information and to rewrite the auto dialer system at a cost of $0.3 million. 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 160

ATTACHMENT C – ADDITIONAL DETAILS OF HYPOTHESIS TESTING

The following information contains the results of the statistical tests undertaken to 

evaluate the hypothesis put forward in the quantitative analysis. Additional information 

is also included as relevant. 

Hypothesis 1: 

Figure C.1 

Remaining Reed Act Funds Balance as of 2003.2 

(by level of covered unemployment) 

0%

25%

50%

75%

100%

Hawaii 

South Dakota 

Maryland 

North Dakota 

Florida 

Nebraska 

New Hampshire 

Georgia 

District of Columbia 

Virginia 

Utah 

Louisiana 

Wyoming 

Wisconsin 

Arizona 

Virgin Islands 

Kentucky 

Tennessee 

Iowa 

Pennsylvania 

Connecticut 

Oklahoma 

South Carolina 

Rhode Island West Virginia 

Kansas 

Alabama 

Nevada 

Idaho 

New Jersey 

Mississippi 

Maine 

Montana 

Vermont 

Indiana 

Ohio 

Arkansas 

Colorado 

New Mexico 

California 

Massachusetts 

Texas 

Minnesota 

Delaware 

Missouri 

New York 

Illinois 

Michigan 

North Carolina 

Washington 

Puerto Rico 

Alaska 

Oregon 

0% to 2.1% 2.1% to 4.2% 4.2% to

6.3%

Covered Unemployment Rate (2003.2)

Remaining Reed Act Funds in Trust Fund (Percent)
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 161

Hypothesis 1 Statistical Tests 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 162

Test of rate of change in unemployment

Tested by grouping on Reed Act Funds 

Remaining and testing change in 

unemployment

Average of 1999-2003 Delta against 

average of remaining Reed Act Funds 

Grouping (by thirds)

t-Test: Two-Sample Assuming Unequal Variances

0-33.3% 33.3-66.6%

Mean 0.011261397 0.011093602

Variance 0.0000163255 0.0000335687 

Observations 11 8

Hypothesized Mean Difference 0

df 12

t Stat 0.070403875

P(T<=t) one-tail 0.47251595

t Critical one-tail 1.782286745

P(T<=t) two-tail 0.945031901

t Critical two-tail 2.178812792

Null hypotheses is (the means are the same) is ACCEPTED

Average of 1999-2003 Delta against 

average of remaining Reed Act Funds 

Grouping (by thirds)

t-Test: Two-Sample Assuming Unequal Variances

0-33.3% 66.6%-100%

Mean 0.011261397 0.007179992

Variance 0.000016326 0.000029783 

Observations 11 34

Hypothesized Mean Difference 0

df 23

t Stat 2.656713769

P(T<=t) one-tail 0.00704697

t Critical one-tail 1.713870006

P(T<=t) two-tail 0.014093939

t Critical two-tail 2.068654794

Null hypotheses is (the means are the same) is REJECTED

Average of 1999-2003 Delta against 

average of remaining Reed Act Funds 

Grouping (by thirds)

t-Test: Two-Sample Assuming Unequal Variances

33.3-66.6% 66.6%-100%

Mean 0.011093602 0.007179992

Variance 0.000033569 0.000029783 

Observations 8 34

Hypothesized Mean Difference 0

df 10

t Stat 1.737743736

P(T<=t) one-tail 0.056447623

t Critical one-tail 1.812461505

P(T<=t) two-tail 0.112895247

t Critical two-tail 2.228139238

Null hypotheses is (the means are the same) is ACCEPTED

Average of 1999-2003 Delta against 

average of remaining Reed Act Funds 

Grouping (by thirds)

t-Test: Two-Sample Assuming Unequal Variances

Two lower Highest 

Mean 0.011190746 0.007179992

Variance 0.000022131 0.000029783 

Observations 19 34

Hypothesized Mean Difference 0

df 42

t Stat 2.807557613

P(T<=t) one-tail 0.00376984

t Critical one-tail 1.681951289

P(T<=t) two-tail 0.007539681

t Critical two-tail 2.018082341

Null hypotheses is (the means are the same) is REJECTED
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 163

Test of absolute level of unemployment Test of absolute level of unemployment

Tested by grouping on 

unemployment and testing variance 

in Remaining Reed Act Funds

Tested by grouping on remaining 

Reed Act Funds and testing 

variance in unemployment

Level of unemployment in 2003.2

t-Test: Two-Sample Assuming Unequal Variances t-Test: Two-Sample Assuming Unequal Variances

UE Less than .14% UE .14% to 1.2% Lower Higher

Mean 0.88906173 0.66713103 Mean 0.027919288 0.025707203

Variance 0.010094211 0.11182198 Variance 0.0000372 0.000108214

Observations 5 35 Observations 11 34

Hypothesized Mean Difference 0 Hypothesized Mean Difference 0

df 21 df 30

t Stat 3.073562366 t Stat 0.863601527

P(T<=t) one-tail 0.002881617 P(T<=t) one-tail 0.197329544

t Critical one-tail 1.720743512 t Critical one-tail 1.697260359

P(T<=t) two-tail 0.005763233 P(T<=t) two-tail 0.394659087

t Critical two-tail 2.079614205 t Critical two-tail 2.042270353

Null hypotheses is (the means are the same) is REJECTED Null hypotheses is (the means are the same) is ACCEPTED

t-Test: Two-Sample Assuming Unequal Variances

UE Less than .14% UE more than 1.2%

Mean 0.88906173 0.484626904

Variance 0.010094211 0.176180536

Observations 5 13

Hypothesized Mean Difference 0

df 15

t Stat 3.241064151

P(T<=t) one-tail 0.002741389

t Critical one-tail 1.753051038

P(T<=t) two-tail 0.005482778

t Critical two-tail 2.131450856

Null hypotheses is (the means are the same) is REJECTED

t-Test: Two-Sample Assuming Unequal Variances

UE .14% to 1.2% UE more than 1.2%

Mean 0.66713103 0.484626904

Variance 0.11182198 0.176180536

Observations 35 13

Hypothesized Mean Difference 0

df 18

t Stat 1.410265148

P(T<=t) one-tail 0.087754223

t Critical one-tail 1.734063062

P(T<=t) two-tail 0.175508446

t Critical two-tail 2.100923666

Null hypotheses is (the means are the same) is ACCEPTED

THIS TEST HAS SOME PROBLEMS BECAUSE OF ZEROS IN DATA SET
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 164

Hypothesis 2 Statistical Tests 

Absolute values Relative values

2003.2 Benefit Level Grouped by Unionization Benefit change 2001.2 to 2003.2 by Unionization

t-Test: Two-Sample Assuming Unequal Variances t-Test: Two-Sample Assuming Unequal Variances

High Medium High Medium

Mean 277.708 245.744 Mean 19.105 16.691

Variance 1448.618 1794.177 Variance 304.435 109.327

Observations 17.000 17.000 Observations 17.000 17.000

Hypothesized Mean Difference 0.000 Hypothesized Mean Difference 0.000

df 32.000 df 26.000

t Stat 2.314 t Stat 0.489

P(T<=t) one-tail 0.014 P(T<=t) one-tail 0.314

t Critical one-tail 1.694 t Critical one-tail 1.706

P(T<=t) two-tail 0.027 P(T<=t) two-tail 0.629

t Critical two-tail 2.037 t Critical two-tail 2.056

Null hypotheses is (the means are the same) is REJECTED Null hypotheses is (the means are the same) is ACCEPTED

2003.2 Benefit Level Grouped by Unionization Benefit change 2001.2 to 2003.2 by Unionization

t-Test: Two-Sample Assuming Unequal Variances t-Test: Two-Sample Assuming Unequal Variances

High Low High Low

Mean 277.708 226.911 Mean 19.105 14.792

Variance 1448.618 998.522 Variance 304.435 194.324

Observations 17.000 17.000 Observations 17.000 17.000

Hypothesized Mean Difference 0.000 Hypothesized Mean Difference 0.000

df 31.000 df 31.000

t Stat 4.234 t Stat 0.796

P(T<=t) one-tail 0.000 P(T<=t) one-tail 0.216

t Critical one-tail 1.696 t Critical one-tail 1.696

P(T<=t) two-tail 0.000 P(T<=t) two-tail 0.432

t Critical two-tail 2.040 t Critical two-tail 2.040

Null hypotheses is (the means are the same) is REJECTED Null hypotheses is (the means are the same) is ACCEPTED

2003.2 Benefit Level Grouped by Unionization Benefit change 2001.2 to 2003.2 by Unionization

t-Test: Two-Sample Assuming Unequal Variances t-Test: Two-Sample Assuming Unequal Variances

Medium Low Medium Low

Mean 245.744 226.911 Mean 16.691 14.792

Variance 1794.177 998.522 Variance 109.327 194.324

Observations 17.000 17.000 Observations 17.000 17.000

Hypothesized Mean Difference 0.000 Hypothesized Mean Difference 0.000

df 30.000 df 30.000

t Stat 1.469 t Stat 0.449

P(T<=t) one-tail 0.076 P(T<=t) one-tail 0.328

t Critical one-tail 1.697 t Critical one-tail 1.697

P(T<=t) two-tail 0.152 P(T<=t) two-tail 0.656

t Critical two-tail 2.042 t Critical two-tail 2.042

Null hypotheses is (the means are the same) is ACCEPTED* (close...) Null hypotheses is (the means are the same) is ACCEPTED
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 165

Hypothesis 3 Statistical Tests 

Count of State

Hypo3 Benefit Increase Total

Both Low Unemployme Yes Benefit Increase 6

No benefit increase 6

Not both Low UnemployYes Benefit Increase 12

No benefit increase 27

Grand Total 51

p0 0.352941176 Yes answers divided by all answers

p1 0.5 Yes proportion in first group

p2 0.307692308 Yes proportion in second group

n1 12 count of cells in first group

n2 39 count of cells in second group

z calc 1.219021733 test statistic

p value 0.111 estimated probability of false positive

a=0.1

one-tail z value 1.240

a=0.05

one-tail z value 1.645
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 166

Hypothesis 4 Statistical Tests 

Relative values Absolute Values

AWBA change 2002.2 to 2003.2 by ACHM AWBA change 2002.2 to 2003.2 by ACHM

t-Test: Two-Sample Assuming Unequal Variances t-Test: Two-Sample Assuming Unequal Variances

EXLUDING CALIFORNIA

Low Medium Low Medium

Mean 0.467272727 1.583 Mean -0.30090909 2.817894737

Variance 10.87044182 253.3952642 Variance 15.19376909 23.81238421

Observations 11 20 Observations 11 19

Hypothesized Mean Difference 0 Hypothesized Mean Difference 0

df 22 df 25

t Stat -0.301901124 t Stat -1.92148086

P(T<=t) one-tail 0.382781465 P(T<=t) one-tail 0.033071011

t Critical one-tail 1.717144187 t Critical one-tail 1.708140189

P(T<=t) two-tail 0.765562929 P(T<=t) two-tail 0.066142023

t Critical two-tail 2.073875294 t Critical two-tail 2.05953711

Null hypotheses is (the means are the same) is ACCEPTED Null hypotheses is (the means are the same) is ACCEPTED

AWBA change 2002.2 to 2003.2 by ACHM

t-Test: Two-Sample Assuming Unequal Variances

Low High

Mean 0.467272727 1.672

Variance 10.87044182 135.5215432

Observations 11 20

Hypothesized Mean Difference 0

df 24

t Stat -0.432352139

P(T<=t) one-tail 0.334672758

t Critical one-tail 1.710882316

P(T<=t) two-tail 0.669345516

t Critical two-tail 2.063898137

Null hypotheses is (the means are the same) is ACCEPTED

AWBA change 2002.2 to 2003.2 by ACHM

t-Test: Two-Sample Assuming Unequal Variances

High Medium

Mean 1.672 1.583

Variance 135.5215432 253.3952642

Observations 20 20

Hypothesized Mean Difference 0

df 35

t Stat 0.020182578

P(T<=t) one-tail 0.492006174

t Critical one-tail 1.689572855

P(T<=t) two-tail 0.984012347

t Critical two-tail 2.030110409

Null hypotheses is (the means are the same) is ACCEPTED

Hypothesis 4 -- z-test of proportions

Count of State Benefit Increase

AHCM Group 03.Q2 Benefits Increase No Benefit Increase Grand Total

1. Low AHCM 11 11

2. Mid AHCM 6 15 21

3. High AHCM 12 9 21

Grand Total 18 35 53

hypo4

p0 0.339622642 Proportion of increases in sample

p1 0.1875 First group increase proportion

p2 0.571428571 Second group increase proportion

n1 32 N of first proportion

n2 21 N of second proportion

z stat 2.886707161 Test statistic

p value 0.9981 Probability of false positive

a=0.1 H0: rejected

one-tail z value 1.240

a=0.05

one-tail z value 1.645
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 167

Hypothesis 5 Statistical Tests 

Relative values

Change in tax collected per 1000 covered employment 2002.2 to 2003.2 by ACHM

t-Test: Two-Sample Assuming Unequal Variances

Low High

Mean 32.62776153 9.682999687

Variance 216.534007 534.991224

Observations 11 19

Hypothesized Mean Difference 0

df 28

t Stat 3.317243379

P(T<=t) one-tail 0.00126326

t Critical one-tail 1.701130259

P(T<=t) two-tail 0.00252652

t Critical two-tail 2.048409442

Null hypotheses is (the means are the same) is REJECTED

AWBA change 2002.2 to 2003.2 by ACHM

t-Test: Two-Sample Assuming Unequal Variances

Low Medium

Mean 32.62776153 18.27826922

Variance 216.534007 770.7924988

Observations 11 21

Hypothesized Mean Difference 0

df 30

t Stat 1.91090074

P(T<=t) one-tail 0.032807425

t Critical one-tail 1.697260359

P(T<=t) two-tail 0.065614849

t Critical two-tail 2.042270353

Null hypotheses is (the means are the same) is REJECTED (one tail)

AWBA change 2002.2 to 2003.2 by ACHM Change in tax collected per 1000 covered employment 2002.2 to 2003.2 by ACHM

t-Test: Two-Sample Assuming Unequal Variances t-Test: Two-Sample Assuming Unequal Variances

EXLUDING CALIFORNIA

Medium High Medium High

Mean 18.27826922 9.682999687 Mean 17.89720347 9.682999687

Variance 770.7924988 534.991224 Variance 808.1505954 534.991224

Observations 21 19 Observations 20 19

Hypothesized Mean Difference 0 Hypothesized Mean Difference 0

df 38 df 36

t Stat 1.067246835 t Stat 0.992006119

P(T<=t) one-tail 0.146297021 P(T<=t) one-tail 0.163907868

t Critical one-tail 1.685953066 t Critical one-tail 1.688297289

P(T<=t) two-tail 0.292594043 P(T<=t) two-tail 0.327815735

t Critical two-tail 2.024394234 t Critical two-tail 2.02809133

Null hypotheses is (the means are the same) is ACCEPTED Null hypotheses is (the means are the same) is ACCEPTED

Hypothesis 5 z-test of proportions

Count of State Taxes Reduced

AHCM Group 03.Q2 No Yes Grand Total

1. Low AHCM 7 4 11

2. Mid AHCM 13 8 21

3. High AHCM 8 13 21

Grand Total 28 25 53

p0 0.471698113 Proportion of yes in sample

p1 0.375 Two lower group's proportion of yes

p2 0.619047619 Highest group's proportion of yes

n1 32 N in lower group

n2 21 N in higher group

z calc 1.740796987 test statistic

p value 0.959 H0: Rejected

a=0.1

one-tail z value 1.240

a=0.05

one-tail z value 1.645
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 168

ATTACHMENT D – QUALITATIVE STUDY INTERVIEW GUIDE

REED ACT STUDY – CASE ANALYSIS 

INTERVIEW GUIDE

The information presented below is based on Booz Allen’s analysis of publicly available information and will be verified with [state name] state representatives as a part of the Reed Act case 

study. 

Background 

[text inserted here for each state with summary of publicly available/known use of Reed Act 

funds.] 

I. Process Considerations 

1. How did the state use its Reed Act funds? How much of the funds have been appropriated 

and how will the remaining funds be used? 

2. Describe the process by which the proposals for spending the Reed Act funds were generated. Were they generated by the state administrator or the governor’s office? 

3. What were the steps taken to educate stakeholders/ policy makers about Reed Act funding? 

4. How useful were the Reed Act funds for stimulating the state economy? 

5. Did the Reed Act distribution contribute to solvency and was there a decision not to spend 

the Reed Act funds until the annual tax adjustment? 

6. The Reed Act funds are restricted to certain uses. What are other areas you would like to 

improve/invest in that are outside the scope of the Reed Act distribution? 

7. If your state had not received the Reed Act distribution, how would the 2003 tax rates have 

compared to 2002? 

8. Are your 2003 tax rates lower than they would have been otherwise? If yes, by how much? 

How much lower ($) are your UI taxes? Were the lower tax rates a result of an automatic 

change or a legislated change? 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 169

Uses of the Reed Act Funds 

II. Investment in Employment Services (ES)

9. Did the state use its Reed Act funds to invest in its employment services (ES)? If so, how 

much was spent on ES? 

10. What types of investments in ES were made? What are the expected benefits of these investments? 

11. Why did the state decide to invest in ES as opposed to other uses? 

12. What amount of the state’s distribution was used to substitute for state supplemental funds 

that were then reallocated to programs other than ES? 

13. Did the State use Reed Act funds to invest in the Employment Service Labor Exchange System? 

14. If ‘yes’ to question #13, how much was utilized and on which ES activities e.g. basic labor 

exchange services, core services for the One-Stop delivery system etc? 

15. Did the State provide supplemental dollars to fund any activities in the ES Labor Exchange 

System? 

16. If ‘yes’ to question #15, what was the amount and for which activities? 

17. Were there any additional funds that were utilized or proposed for use to support the ES Labor Exchange System? 

18. What tools and/or resources were developed to educate stakeholders about the use of Reed 

Act funds for the Employment Service Labor Exchange? (include appropriate Departmental 

guidance) 

III. UI Administration 

19. Did the state use its Reed Act funds to invest/improve its UI administration? If so, how much 

was spent on it? 

20. What type of investments/improvements were made? 

21. Why did the state decide to invest/improve its UI administration as opposed to other uses? 

22. What amount of the state’s distribution was used to substitute for state supplemental funds 

that were then reallocated to programs other than UI? 

IV. Benefit Expansion/Extension/Enhancement 

23. What dollar amount of the state’s distribution was used to expand, extend or enhance benefits? Does the state have any plans to expand benefits by instituting an alternate base period? 

24. Does the state provide benefits to part-time workers? 

25. The Reed Act distribution is a “one-time” distribution – how was the issue that a one-time 

funding can be adequate to fund eligibility and benefit expansions addressed? Is the benefit 

extension/expansion/enhancement a sunset provision? If not, how will the out-years be 

funded? 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 170

V. Stakeholders 

26. Were stakeholders active in communicating their interest in policy formulation regarding the 

use of the Reed Act funds? If yes, who were they? (Please provide name, affiliation and telephone number) 

27. Does the state have a UI advisory council? If yes, who are the members of this council? 

28. What was the role if any, of the advisory council in the policy formulation regarding the 

Reed Act funds? 

VI. Other 

29. Does your state plan to propose spending Reed Act funds next year? 

30. What were the lessons learned regarding the Reed Act distribution and its implications? 

Contact Information _________________________________________________________ 

Phone Number _________________________________________________________ 

E-Mail _________________________________________________________ 
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 171

ATTACHMENT E – TRENDS IN AWBA FOR SELECTED STATES 1999.1 TO 2003.2 

Figure E1 

Trends in AWBA for selected states 1999.1 to 2003.2 

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Iowa 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Louisiana 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Michigan 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 172

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Montana 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in New Jersey 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Minnesota 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 173

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Ohio 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Virginia 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount

Trends in the Average Weekly Benefit Amount (AWBA) and 

Tax Rate on Total Wages in Washington 

1999 - 2003

$0

$50

$100

$150

$200

$250

$300

$350

1999.1 1999.2 1999.3 1999.4 2000.1 2000.2 2000.3 2000.4 2001.1 2001.2 2001.3 2001.4 2002.1 2002.2 2002.3 2002.4 2003.1 2003.2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

AWBA CY Tax Rate on Total Wages

Tax Rate on Total Wages 

Special Reed Act 

Distribution

Economic

Recession

Sources: Data Come From the UI Data Summary, Employment and Training Administration 

 Period Designation for the 2001 Economic Recession comes from the National Bureau of Economic Research

Average Weekly Benefit Amount
Assessment of the Impact of the 2002 Reed Act Distribution 

Center for Employment Security Education and Research 174