UNEMPLOYMENT 

INSURANCE

States’ Reductions in 

Maximum Benefit 

Durations Have 

Implications for 

Federal Costs

Report to Congressional Requesters

April 2015

GAO-15-281

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-15-281, a report to 

congressional requesters

April 2015

UNEMPLOYMENT INSURANCE

States’ Reductions in Maximum Benefit Durations 

Have Implications for Federal Costs

Why GAO Did This Study

As part of the nation’s UI system, 

overseen by DOL, states provide 

benefits to eligible unemployed 

workers, with additional weeks of 

benefits sometimes provided by the 

federal government in times of 

economic stress. Since the 1960s, 

states have had maximum UI benefit 

durations of 26 weeks or longer. 

However, since 2011, nine states have 

reduced their maximum benefit 

durations: Arkansas, Florida, Georgia, 

Illinois, Kansas, Michigan, Missouri, 

North Carolina, and South Carolina. 

GAO was asked to review the states’ 

reductions. 

GAO examined (1) the circumstances 

in which states reduced the maximum 

duration of UI benefits, (2) the 

implications of these reductions for 

individuals, (3) the effects on federal UI 

costs, and (4) their broader economic 

effects. GAO reviewed relevant federal 

and state laws; visited Georgia and 

Michigan, which had different 

approaches to reducing durations; 

analyzed UI program data from 2006 

(before the recession) to 2014; and 

reviewed relevant economic research.

What GAO Recommends

GAO recommends that the Secretary 

of Labor examine the implications of 

state duration reductions for federal UI 

program costs and develop 

recommendations, if warranted. DOL 

agreed with GAO’s recommendation 

and indicated it will begin to assess an 

approach for studying the implications 

of reductions in maximum duration on 

federal costs.

What GAO Found

The unemployment insurance (UI) system, a federal and state partnership that 

provides benefits to eligible workers who have lost their jobs, was under financial 

pressures during the recent recession and recovery. Since 2011, nine states 

reduced the maximum length of time (duration) individuals could receive state 

benefits. These states reduced duration from 26 weeks to as few as 12 weeks, 

with 20 weeks being the most common new maximum. Compared to states that 

did not reduce duration, those that did generally had higher unemployment rates 

and weaker UI trust fund balances and were more likely to have federal loans as 

their UI reserves became depleted. Officials in five of the nine states said that 

replenishing their trust fund balance was a key rationale for reducing benefit 

duration. GAO found that most of the nine states, like other states, also 

increased employer taxes for their UI program and made other benefit reductions 

such as by changing UI eligibility rules.

Reductions in state benefit durations resulted in some individuals receiving 

substantially less in total UI benefits. During the period from 2009 through 2013, 

individuals who exhausted their state benefits could receive additional weeks of 

benefits from the federal government. The duration of federal benefits was based 

on the duration of state benefits; shorter maximum state benefit periods resulted 

in shorter maximum federal benefit periods. As a result, some individuals 

received substantially less in total UI benefits because the durations of both their 

state and federal benefits were reduced. For example, in 2013, an individual in a 

state that had shortened its maximum benefit duration to 20 weeks could have 

received up to 52.4 additional weeks of federal benefits, for a total of 72.4 weeks. 

However, had the state maximum duration remained at 26 weeks, that individual 

could have received up to 67 weeks of federal benefits, for a total of 93 weeks. 

In contrast, individuals eligible for UI benefits for relatively short periods of time 

were unaffected by the reduced durations.

The effects of these reductions on federal UI program costs are unclear. 

Although GAO’s prior work on past recessions found it can be useful for federal 

agencies to assess the unintended consequences of state policy responses, the 

Department of Labor (DOL) has not assessed the extent of any cost shift to the 

federal government. The net impact on federal UI costs would depend on how 

reductions in the duration of state benefits affect the number of people receiving 

federal benefits and for how long. On the one hand, federal costs are increased 

to the extent that state duration reductions shift individuals to federal benefits 

earlier. On the other hand, federal costs are decreased to the extent that fewer 

weeks of federal UI benefits are available. However, because DOL has not 

analyzed state data on individuals’ weekly benefits, it remains unclear whether 

the federal government incurred a net cost due to the states’ duration reductions.

Relevant research suggests that reductions in benefit duration may reduce the 

positive effects of UI on the economy. The economic literature that GAO 

reviewed, including analysis by the Congressional Budget Office, generally 

indicates positive macroeconomic effects from the UI program, based on the 

likelihood that benefits are spent, thus providing a stimulus to the economy. View GAO-15-281. For more information, 

contact Andrew Sherrill at (202) 512-7215 or 

sherrilla@gao.gov.
Page i GAO-15-281 Unemployment Insurance

Letter 1

Background 3

States That Reduced UI Benefit Durations Generally Had Weak 

Pre-Recession Trust Funds and Raised Taxes While Improving 

Solvency 15

Reduction in Maximum Duration of UI Benefits Lowered Total 

Benefits for Some Individuals 25

Duration Reduction by States Shifted Some Costs from States to

the Federal Government 34

Research Suggests That Reductions in Benefit Duration May 

Lessen UI’s Positive Effects on the Economy 40

Conclusions 44

Recommendation for Executive Action 45

Agency Comments and Our Evaluation 45

Appendix I Objectives, Scope, and Methodology 47

Appendix II Financial Characteristics of Selected States 54

Appendix III Specifications for Variable Maximum Durations, Estimated Cost 

Savings, and Additional UI Program Changes for Selected States 57

Appendix IV Washington State Simulation Using Benefit Financing Model 60

Appendix V Analysis of Individual States 62

Appendix VI Comments from the Department of Labor 66

Appendix VII GAO Contact and Staff Acknowledgments 68

Contents
Page ii GAO-15-281 Unemployment Insurance

Related GAO Products 69

Tables

Table 1: States That Reduced the Maximum Duration of 

Unemployment Insurance Benefits to Fewer Than 26 

Weeks Since 2011 5

Table 2: Foregone Unemployment Benefit Amounts per Claimant 

in Duration Reduction States with Flat Maximum 

Durations, as of 2014 25

Table 3: Foregone Unemployment Benefit Amounts per Claimant 

in Duration Reduction States with Variable Maximum 

Durations, as of October 2014 26

Table 4: Average Length of Unemployment and Maximum 

Unemployment Benefit Duration in States that Reduced 

Duration, as of October 2014 27

Table 5: Hypothetical Foregone Unemployment Benefit Amounts 

in Duration Reduction States Assuming 93 Weeks of Total 

Benefits before Duration Reduction, as of May 2013 31

Table 6: Sample Effect on Federal Unemployment Insurance 

Programs of Reducing Maximum State Benefit Duration 

from 26 to 20 Weeks, as of May 2013 35

Table 7: Stakeholders Interviewed by State 48

Table 8: Variables Used in Cluster Analysis 50

Table 9: Selected Financial Characteristics of States That 

Reduced Duration and States That Did Not Reduce 

Duration 54

Table 10: Maximum Trust Fund Loan Balances, by State 55

Table 11: Federal Unemployment Tax Act (FUTA) Credit 

Reductions Due to States Having Outstanding Federal 

Advances 56

Table 12: State Specifications for Variable Maximum Durations of 

Unemployment Insurance Benefits 57

Table 13: Estimated Cost Savings Attributable to Duration 

Reduction and Maximum Loan Balances in Selected 

States 58

Table 14: Additional Financing and Benefit Changes Made by 

Duration Reduction States 58

Table 15: Impact of Benefit Reduction on Washington State 2013 

Benefits 60

Table 16: Highest Tier of Emergency Compensation Benefits 

Available in Duration Reduction States, 2008-2013 62
Page iii GAO-15-281 Unemployment Insurance

Table 17: Effective Dates of Extended Benefits for Reduction 

States, 2008-2013 62

Table 18: GAO Analysis of Selected 2006-2014 Data and Results 63

Figures

Figure 1: Sequence of Unemployment Benefits by Unemployment 

Programs 8

Figure 2: Changes in Unemployment Benefits and Nation’s 

Unemployment Rate, 2008-2014 10

Figure 3: Balancing Unemployment Insurance Program Revenue 

and Benefits 12

Figure 4: Unemployment Insurance Trust Fund Adequacy before 

the Recession: Average High Cost Multiple for Duration 

Reduction States, 4th Quarter 2007 17

Figure 5: Potential Maximum Duration of State and Federal 

Unemployment Insurance Benefits, Assuming a 

Reduction of State Benefits to 20 Weeks, as of May 2013 28

Figure 6: Unemployment Insurance Benefits Paid at Shorter 

Unemployment Durations, Assuming State Reduced 

Maximum Duration from 26 to 20 Weeks, as of December 

2013 29

Figure 7: State and Federal Costs at Selected Unemployment 

Benefit Durations, Assuming State Reduced Duration 

from 26 to 20 Weeks, as of May 2013 36

Figure 8: Estimated Costs to the Federal Government after 

Missouri’s Unemployment Benefits Duration Reduction, 

Weeks 21-26 38

Figure 9: Estimated Costs to the Federal Government after 

Georgia’s Unemployment Benefits Duration Reduction, 

Weeks 19-26 39

Figure 10: Congressional Budget Office Estimates of the 

Maximum and Minimum Multiplier Effects for Stimulus 

Provisions of the American Recovery and Reinvestment 

Act of 2009 42

Figure 11: Annual Private-Sector Gross Job Gains and Losses, 

1994-2014 64
Page iv GAO-15-281 Unemployment Insurance

Abbreviations

AHCM average high cost multiple

BLS Bureau of Labor Statistics

CBO Congressional Budget Office

CRS Congressional Research Service

DOL Department of Labor

FUTA Federal Unemployment Tax Act

GDP gross domestic product

SSDI Social Security Disability Income

TTR Total Taxable Resources

UI unemployment insurance

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Page 1 GAO-15-281 Unemployment Insurance

441 G St. N.W.

Washington, DC 20548

April 22, 2015

The Honorable Patty Murray

Ranking Member

Committee on Health, Education, Labor, and Pensions

United States Senate

The Honorable Jack Reed

United States Senate

The recent recession and the slow recovery placed extraordinary 

demands on the nation’s unemployment insurance (UI) system—a 

program of temporary wage replacement. UI benefits are generally 

provided through states and extended, at times, with federally-provided 

benefits, for example during periods of high unemployment.1

The UI system provides temporary benefits that partially replace earnings 

for individuals who have lost jobs through no fault of their own. Under 

federal law, there is no minimum or maximum period of time state 

programs must provide benefits. From the 1960s until recently, according 

to the Congressional Research Service (CRS), all states provided 

benefits up to 26 weeks, and 2 states provided additional weeks. During 

periods of high unemployment, the federal government has provided UI 

benefits beyond the states’ maximum durations. Since 2011, however, 9 

states reduced the maximum allowable duration for their benefits:

Between 

late 2007, when the recession began, and early 2009, the total dollar 

value of state-funded UI benefit payments to individuals increased 164 

percent nationwide and 22 states experienced increases of 200 percent 

or more.

 

1 During the recovery following the recent recession, the federal government provided UI 

benefits through two major programs, Emergency Unemployment Compensation and 

Extended Benefits, which we refer to as “federal programs” and “federal benefits” in this 

report. The federal government funded benefits under Emergency Unemployment 

Compensation. Under federal law, benefits in the Extended Benefits program are 

generally funded by both the federal government and the states; however, under the 

American Recovery and Reinvestment Act of 2009 as amended, the federal government 

fully funded these benefits through December 31, 2013. Throughout this report, we use 

“state program” and “state benefits” to refer to the initial period of state-provided UI 

benefits that most states provide for up to 26 weeks.

Letter
Page 2 GAO-15-281 Unemployment Insurance

Arkansas, Florida, Georgia, Illinois, Kansas, Michigan, Missouri, North 

Carolina, and South Carolina. Among these states, the most common 

new maximum duration is 20 weeks, and in 2 states it can be as low as 

12 weeks under certain conditions.

You asked us to review state reductions in maximum durations to assess 

their significance. Our review examines (1) the circumstances in which 

states reduced the maximum duration of their UI benefits to fewer than 26 

weeks, (2) the implications of these reductions for individual UI claimants 

in these states, (3) the effect, if any, on costs for the federal government, 

and (4) what is known about the broader economic effects of these 

benefit reductions.

To identify the circumstances in which states reduced the maximum 

duration of state unemployment benefits, we reviewed relevant federal 

laws and regulations, as well as relevant state laws, interviewed federal 

UI program officials and state UI officials in 7 of the 9 states that reduced 

their durations,2 and conducted site visits to 2 of them—Georgia and 

Michigan. We selected these 2 states because they differed in type, 

magnitude, and timing of the duration reductions, as well as geographic 

region. In the site visit states, we conducted additional interviews with 

selected state legislators, researchers, governors’ workforce policy 

advisors, employer groups, and labor advocates. To understand more 

broadly how state UI programs responded to challenges following the 

recession, we also interviewed state UI officials in 4 states that did not 

reduce their UI benefit duration. We selected 3 of these states—Indiana, 

Ohio, and Tennessee—based on their similarity to the states that reduced 

benefit duration. We selected the fourth state, Washington, on the basis 

of expert recommendation. To identify state characteristics that most 

distinguished the states that reduced duration from those that did not, we 

analyzed data for all 50 states and the District of Columbia,3

 

2 We also asked state officials to confirm our understanding of state laws. Among the 9 

states that reduced duration, officials from 2—Florida and North Carolina— did not 

respond to our written questions. We interviewed advocates and employer groups in both 

of these states.

primarily 

from the Department of Labor’s (DOL) Office of Unemployment Insurance 

and Bureau of Labor Statistics (BLS). The data analyzed included both UI 

3 For the purposes of this report, the District of Columbia is treated as a state. While 

Puerto Rico and the Virgin Islands also participate in the UI program, they are not included 

in the scope of this report.
Page 3 GAO-15-281 Unemployment Insurance

program and financing characteristics, as well as state demographic and 

economic characteristics. We also analyzed these data to address 

potential implications of duration reduction for individuals, focusing on the 

9 duration reduction states and the 4 states we selected that did not 

reduce duration.

To examine any potential effect of the states’ maximum duration 

reductions on costs to the federal government, we analyzed data 

provided to us by two states, Georgia and Missouri. These data included 

specific items from reports that states provide regularly to DOL. We 

assessed the reliability of the data we used for this report.4

We conducted our work from November 2013 through April 2015 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

In each case, 

we collected information about the data series in question, such as the 

uses of the data, applicable internal controls, and data entry practices. 

We determined the data to be sufficiently reliable for the purpose of this 

report. Finally, we reviewed economic literature to understand the 

significance of UI benefits for individuals, in terms of their attachment to 

the labor force and job search behavior, among other implications, and 

the effects of UI on the economy. From this research, we derived 

reasonable conclusions about the likely implications of duration 

reductions for individuals and the broader economic effects of these 

benefit reductions. For additional information about our methodology, see 

appendix I.

The nation’s UI system is a joint federal/state partnership originally 

authorized by the Social Security Act and funded primarily through federal 

 

4 In addition to DOL and selected states, other sources included the Department of the 

Treasury and the National Conference of State Legislatures for selected variables.

Background

UI: A Federal and State 

Partnership
Page 4 GAO-15-281 Unemployment Insurance

and state taxes on employers. Under this arrangement, states administer 

their own programs, generally known as regular UI benefits, according to 

certain federal requirements and under the oversight of DOL’s Office of 

Unemployment Insurance. The primary objectives of this partnership are 

to provide temporary, partial compensation for lost earnings to individuals 

who have become unemployed through no fault of their own and to help 

stabilize the economy during economic downturns.5

Federal law sets forth broad provisions for the categories of workers who 

must be covered by the program, some benefit provisions, the federal tax 

base and rate, and program administration, such as how states will repay 

any funds they borrow from the federal government to pay benefits when 

state reserves are depleted.

States have considerable flexibility to set benefit amounts and their 

duration, or the maximum period of time that the state pays benefits, and 

establish eligibility requirements and other program details.6 Regarding 

duration, for example, most states provided up to 16 weeks in 1938, after 

the program was first established.7 More recently, states provided up to 

26 weeks.8

 

5 See Background Material and Data on Programs within the Jurisdiction of the Committee 

on Ways and Means (Green Book) (Washington, D.C.: November 2014).

In the wake of the recession, according to DOL, 9 states 

reduced benefit duration, with 20 weeks—representing a reduction of 

6 Although there are no federal requirements for the minimum or maximum time states 

must provide benefits, in a 1996 report to the President and the Congress, an advisory 

body composed of labor and employer representatives, state officials, and a researcher 

recommended a duration of 6 months—i.e., 26 weeks. See Advisory Council on 

Unemployment Compensation, Collected Findings and Recommendations 1994-1996

(Washington, D.C.: 1996). 

7 Daniel N. Price, Unemployment Insurance, Then and Now, 1935-1985 (Social Security 

Bulletin, vol. 48, no. 10, October 1985). 

8 Currently, according to DOL, two states provide benefits for longer than 26 weeks: 

Montana provides 28 weeks and Massachusetts provides 30 weeks.
Page 5 GAO-15-281 Unemployment Insurance

over 20 percent—the most common new maximum (see table 1).9 

Among these states, 4 enacted new maximum durations that vary 

according to the state’s unemployment rate (referred to in this report as 

“variable duration”), while the other 5 states’ new maximum durations do 

not vary in this way (referred to in this report as “flat duration”). All 9 

states established these new durations through changes in state law.10

Table 1: States That Reduced the Maximum Duration of Unemployment Insurance 

Benefits to Fewer Than 26 Weeks Since 2011

State 

Maximum benefit 

duration before 

reduction (weeks)

New maximum 

benefit duration

(weeks)

Year duration 

reduction 

enacted

Arkansas 

a

26 25 2011

Florida 26 b 12-23 2011

Georgia 26 b 14-20 2012

Illinois 26 c 25 2011

Kansas 26 b 16-26 2013

Michigan 26 20 2011

Missouri 26 20 2011

North Carolina 26 b 12-20 2013

South Carolina 26 20 2011

Source: DOL, Comparison of State Unemployment Laws, selected years, and GAO analysis of relevant state laws. | GAO-15-281

a

In some states, the date that the change took effect was later than the enactment date.

b

In these states, the maximum duration varies within the range shown, depending on the state’s total 

unemployment rate. For example, in Kansas, 26 weeks of benefits are available only when the total 

unemployment rate in the state is 6 percent or more. According to state officials, as of October 2014, 

the maximum duration in Kansas was 20 weeks.

c

 

9 There is some evidence of reduction in the duration of state benefits that predated the 

current duration reductions. Specifically, in 1993, we reviewed UI program changes in 7 

states, and found that 2 of them—Massachusetts and New Hampshire—had reduced 

duration, in concert with other changes. In Massachusetts’ case, we found that the 

reduction was from 30 weeks to 26 weeks. According to DOL, as of January 2015, 

maximum duration in Massachusetts is 30 weeks. See GAO, Unemployment Insurance: 

Program’s Ability to Meet Objectives Jeopardized, 

Illinois’ reduction to 25 weeks was temporary, and applicable to claims filed in 2012. Illinois law also 

sets forth a future temporary reduction to 24 weeks, which will be applicable to claims filed in 2016 

and 2018. 820 Ill. Comp. Stat. 405/403 (2014).

GAO/HRD-93-107 (Washington, D.C.: 

September 28, 1993). However, according to an outside expert who reviewed a draft of 

this report, the scale of the current duration reductions is unprecedented.

10 None of the officials from the 7 duration reduction states where we were able to conduct 

interviews identified any successful efforts in their states to restore duration to 26 weeks.
Page 6 GAO-15-281 Unemployment Insurance

States also have flexibility to establish eligibility requirements, which can 

affect duration.11 There are two kinds of eligibility requirements. Monetary 

eligibility typically refers to an earnings threshold and employment history 

that applicants must meet in order to qualify for benefits. Based on such 

eligibility criteria, individuals may qualify for less than a state’s maximum 

duration.12 The other category of eligibility requirements is non-monetary, 

which according to DOL, refers to states’ criteria to determine if an 

individual’s job loss is through no fault of his or her own,13 and that the 

individual is able to work, available for work, and actively seeking work. 

According to DOL, each state’s law sets both monetary and nonmonetary requirements for eligibility.

In addition to the state UI benefits, federal emergency and extended UI 

programs may sometimes provide additional weeks of benefits under 

certain economic conditions, such as rising unemployment or economic 

downturns.

Temporary Federal UI Programs. During economic downturns, 

Congress has sometimes passed legislation to provide temporary 

unemployment compensation. Most recently, such a temporary program 

 

11 This discussion of state eligibility requirements is based on DOL’s Comparison of State 

Unemployment Insurance Laws, 2014 (Washington, D.C.: 2015). 

12 According to DOL, most states calculate the durations that claimants are eligible for 

based on their earnings or employment history. That is, they determine the maximum 

benefit an individual may receive, either by calculating the amount as a fraction or percent 

of wages earned during a specified period, or they set maximum weeks of benefits as a 

fraction of weeks worked during a specified period and then divide the maximum benefit 

by the state’s average weekly benefit amount to determine weeks of benefits. These 

methods can result in durations for individual claimants that are less that the state’s 

maximum. By contrast, as of January 1, 2014, 8 states did not use either of these 

methods, and provided benefits for 26 weeks for all claimants. See DOL, Comparison of 

State Unemployment Insurance Laws, 2014 (Washington, D.C.: 2015).

13 According to DOL, those who voluntarily leave their jobs are generally ineligible for UI. 

However, some states allow exceptions, such as accepting a layoff to avoid bumping 

another worker, leaving employment after being directed to perform an illegal act, or 

leaving employment due to unsafe working conditions. States also vary in their definitions 

of “misconduct,” which generally refers to intentional and substantial disregard of the 

employer’s interests, and in the applicable penalties for misconduct. States provide for 

heavier penalties in cases of dishonesty or criminal acts, but in some cases, misconduct 

can result in temporary suspension of benefits, depending on state law. See DOL, 

Comparison of State Unemployment Insurance Laws, 2014.

Federal Programs Can 

Provide UI Benefits 

Beyond the State 

Maximum
Page 7 GAO-15-281 Unemployment Insurance

was created by the Supplemental Appropriations Act, 2008 (Emergency 

Unemployment Compensation; “emergency benefits” for the purposes of 

this report).14 According to CRS, this represented the eighth time a 

federal temporary unemployment compensation program was created 

since the inception of the UI program. This program provided up to 53 

additional weeks of emergency benefits to qualifying claimants and 

expired in December 2013.15 After establishing the recent emergency 

benefits program in 2008, Congress amended the program 11 times, 

extending it and in some cases adding weeks of benefits, according to 

information provided by DOL. From December 2008 until the program 

expired in December 2013, emergency benefits were available in all 

states, including the states that reduced duration, with the exception of 

North Carolina (see app. V).16

Extended UI Benefits. In addition, states and the federal government 

provide “extended” benefits to workers. This program, which has no 

expiration date, provides up to 13 additional weeks of benefits to workers 

who have exhausted state unemployment insurance benefits during 

periods of high unemployment.17

 

14 Pub. L. No. 110-252, Title IV, 122 Stat. 2353, 2353.

According to CRS, some states have 

also utilized an option to pay up to 7 additional weeks of extended 

benefits when unemployment reaches certain levels. While financing for 

extended UI benefits is typically shared between the states and the 

federal government, the American Recovery and Reinvestment Act of 

2009, as amended, provided for temporary full federal funding of the 

extended benefits program through December 2013.

15 Katelin P. Isaacs and Julie M. Whittaker, Emergency Unemployment Compensation 

(EUC08): Status of Benefits Prior to Expiration, R42444 (Washington, D.C.: Congressional 

Research Service, August 11, 2014).

16 North Carolina made other changes to its UI program that made it ineligible to receive 

emergency benefits as of June 29, 2013, according to CRS.

17 The extended benefits program comes into effect and pays unemployment benefits 

when a state’s unemployment rate is increasing and reaches certain levels. All states 

must pay up to 13 weeks of extended benefits if the unemployment rate among those 

eligible for UI for a specified 13-week period is at least 5 percent and is 120 percent of the 

average of the rates for the same 13-week period in each of the two previous years. 

States can also choose to pay an additional 7 weeks of extended benefits if the 

unemployment rate among those eligible reaches certain thresholds and is increasing. 
Page 8 GAO-15-281 Unemployment Insurance

According to DOL, from January 2009 to May 2013, 39 states met the 

criteria for extended benefits at various times, including all of the states 

that reduced duration, and since May 2013, no state has met the criteria 

for federal extended benefits (see app. V). During the recovery, the 

maximum period for all combined benefits—state, emergency, and 

extended—to qualifying claimants reached 99 weeks in some states (see 

fig. 1).18

Figure 1: Sequence of Unemployment Benefits by Unemployment Programs

a

In most states, the maximum duration remains 26 weeks. b

According to CRS, total potential maximum duration for all programs reached 99 weeks between 

November 8, 2009 and September 1, 2012, but was 93 weeks when the emergency program expired 

in December 2013.

Under both emergency and extended benefit programs, the duration of an 

individual’s federal UI benefits has depended, in part, on the duration of 

his or her state UI benefits. If a claimant was entitled to fewer than 26 

weeks of state benefits, the duration of any available federal benefits to 

the claimant would be reduced proportionally. Under the most recent 

rules for the emergency program, the formula specified that, for the first 

level or “tier” of benefits, benefits were payable for up to 54 percent of the 

 

18 This period exceeded the maximum total duration of 72 weeks available in some states 

during the recession of 2002-2004, which duration reflected another temporary UI 

program created at the time, the Temporary Extension of Unemployment Compensation. 

See Henry S. Farber and Robert G. Valletta, Do Extended Unemployment Benefits 

Lengthen Unemployment Spells? Evidence From Recent Cycles In The U.S. Labor 

Market, Working Paper 19048 (Cambridge, Massachusetts: National Bureau of Economic 

Research, May 2013).

Calculating Federal 

Benefits
Page 9 GAO-15-281 Unemployment Insurance

duration of an individual’s total state benefits.19

 

19 The most recent emergency benefits program provided potentially four tiers, or levels, 

of benefits. Under the most recent rules for this program, the first two tiers provided up to 

54 percent of state benefit duration, the third tier provided up to 35 percent of state benefit 

duration, and the fourth tier provided up to 39 percent of state benefit duration. Under 

sequestration, which applies to emergency benefits, as well as to the federal share of 

extended benefits, to assist states in their efforts to comply with the cuts required by 

sequestration, DOL has allowed states to make changes to the administration of 

emergency benefits, including changes to duration of benefits. See Julie M. Whittaker and 

Katelin P. Isaacs, Unemployment Insurance: Programs and Benefits RL33362 

(Washington, D.C.: Congressional Research Service, February 12, 2014). 

Extended benefits can 

provide up to 50 or 80 percent of the duration of an individual’s total state 

benefits, depending in part on the rate of unemployment in the claimant’s 

state. For the 80 percent level to be applicable, a state must have a 

provision in its laws causing extended benefits to become available when 

the unemployment rate reaches a certain level. Both federal emergency 

and extended benefits were available in 2011, when duration reductions 

were first enacted in 6 states (see fig. 2).
Page 10 GAO-15-281 Unemployment Insurance

Figure 2: Changes in Unemployment Benefits and Nation’s Unemployment Rate, 2008-2014

Note: The unemployment rate declined in the recovery but so did labor force participation.

a

This figure represents the period when Extended Benefits were first paid during the most recent 

recession.

The UI program was designed to be forward funded20

 

20 The term “forward funding” usually refers to budget authority that is made available for 

obligation beginning in the last quarter of the fiscal year for the financing of ongoing 

activities (usually grant programs) during the next fiscal year. GAO, A Glossary of Terms 

Used in the Federal Budget Process,

and self-financed 

by states through a trust fund that the federal government maintains on 

GAO-05-734SP (September 2005). However, in this 

report we use “forward funding” to refer to the practice of states accumulating reserves in 

unemployment insurance trust funds in anticipation of increased outlays in the future.

UI Financing
Page 11 GAO-15-281 Unemployment Insurance

behalf of the states.21

The UI program is financed primarily by state taxes levied on employers, 

as well as a federal tax—the Federal Unemployment Tax Act (FUTA) 

tax—also levied on employers.

Ideally, states build reserves in their trust fund 

accounts through revenue from employer taxes during periods of 

economic expansion in order to pay UI benefits during economic 

downturns. Because unemployment can vary substantially during a 

business cycle, it is important that states build sufficient reserves so trust 

fund balances remain solvent during recessions.

22 Employers receive a FUTA tax credit 

depending on the extent to which their state UI programs comply with 

federal criteria. Specifically, states set a taxable wage base—the

maximum amount of an employee’s wages subject to UI employer 

taxes—and any wages above this amount are not subject to taxation. In 

addition, states determine the employer tax rate levied on the taxable

wage base. In order for employers in a state to qualify for the full FUTA 

tax credit, the state’s taxable wage base must at least be equal to the 

FUTA wage base—currently $7,000. In addition, the state’s tax rate for 

each employer may vary according to the employer’s layoff records—a 

practice known as experience rating.23 Experience rating results in lower 

tax rates for employers with fewer layoffs and higher tax rates for those 

with more layoffs.24

 

21 Federal trust funds link designated monies with a specific purpose or program. They are 

included in the unified budget, which provides information on the federal government’s 

overall fiscal policy—the aggregate size of the government and its borrowing 

requirements. See GAO, Federal Trust and Other Earmarked Funds: Answers to 

Frequently Asked Questions, 

States can also levy other taxes on employers, known 

as surtaxes or surcharges, for various purposes.

GAO-01-199SP (Washington, D.C.: January 1, 2001).

22 This discussion of state tax provisions is based on DOL’s Comparison of State 

Unemployment Insurance Laws, 2014 (Washington, D.C.: 2015) and UWC— Strategic 

Services on Unemployment & Workers’ Compensation, Highlights of State Unemployment 

Compensation Laws 2014. Although these taxes are paid by the employer, economists 

generally have concluded that their cost is likely to be borne by workers. Additionally, 3 

states—Alaska, Pennsylvania, and New Jersey—directly levy UI taxes on workers.

23 In 2014, states’ taxable wage bases ranged from $7,000 in Arizona to $41,300 in 

Washington. UWC—Strategic Services on Unemployment & Workers’ Compensation, 

Highlights of State Unemployment Compensation Laws 2014. 

24 In 2014, the lowest minimum tax rate for employers was 0 percent in Iowa, Missouri, 

Nebraska, and South Dakota, and the highest maximum tax rate was12.9 percent in 

Arkansas. UWC—Strategic Services on Unemployment & Workers’ Compensation, 

Highlights of State Unemployment Compensation Laws 2014. 
Page 12 GAO-15-281 Unemployment Insurance

In addition to their ability to change tax rates, states can make changes to 

program benefits to help ensure that funds are available to pay future 

benefits. For example, as previously mentioned, states can change

program eligibility provisions to limit or expand the population who qualify 

for benefits. States can also change benefit amounts directly.25

Figure 3: Balancing Unemployment Insurance Program Revenue and Benefits

Figure 3 

shows the various tools states generally use to balance program revenue 

and benefits.

Although states have flexibility to change both revenues and benefits, 

they can exhaust their UI reserves during periods of exceptional 

unemployment. In such times, states may borrow from the federal 

government. If a state satisfies certain conditions, loans taken from 

January 1 through September 30 and repaid before October 1, are 

interest free as long as the state does not borrow again during the fourth 

quarter of the calendar year. In states that do not repay their loans within 

 

25 However, a federal “nonreduction” rule made the availability of federally financed 

emergency benefits conditional on a state not actively changing its method of calculating 

UI benefits, if doing so would decrease weekly benefit amounts. Automatic adjustments to 

weekly benefit amounts that exist in some states do not violate the nonreduction rule. The 

American Recovery and Reinvestment Act of 2009 also temporarily provided an additional 

$25 weekly benefit per claimant. This benefit was known as Federal Additional 

Compensation (FAC). One condition (known as the “nonreduction rule”) for states to be 

eligible for FAC was that the state could not modify the method for calculating regular UI 

benefits such that the average weekly benefit amounts would decrease from their levels in 

place December 31, 2008. Although this benefit expired in 2010, soon thereafter, the

nonreduction rule was attached to the emergency benefits program.
Page 13 GAO-15-281 Unemployment Insurance

a specified period, employers lose a portion of the FUTA tax credit.26

However, states with outstanding loans can still seek relief from these 

loan provisions in the form of a limit to the reduction of the FUTA tax 

credit and the opportunity to delay interest payments.27 During the recent 

recession, most states opted to borrow from the federal government: 36 

states had federal trust fund loans, and the total borrowed reached $48.5 

billion in March 2011.28

Measures of UI solvency are expressed as a percentage of wages, 

typically total annual wages earned by employees who are potentially 

eligible for receiving UI benefits. Among the measures that DOL reports 

are reserve ratios

As of March 2015, 9 states and the U.S. Virgin 

Islands had trust fund loan balances, totaling about $14 billion.

29 and the high cost multiple.30

 

26 Specifically, if a state has an outstanding loan balance on January 1 for two 

consecutive years, the full amount of the loan must be repaid by November 10 of the 

second year, or employers in that state lose 0.3 percent of the FUTA tax credit. For 

example, we previously reported that, if a state borrows to pay UI benefits and has an 

outstanding loan balance on the second subsequent January 1, the FUTA tax credit is 

reduced, and in such instances, according to DOL, employers’ effective FUTA rate jumps 

from 0.6 percent to .9 percent. Federal law also sets forth formulas for determining the 

amount of the reduction in states with loan balances outstanding for 3 or more years. 26 

U.S.C. § 3302. According to DOL, each 0.3 percent reduction in the tax credit represents 

up to $21 in additional employer taxes per worker per year, on the current $7,000 taxable 

wage base. Additionally, such tax credit reductions affect employers in a state, without 

regard to their experience rating. For more information, see Appendix II.

A high cost multiple 

measure of 1.0 corresponds to sufficient reserves to pay benefits at the 

high cost rate for 1 year without taking in additional revenue, according to 

DOL. A similar measure is the average high cost multiple (AHCM), which 

divides a trust fund’s reserve ratio by the average high cost rate, which 

27 Some states may choose to repay federal trust fund loans by securing loans in the 

private bond market. By doing so, states can use the proceeds from private loans to repay 

borrowing from the federal government, and then levy higher payroll taxes on employers 

to repay the private loans. Although the state remains in debt, the state may be able to 

negotiate a lower interest rate and, because the federal government has been repaid, 

avoids FUTA tax credit reductions.

28 Gay Gilbert, National Unemployment Insurance Program Update, U.S. Department of 

Labor, Employment and Training Administration, June 18, 2014.

29 Reserve ratios are UI trust fund levels as a percentage of total annual statewide wages.

30 The high cost multiple is derived by dividing the reserve ratio by the high cost rate, 

which is the highest historical ratio of benefits to wages for a 12-month period in a 

particular state. 
Page 14 GAO-15-281 Unemployment Insurance

uses a multi-year average.31 An AHCM measure of 1.0 is the target for 

solvency, recommended by the Advisory Council on Unemployment 

Compensation and is specified in DOL regulations providing for interestfree loans.

32 States also monitor their own trust fund balances. We have 

previously reported that almost all states measure their trust fund 

balances and make tax rate changes once per year.33 According to our 

previous report, the majority of states have trust fund balance targets 

written into their state laws, with triggers built in to adjust the tax rates 

according to the balance. Most states impose higher tax rates when their 

trust fund balances are low and lower rates when their balances are high, 

according to DOL.

 

31 The average high cost rate is the average of the three highest calendar year benefit 

cost rates in the last 20 years or the period covering the last 3 recessions, if longer.

32 See Advisory Council on Unemployment Compensation, Collected Findings and 

Recommendations 1994-1996 (Washington, D.C.: 1996), and 20 C.F.R. § 606.32.

Beginning in 2019, DOL’s regulations on interest relief implement an AHCM solvency 

criterion of 1.00, for purposes of rounding.

33 See GAO, Unemployment Insurance Trust Funds: Long-standing State Financing 

Policies Have Increased Risk of Insolvency, GAO-10-440 (Washington, D.C.: April 14, 

2010).
Page 15 GAO-15-281 Unemployment Insurance

In our analysis of the 9 duration reduction states, we found that as a 

group they exhibited several characteristics that tended to distinguish 

them from other states.34

• weaker trust fund balances before the recession;

Overall, as compared to the states that did not 

reduce duration, the states that reduced duration had:

• lower total taxable resources;

• federal loans to a greater degree;

• higher unemployment rates;

• lower union membership rates; and

• greater political homogeneity.

In addition, while state officials cited a range of considerations in reducing 

benefit durations, we found that most duration reduction states, like most 

of the states we selected for comparison that did not reduce duration, 

raised taxes and made other changes to their programs. Overall, our 

interviews with state officials could not establish the degree to which any 

characteristics or considerations affected the decisions to reduce 

durations.

 

34 Of these six characteristics, we identified five through a technique known as cluster 

analysis. Other characteristics that we considered—state industry composition, state 

population age 55 and over, and UI program variables such as recipiency rate and 

exhaustion rate—less clearly distinguished duration reduction states from states that did 

not reduce duration. See appendix I for a list of all characteristics reviewed. The sixth 

characteristic that distinguished states that reduced duration from those that did not—

political homogeneity—was analyzed separately. For a description of other characteristics 

of duration reduction states, such as the status of Medicaid expansion, tax system 

progressivity, and the labor force and long-term unemployed population by race and 

ethnicity, see Josh Bivens, Joshua Smith, and Valerie Wilson, State Cuts to Jobless 

Benefits Did Not Help Workers or Taxpayers (Economic Policy Institute, Briefing Paper 

380, July 28, 2014).

States That Reduced 

UI Benefit Durations 

Generally Had Weak 

Pre-Recession Trust 

Funds and Raised 

Taxes While 

Improving Solvency
Page 16 GAO-15-281 Unemployment Insurance

Duration reduction states were more likely than other states to enter the 

recession with trust fund balances that were inadequate to pay historical 

benefit levels. Specifically, 8 of the 9 duration reduction states (89 

percent) had an AHCM below 1.0 in the last quarter of 2007—indicating 

an inadequate trust fund balance—as compared to 25 of the 42 states (60 

percent) that did not reduce duration. Duration reduction states had a 

median AHCM of .33, which was less than half the median AHCM of .79 

among states that did not reduce duration (see fig. 4). Consequently, the 

trust fund balances of the duration reduction states were particularly 

vulnerable to recessionary pressures and these states faced a greater 

risk of depleting their trust fund balances than states with more adequate 

trust fund balances. Among the states that reduced duration and among 

those that did not, there was variation in AHCM values: for example, as 

shown in figure 4, 1 duration reduction state among the 9 did have an 

adequate AHCM. In contrast, 17 of the 42 states that did not reduce 

duration had an AHCM greater than 1.35

 

35 Among the 42 states that did not reduce duration, in the fourth quarter of 2007, AHCM 

values ranged from .09 in New York to 1.88 in Hawaii.

Duration Reduction States 

Generally Had Weaker 

Finances and Faced 

Higher Unemployment 

Rates than States That 

Did Not Reduce Duration

Weaker Trust Fund Balances
Page 17 GAO-15-281 Unemployment Insurance

Figure 4: Unemployment Insurance Trust Fund Adequacy before the Recession: Average High Cost Multiple for Duration 

Reduction States, 4th Quarter 2007

a

The inadequacy of trust fund balances may have been a factor in the 

decision to reduce duration for some states. Officials from 5 of the 7 

duration reduction states with whom we had interviews cited the condition 

of their state’s trust fund balance as having been a likely consideration in 

the decision to reduce duration.

Because AHCM values are derived, in part, from trust fund balances, they are not calculated for 

states with loans. In 2007, Michigan already had a trust fund loan. By the last quarter of the year 

before each state adopted duration reductions, all but one did not have AHCM values calculated, 

indicating that they already had trust fund loans at that point. The remaining state, Kansas, which 

reduced duration in 2013, had an AHCM value of .08 in the last quarter of 2012.

36

The weak or inadequate trust fund balances may have been partially a 

result of relatively low employer UI tax rates. Specifically, 5 of the 9 

reduction states had average UI tax rates on total wages that were lower 

One state UI director said it had been a 

driving factor in his state’s deliberation.

 

36 Officials in 2 of the 9 duration reduction states—Florida and North Carolina—declined to 

respond to our question about the rationale for duration reduction. Among the states 

whose UI officials discussed the rationale for duration reduction, officials in 5 states 

cautioned that they had little or no direct knowledge of their legislatures’ rationale for 

duration reduction.
Page 18 GAO-15-281 Unemployment Insurance

than the U.S. average for the 5 years preceding reduction.37 Additionally, 

stakeholders in 4 reduction states told us that there were periods (prior to 

the recession) of up to several years in which employer UI taxes were 

held to minimal levels through means such as tax holidays, tax cuts, 

actions to suppress automatic tax adjustment mechanisms, and actions to 

distribute some trust fund revenues to employers.38 We have previously 

reported that long-standing UI tax policies and practices in many states 

have eroded trust fund reserves, leaving states in a weak position prior to 

a previous recession.39

Additionally, duration reduction states had weaker overall fiscal capacity 

than other states. The total taxable resources of duration reduction states 

were generally lower than those of states that did not reduce duration, 

according to a measure of states’ overall fiscal capacity calculated by the 

Department of the Treasury.40

 

37 Because state tax rates vary widely, and include both maximum and minimum tax rates, 

we analyzed the average tax rate on total wages—total employer contributions for a 12-

month period divided by the total wages paid by taxable employers for the same period. 

We analyzed quarterly data for a 5-year period—2006 to 2010—before duration 

reductions were adopted in any state. The U.S. average for this period was .69 percent, 

and 3 of the 6 states that reduced duration in 2011 had tax rates below this level. Of the 3 

states that reduced duration after 2011, 2 had average tax rates below the U.S. average 

for the 5 years before they reduced duration. However, this variable was not among the 

characteristics that most distinguished the states that reduced duration from those that did 

not. For more information, see appendix I.

 In 2010 (the year before any duration 

reductions occurred), 8 of the 9 duration reduction states had measures 

of total taxable resources below the median per capita indexed value for 

38 These stakeholders were labor advocates in all 4 states as well as employer groups in 

3 states. The 4 states were Florida, Georgia, Michigan, and North Carolina. In 2 of these 

states, employer groups noted that such actions had contributed to the weakness of their 

states’ trust fund balances.

39 See GAO-10-440. 

40 Under federal law, the Department of the Treasury is required to produce annual 

estimates of Total Taxable Resources (TTR), Treasury’s estimates of the relative fiscal 

capacity of the states. See 42 U.S.C. § 300x-7. TTR is a flow concept, and is the 

unduplicated sum of the income flows produced within a state and the income flows 

received by its residents that a state can potentially tax. TTR does not consider the actual 

fiscal choices made by states. It measures all income flows a state can potentially tax. 

Lower Total Taxable 

Resources
Page 19 GAO-15-281 Unemployment Insurance

the U.S. overall, and 3 of these states had measures that were among the 

lowest in the country (see app. II for more information).41

States that reduced their benefit durations were more likely to have 

received a federal trust fund loan since 2010 (see app. II for more 

information). Specifically, all 9 duration reduction states took such loans 

at some point during the recession; whereas 61 percent of nonreduction 

states had trust fund loans (see app. II for the maximum trust fund loan 

balances for each state). While the size of loans varied among reduction 

states, 2 of them (Michigan and North Carolina) ranked among the top 4 

states nationwide with the largest debt per covered employee.

States that reduced UI benefit duration also tended to have higher 

unemployment rates. Before they adopted duration reduction, almost all—

7 of 9—duration reduction states had total unemployment rates of 9 

percent or more.42

Duration reduction states also had lower rates of union membership. In 

2010, 7 of the 9 duration reduction states had rates of union membership 

below the median for states that did not reduce duration—13.2 percent—

and 3 of them had rates that were among the 5 states with the lowest 

rates in the country—5.6 percent or lower. Low union membership has 

been associated with lower benefits and wages in the economics 

literature.

In contrast, 14 of 42 states that did not reduce 

duration—one-third—had unemployment rates of 9 percent or more in 

2010. Higher unemployment rates increase the pressure on UI trust funds 

because they reflect the population of those who could qualify for and 

receive UI benefits.

Finally, duration reduction states also exhibited fairly homogenous 

political composition of their legislatures and governorships, which may 

have facilitated development and adoption of the state laws that included 

 

41 In 2010, the median TTR indexed per capita value for the duration reduction states was 

88.5, and the median for states that did not reduce duration was 102.4. South Carolina, 

Arkansas, and Michigan had TTR values that ranged from 76.1 to 79.0, among the seven 

lowest TTR indexed per capita values in the country. The TTR indexed per capita values 

for all 9 duration reduction states ranged from 76.1 to 107.0; by contrast, the values for the 

states that did not reduce duration ranged from 71.1 to 194.4. 

42 For the duration reduction states, we measured the unemployment rate in the quarter 

preceding the enactment of duration reduction for each state.

More Likely to Have Federal 

Trust Fund Loans

Higher Unemployment Rates

Lower Union Membership 

Rates

Greater Political Homogeneity
Page 20 GAO-15-281 Unemployment Insurance

duration reduction. We found that 8 of the 9 duration reduction states had 

a single party in control of both the legislature and the governorship when 

reductions were enacted.43 In contrast, 45 percent of nonreduction states 

were politically homogeneous in 2010, although by 2013, this was the 

case for 71 percent.

Beyond the characteristics that tended to distinguish the states that 

reduced duration from other states, officials in some duration reduction 

states suggested other considerations as influential. Specifically, officials 

cited a federal program requirement and the availability of federal 

benefits, among other reasons for reducing duration.

In 4 of the 7 states where we interviewed UI officials, officials cited the 

federal nonreduction requirement as a possible factor. This requirement 

made states that directly reduced UI benefit amounts ineligible for federal 

UI emergency funds, thereby limiting the range of options available to 

states to reduce benefit costs.44

Also, although the duration reductions will continue regardless of the 

availability of federal benefits, in 4 of the 7 states where we interviewed 

UI officials, officials said the availability of federal benefits may have 

played a role in the decision to reduce the maximum duration of statefunded benefits. The availability of federal benefits meant that claimants 

would generally continue to receive benefits, albeit federal benefits, 

beyond the new maximum state duration. One state UI official told us the 

state’s reduction was “not significant,” in part because federal benefits 

were then available, and another told us that the legislature likely 

As one state official said, this rule 

suggested that “no other effort to reduce benefits [beyond reducing 

duration] would be acceptable.” 

 

43 Of the 8 states that had state legislatures and governorships aligned with a single party 

when duration reductions were enacted, 6 (Florida, Georgia, Kansas, Michigan, North 

Carolina, and South Carolina) were aligned with the Republican Party and 2 (Arkansas 

and Illinois) were aligned with the Democratic Party. Missouri had divided government at 

the time. 

44 See Pub. L. No. 110-252, § 4001(g), 122 Stat. 2323, 2353, as amended, codified at 26 

U.S.C. § 3304 note. While officials in 4 of the 7 states where we conducted interviews did 

identify the nonreduction requirement as a possible factor, officials in 2 states said it was 

not a consideration, and officials in 1 of these 2 states said that duration reduction was 

adopted before it took effect. In the remaining state, UI officials indicated they did not 

know if it was a consideration. 

State Officials Cited Some 

Additional Factors 

Relevant to Reducing 

Benefit Durations
Page 21 GAO-15-281 Unemployment Insurance

anticipated minimal impact on claimants. In 7 of the 9 duration reduction 

states, the total maximum duration of all available benefits, including 

federal benefits, was at least 93 weeks at the time of duration reduction 

(see app. V).

During our interviews, officials in 2 states cited the state’s economic 

health and the need to encourage claimants’ reemployment efforts as 

reasons for reducing duration. Specifically, officials in Kansas said that 

duration in that state is tied to the health of the state’s economy so that 

longer durations are available when the unemployment rate is high. 

Kansas is 1 of 4 states, along with Florida, Georgia, and North Carolina, 

that adopted variable maximum durations. They provide more weeks of 

benefits when the total state unemployment rate is high, and fewer weeks 

when it is low (see app. III).

States reduced maximum benefit duration in the context of other changes 

to their UI programs, according to information provided by state officials 

and our review of selected state laws. Some of these changes, such as 

tax increases, played a role in repaying federal loans and improving their 

trust fund balances.45

Increasing Tax Revenues. Of the 9 duration reduction states, 7 adopted 

increases in employer taxes, some of them temporary, according to 

information provided by state officials.

States also made other changes to their programs 

that can reduce benefit payments, such as changes related to eligibility 

and program integrity.

46

Data provided by the states suggest that tax increases likely played a 

greater role than benefit duration reductions in repaying loans and 

restoring solvency. Notwithstanding the relatively small savings 

associated with duration reductions in most states, four employer groups 

told us there was a need to balance the increased revenue from 

employers with some sacrifice on the claimant side, and characterized 

Specifically, these states 

changed the taxable wage base, employer tax rates, supplemental taxes, 

or some combination of these (see app. III).

 

45 States set their own targets for trust fund levels. For example, Georgia’s target for its 

trust fund is $1 billion and Michigan’s is $2.5 billion, according to state officials. 

46 Of the 9 duration reduction states, 2 did not respond to our written questions. 

Duration Reduction States 

Raised Taxes and Made 

Other Program Changes
Page 22 GAO-15-281 Unemployment Insurance

duration reductions as providing such a balance.47 To understand the 

relative role of duration reductions and tax increases, we asked the states 

whether they had estimated any cost savings associated with duration 

reductions. Of the 7 duration reduction states we contacted, 4 provided

estimates of cost savings equivalent to 3.4 percent, 4.6 percent, 9.8 

percent, and 44.9 percent of their maximum loan balances (see app. III).48

Other Changes. Two duration reduction states issued bonds to repay 

their loans.

In addition, officials in the 3 other duration reduction states we contacted 

identified tax changes as among the actions that contributed most to 

repayment of the trust fund loan, and one of these states identified 

duration reduction as a major contributor to repaying the loan. One official 

estimated that state tax rate changes accounted for about 65 percent of 

the funds needed to restore the trust fund balance.

49

 

47Employer groups consistently told us that they supported duration reduction and 

considered the employer tax increases as necessary to restore solvency. Although 

concerned about their tax burden, employers generally characterized the tax increases as 

preferable to the status quo, which appeared “unsustainable” to them because they faced 

additional burdens, such as automatic tax increases to repay the federal loan, future 

FUTA tax credit reductions if their states’ loans were not repaid in a timely way, and 

greater burdens under the state’s system for increasing an employer’s tax rates according 

to its layoff records.

 On the benefits side, one state lowered its benefit amount, 

48 These cost savings estimates are subject to limitations, such as their basis in economic 

conditions that may have changed. The states that provided estimates included 2 with 1-

week reductions and 2 with 6-week reductions. It is possible that states with larger 

reductions realized greater cost savings. However, an analysis of North Carolina’s 

adoption of a larger reduction—down to a variable duration of 12-20 weeks—found that it 

contributed less to program solvency than that state’s reduction in benefit amounts. See 

Alexandra Forter Sirota, What’s the Harm? Plenty: Unemployment Insurance Changes 

Threaten the State’s Economy and Hurt the Unemployed (North Carolina Justice Center, 

BTC Reports, vol. 20, no. 5, July 2014).

49 According to the Department of Labor, 8 states issued bonds to repay their trust fund 

loans: Arizona, Colorado, Idaho, Illinois, Michigan, Nevada, Pennsylvania, and Texas.
Page 23 GAO-15-281 Unemployment Insurance

according to CRS.50 In addition, 8 of the 9 duration reduction states made 

changes to program eligibility. These included changes to requirements 

for individuals regarding earnings or employment history, as well as 

changes to rules addressing conduct for which an individual could be 

disqualified. In one state, eligibility changes were enacted to reverse 

previous expansions of eligibility under federal law, such as eligibility for 

those who claimed UI on the basis of part-time employment.51

Actions taken to address program integrity were reported by all 7 of the 9 

duration reduction states that provided information, and included activities 

to address overpayments, detect fraud, and impose penalties for 

noncompliant employers.52 State officials reported that these actions were 

taken in response to both federal and state initiatives.

The 4 states we examined that did not reduce duration also reported 

making similar program changes in raising employer taxes, tightening 

eligibility, and strengthening program integrity. Specifically, 3 of the 4 

comparison states reported increasing employer taxes. Of the 3 

comparison states that had loans, two— Indiana and Tennessee—

reported increasing employer taxes (see app. III).53

 

50 In February 2013, North Carolina enacted legislation that reduced benefit amounts as of 

July 2013, thereby losing eligibility for the emergency benefits program, according to CRS. 

However, states that made changes to their benefit amounts before March 1, 2012 are not 

subject to the nonreduction requirement. Pub. L. No. 112-96, § 2144, 126 Stat. 156, 171 

(2012). Historically, following recessions, states have made changes to areas such as 

employer taxes, eligibility, and benefits. For example, in a review of changes by 7 states 

between 1978 and 1992, we found that all had increased employer taxes, and some 

strengthened disqualification provisions, increased the taxable wage base, and decreased 

the minimum benefit amount. Two of the states reduced duration. See GAO, 

Unemployment Insurance: Program’s Ability to Meet Objectives Jeopardized, 

The third state with a 

GAO/HRD-93-107 (Washington, D.C.: Sept. 28, 1993).

51 The American Recovery and Reinvestment Act of 2009 had offered incentives to states 

to expand eligibility in certain ways. See Pub. L. No. 111-5, § 2003, 123 Stat. 115, 439.

Eligibility restrictions have the effect of limiting the size of the population drawing claims.

52 Furthermore, in 2 of the 4 states where we spoke with employers, employer groups 

noted that program integrity efforts helped build support for other changes, which included 

tax increases. Program integrity initiatives, similar to eligibility restrictions, can limit the 

size of the population drawing claims.

53 In addition to their loans, these states were selected based on their similarity to the 

duration reduction states according to criteria including weaker trust funds, lower overall 

ability to tax, and state unemployment rate. See appendix I.

Comparison States Also 

Made Program Changes 

but Varied in 

Consideration of Benefit 

Duration
Page 24 GAO-15-281 Unemployment Insurance

loan, Ohio, was considering changes to its UI program, including to 

employer taxes.54

Regarding eligibility, 3 of the 4 comparison states reported recent actions 

to tighten eligibility, such as by strengthening work requirements.

The fourth state, Washington, did not require a loan, 

and officials told us that the state’s taxable wage base—the maximum 

amount of an employee’s wages subject to tax—was raised through a 

provision in state law that took effect automatically, while employer taxes 

were reduced.

55

The 4 comparison states varied in the extent to which they considered 

reducing maximum duration. Indiana, Ohio, and Tennessee were similar 

to the duration reduction states, for example, in terms of having had weak 

trust fund balances before the recession.

All 4 

states reported taking actions to strengthen program integrity, such as 

efforts to address overpayments.

56 However, UI officials in 

Indiana told us that benefit amounts for some claimants had already been 

reduced in 2011, and no further actions have been taken on the benefit 

side. In Ohio, which has a large outstanding loan balance, state UI 

officials told us that a bipartisan group of legislators was considering 

changes to the program, including a potential reduction in maximum 

duration. Officials in Tennessee and Washington told us that duration 

reduction had not been considered in their states.57

 

54 Ohio UI officials noted that state law requires annual adjustment of monetary eligibility 

requirements and benefits, but makes no similar provision for changes in employer taxes.

55 According to information provided by an official in one comparison state, eligibility 

changes were enacted to reverse previous expansions of eligibility under federal law, such 

as eligibility based on part-time employment.

56 In addition to being similar in terms of the condition of their trust fund balances before 

the recession, 2 of these 3 states had high loan amounts per employee, and all 3 had low 

total taxable resources, high unemployment rates, and political homogeneity (see app. I). 

In 2010, all 3 states had divided governments, but all had Republican-led legislatures and 

governors in 2011, 2012, and 2013. While the comparison state that did not have a federal 

trust fund loan—Washington—was unlike these states and unlike the duration reduction 

states in some respects, such as having an adequate trust fund balance before the 

recession, it did have political homogeneity, since it had a Democratic-led legislature and 

governor in every year from 2010 to 2013.

57 However, we asked officials in Washington to model the effects of a reduction from 26 

to 20 weeks on the state’s trust fund and on employer taxes. For more information, see 

appendix IV. 
Page 25 GAO-15-281 Unemployment Insurance

In the duration reduction states, those UI claimants who would have been 

eligible to receive benefits beyond the new maximum receive less in total 

benefits in the absence of federal UI programs. The foregone benefit for 

those individuals who would have exhausted benefits under the previous 

duration can be estimated as the product of the number of weeks of the 

reduction and the average weekly benefit amount. For example, Michigan 

had an average weekly benefit of $273 in the third quarter of 2014 and 

the maximum benefit duration was 20 weeks (a reduction of 6 weeks from 

the previous maximum). A claimant in Michigan who would have been 

eligible for 26 weeks of benefits absent the reduction could receive 20 

weeks of benefits. The claimant’s foregone benefit can be estimated as 

$1,638 (or 6 times the average weekly benefit amount). Benefits foregone 

by individuals in the states whose durations do not fluctuate with 

unemployment rates (flat maximums) ranged from $289 to $1,638 (see 

table 2)

Table 2: Foregone Unemployment Benefit Amounts per Claimant in Duration 

Reduction States with Flat Maximum Durations, as of 2014 

States with flat 

maximum 

duration

New state 

maximum 

duration

(weeks) a

Previous 

duration

(weeks) 

Average 

weekly 

benefit 2014 

Q3

Foregone benefit amount

for claimants who would 

have been eligible for 26 

weeks of state UI benefits

Arkansas 25 26 $289 $289

Michigan 20 26 $273 $1,638

Missouri 20 26 $238 $1,428

South Carolina 20 26 $252 $1,512

Source: GAO analysis of relevant state law, information provided by states, and information provided by the Center on Budget and 

Policy Priorities. | GAO-15-281

a

As expected, foregone benefits would vary for individuals who would have 

exhausted benefits under the previous duration in the 4 states where 

maximum durations are tied to the unemployment rates —Florida, 

While Illinois reduced duration to a flat 25 week maximum, that reduction was only applicable to 

claims filed in 2012.

Reduction in 

Maximum Duration of 

UI Benefits Lowered 

Total Benefits for 

Some Individuals

Reduced Durations 

Decreased Total Benefits 

for Some Individuals
Page 26 GAO-15-281 Unemployment Insurance

Georgia, Kansas, and North Carolina. The benefit amount foregone by 

individuals in these states ranged from $1,370 to $2,926 (see table 3.)

Table 3: Foregone Unemployment Benefit Amounts per Claimant in Duration Reduction States with Variable Maximum 

Durations, as of October 2014

States with variable 

maximum duration

New maximum 

duration range

(weeks)

Previous 

maximum 

duration (weeks) 

New maximum 

duration as of 

October 2014

Average 

weekly benefit 

2014 Q3

Foregone benefit amount 

for claimants who would 

have been eligible for 26 

weeks of state UI benefits

Florida 12-23 26 16 $137 $1,370

Georgia 14-20 26 15 $266 $2,926

Kansas 16-26 26 20 $348 $2,088

North Carolina 12-20 26 14 $227 $2,724

Source: GAO analysis of relevant state law, information provided by states, and information provided by the Center on Budget and Policy Priorities. | GAO-15-281

One potential rationale for tying maximum durations to the unemployment 

rate is that a lower unemployment rate signals that more jobs are 

available and, consequently, a shorter UI duration may be sufficient to 

find employment. In such a scenario, UI claimants may find jobs sooner 

and may not be affected by the decreased maximum duration. On the 

other hand, improvement in the unemployment rate is not the only factor 

that affects unemployment levels—lower unemployment rates can be 

caused in part by individuals giving up the job search altogether and 

dropping out of the labor force.

Some state UI directors told us their states examined the average 

duration on UI when legislators were considering where to set the new 

maximum durations. For example, Georgia officials told us that average 

duration had been below 14 weeks for years, and was recently closer to 

between 11 and 13 weeks. On the other hand, average duration on UI 

does not always reflect the average length of unemployment for several 

reasons—for example, an unemployment spell can exceed the maximum 

weeks of UI benefits. When we examined the average length of 

unemployment for persons in these states, we found that it is generally 

longer than the state’s new maximum benefit duration.58

 

58 One researcher has found a trend toward longer spells of unemployment, based on 

analysis of data over two decades. See Wayne Vroman, Low Benefit Recipiency in State 

Unemployment Insurance Programs, Urban Institute, June 2001. 

In the states that 

reduced duration, the average length of unemployment for all 
Page 27 GAO-15-281 Unemployment Insurance

unemployed persons—not just those receiving UI—for 2014 ranged from 

almost 24 weeks to nearly 44 weeks. The maximum durations in these 

states ranged from 14 to 25 weeks, as of October 2014 (see table 4).

Table 4: Average Length of Unemployment and Maximum Unemployment Benefit 

Duration in States that Reduced Duration, as of October 2014

State

Average length of 

unemployment, 

2014 (weeks) a

Maximum 

duration, 

October 2014 

(weeks)

Difference between 

average length of 

unemployment and 

current maximum 

duration (weeks)

Arkansas 23.6 25 -1.4

Florida 43.7 16 27.7

Georgia 38.6 15 23.6

Kansas 25.1 20 5.1

Michigan 37.1 20 17.1

Missouri 31.4 20 11.4

North Carolina 35.7 14 21.7

South Carolina 31.2 20 11.2

All states (average) 30.8 26 4.8 b

Source: GAO analysis of relevant state laws, information provided by states, the Bureau of Labor Statistics, and the Center on Budget 

and Policy Priorities. | GAO-15-281

a

While Illinois reduced maximum duration to 25 week maximum, that reduction was only applicable to 

claims filed in 2012.

b

When federal UI benefits were in effect (most recently generally from 

2009 until the end of 2013),

For states that did not reduce duration.

59

 

59 Federal extended benefits were available in some states during 2008, and were jointly 

financed by the state and federal governments until early 2009, when they were 

temporarily fully funded by the federal government through 2013.

those individuals who were eligible to 

receive UI benefits for the maximum total state and federal duration would 

have received substantially less benefits following reduction, since 

duration in each federal benefit program depends, in part, on the duration 

of state benefits. Specifically, in a state that reduced benefits from 26 to 

20 weeks, those claimants who would have received state and federal 

benefits for up to 93 weeks before the reduction would receive benefits 

for up to 72.4 weeks after the reduction, as illustrated in figure 5.
Page 28 GAO-15-281 Unemployment Insurance

Figure 5: Potential Maximum Duration of State and Federal Unemployment Insurance Benefits, Assuming a Reduction of State 

Benefits to 20 Weeks, as of May 2013

However, UI benefit durations would not change for those claimants who

would have received benefits for less than 72.4 weeks before the 

reduction. For example, prior to any reductions in maximum benefit 

durations, an individual who found employment after 36 weeks of 

receiving UI benefits would have received 26 weeks of state benefits and 

10 weeks of federal emergency unemployment benefits. All else equal, 

such an individual would have still received a total of 36 weeks of benefits 

in a scenario in which the state reduced maximum duration, for example, 

to 20 weeks, although the source of the benefit would change: 20 weeks 

of state benefits and 16 weeks of federal emergency unemployment 

benefits (see fig. 6).
Page 29 GAO-15-281 Unemployment Insurance

Figure 6: Unemployment Insurance Benefits Paid at Shorter Unemployment Durations, Assuming State Reduced Maximum

Duration from 26 to 20 Weeks, as of December 2013
Page 30 GAO-15-281 Unemployment Insurance

To illustrate how reductions in state benefit durations could have affected 

UI claimants who were eligible to receive benefits for the maximum state 

and federal durations, we calculated a hypothetical foregone benefit 

amount to illustrate how the reduction in state maximum duration could 

impact benefits paid through the federal programs. For this hypothetical 

scenario (for example in May 2013), we assume that a claimant was 

eligible for the maximum benefit duration available, and that 20 weeks of 

federal extended benefits and all four tiers of emergency benefits were in 

effect, although this was not the case in all states. In such a scenario, 

hypothetical foregone benefits could range from around $700 to over 

$20,000 (see table 5).60

 

60 In order to estimate the affected population in each state, we requested data on the 

population receiving benefits up to 26 weeks before and after the implementation of 

duration reduction from selected duration reduction states (for example, we excluded 

Illinois, where the reduction applied to claims filed in 2012). Based on data provided by 2 

states, we estimated that duration reduction would have affected about 20,600 claimants 

in Missouri in the fourth quarter of 2010 and about 19,000 claimants in Georgia in the 

second quarter of 2012, assuming an 18-week maximum duration. States do collect data 

on benefits received after 26 weeks. 

Estimating the Numbers of Affected 

Individuals

Because DOL does not collect data at the 

individual level, we were not able to quantify 

the number of individuals affected by duration 

reduction. To estimate the number of 

individuals who would be affected by a 

duration reduction, as well as other potential 

effects, we asked officials in Washington state 

to prepare an estimate using the state’s 

benefit financing model. Although Washington 

State did not reduce duration, its model was 

developed to help analysts project the 

condition of their UI trust fund balance several 

years into the future and allow the state to 

assess the financial impact of various 

economic scenarios and possible legislative 

changes. The model showed that if maximum 

duration in Washington was reduced from 26 

weeks to 20 weeks, at an average weekly 

benefit amount of $389, over 32,000 

additional individuals would have exhausted 

their benefits in 2013, when federal benefits 

were in effect, representing a 46 percent 

increase in exhaustions. In addition, 

unemployed individuals in the state would 

have collectively foregone nearly $117 million 

in benefits in that year—a 9.5 percent 

decrease in state benefits. Appendix IV has 

more details on the simulation and the model.

Source: GAO analysis of information provided 

by Washington State Employment Security 

Department. | GAO-15-281
Page 31 GAO-15-281 Unemployment Insurance

Table 5: Hypothetical Foregone Unemployment Benefit Amounts in Duration Reduction States Assuming 93 Weeks of Total 

Benefits before Duration Reduction, as of May 2013

New state 

maximum 

duration

(weeks)

Previous maximum 

duration with federal 

benefitsa 

New maximum 

duration with federal 

(weeks) benefits (weeks)

Average weekly 

benefit 2013 Q2

Hypothetical 

foregone benefit 

amount b

States with flat maximum duration

Arkansas 25 93 90.5 $289 $723

Michigan 20 93 72.4 $297 $6,118

Missouri 20 93 72.4 $240 $4,944

South Carolina 20 93 72.4 $247 $5,088

States with variable maximum duration

Florida 12-23 93 43.4 – 83.3 $234 $2,270 – 

$ 11,606

Georgia 14-20 93 50.7 – 72.4 $265 $5,459 – 

$11,210

Kansas 16-26 93 57.9 – 93 $339 $0 – 

$11,892

North Carolina 12-20 c 93 12-20 $301 c $21,973 – 

$24,381

Source: GAO analysis of relevant state and federal law, information provided by states, and information provided by the Center on Budget and Policy Priorities. | GAO-15-281

a

From November 8, 2009 to September 1, 2012, as much as 99 weeks of benefits was available; 

however, from September 2012-December 2013, 93 weeks was the maximum available, according to 

the Congressional Research Service. Although not all states would have qualified for these amounts 

as of May 2013, according to data provided by DOL, this chart assumes that states have chosen 

extended benefits for a high unemployment period and that states qualify for all four tiers of 

emergency unemployment benefits, and that 93 weeks is the maximum available.

b

This is the last quarter in which states qualified for federal extended unemployment benefits.

C

Because North Carolina reduced benefit amounts, it was not eligible for federal emergency 

compensation after reduction, according to the Congressional Research Service.

In light of our findings that some individuals may have received less total 

UI benefits due to duration reduction, we also examined research on the 

impact of decreases in UI benefits on individuals.61

 

61 While the phenomenon of state reduction to benefit periods is generally very recent, 

existing research on differences in benefit amounts and durations caused by federal UI 

program supplements may inform the question of their impact on individual UI claimants.

The literature we 

reviewed considered the theoretical basis for and empirical research on 

the implications for individuals of changes in UI benefits (amounts and 

duration) in terms of labor market behavior, poverty, and enrollment in 

social safety net programs.

Shorter Benefit Durations 

Reduce Household 

Spending and May Not 

Hasten Reemployment
Page 32 GAO-15-281 Unemployment Insurance

Theories of economic efficiency generally propose that the ideal UI 

benefit amount and duration would prevent sharp reductions in the 

claimant’s household spending without creating incentives for an 

unnecessarily lengthy job search. Benefits that are too high prolong job 

searches and can elevate unemployment, while benefits that are too low 

reduce spending during jobless spells and cause workers to accept suboptimal employment.

According to the research, some claimants facing shorter UI benefit 

durations may find employment, while others may leave the labor force.62

In our own work, some of the state UI directors and stakeholders we 

interviewed told us that they hoped reduced benefit duration would 

increase reemployment. However, the available research on UI duration 

and claimants’ reemployment offers little support to the premise that 

reducing duration increases reemployment. In an economy with few jobs 

relative to the number of job seekers—as was the case during the 

recession and the slow recovery when the ratio of job seekers to job 

openings rose to as much as six to one—a shorter benefit period is not 

likely to return individuals to the labor force sooner. One study estimated 

that as many as one-third of claimants who exhaust benefits are unable to 

find work.

Some models show that a longer benefit period—and thus a longer job 

search—can result in better job offers that enable workers to be more 

productive, although empirical support for this possibility is limited. 

Nevertheless, with low or unavailable benefits, research has found that 

some people give up on seeking employment and leave the labor force 

altogether. Unemployment benefits promote labor force participation, both 

on the “front end’ by reducing the layoff risk in work covered by UI, and on 

the “back end” in the event of layoff, by reducing labor force exit.

63

 

62 See, for example, Katharine Bradbury, Labor Market Transitions and the Availability of 

Unemployment Insurance (Federal Reserve Bank of Boston, Working Paper No. 14-2, 

July 9, 2014).

However, it is difficult to determine with more certainty how 

many people do or do not find jobs once they stop receiving benefits 

because of limited data on individuals who have left the program.

63 David Grubb, Assessing the Impact of Recent Unemployment Insurance Extensions in 

the United States, Working Paper (Paris: Organization for Economic Cooperation and 

Development, May 2011).
Page 33 GAO-15-281 Unemployment Insurance

Empirical research indicates longer durations prolong spells in the 

program. However, the implication of longer spells for the overall 

unemployment rate is ambiguous. Shortened durations could lead to 

reemployment, but the reemployed UI claimant might have taken a job 

otherwise obtained by someone outside the program. Alternatively, 

shorter durations could also lead to earlier exit from the labor force. 

Lengthened durations could lead to longer spells in the program, but also, 

with the benefit of more search time, to the program participant finding a 

job for which they are better suited. Studies that specifically consider net 

employment for the entire labor force indicate little effect from shorter 

benefit durations. For the same reason, research finds that shorter 

durations have a negative effect on consumption in families of 

unemployed workers, since shorter benefit durations do not necessarily 

result in rapid reemployment.64

Some research finds that reduced benefits—including those resulting 

from reduced durations—lead to a greater incidence of poverty among 

those eligible for UI benefits. UI has been shown to reduce poverty; the 

Census Bureau estimated that UI benefits kept 1.2 million people out of 

poverty in 2013.65 Another recent study found that UI reduced the poverty 

rate among unemployed workers from 22.5 percent to 13.6 percent.66

Studies are inconclusive as to whether reduced UI benefits result in more 

people seeking assistance from federal benefit programs such as Social 

Security Disability Insurance (SSDI), Supplemental Security Income, 

Temporary Assistance for Needy Families, and the Supplemental 

 

64 In addition, other implications for individuals of unemployment have been addressed in 

the literature. For example, unemployed workers face depletion of savings, or the need to 

use credit cards to meet household expenses. In addition, there are implications for 

physical and mental health, and other variables. (

See, for example, Cliff Zukin, Dr. Carl E. 

Van Horn, and Charley Stone, Categorizing the Unemployed by the Impact of the 

Recession, Working Paper (John J. Heldrich Center for Workforce Development, 

December 2011) and Kaiser Family Foundation/NPR, Long-Term Unemployed Survey

(December 2011). Because these implications relate more to the condition of being 

unemployed than to the receipt of UI per se, and because it is difficult to determine how, if 

at all, they are affected by shorter durations of UI benefits, this report does not address 

these issues.

65 Carmen DeNavas-Walt and Bernadette D. Proctor, Income and Poverty in the United 

States: 2013, (U.S. Census Bureau Current Population Reports, September 2014).

66 Robert A. Moffitt, Unemployment benefits and unemployment, (IZA World of Labor, May 

2014).
Page 34 GAO-15-281 Unemployment Insurance

Nutrition Assistance Program (formerly known as food stamps).67 For 

example, a 2010 study found that UI extensions reduce SSDI claims,68

while a 2013 study found no relation between benefit exhaustion and 

disability claims.69

We examined UI program and economic indicators, and found that, on 

average, individuals in reduction states were less likely to participate in UI 

and more likely to leave the labor force than individuals in nonreduction 

states. Additionally, while the rates at which claimants exhausted their UI 

benefits increased during the recession, and declined since 2010, these 

rates were consistently higher in duration reduction states on average as 

compared to states that did not reduce duration. Although duration 

reductions may have affected some of these indicators, it is difficult to 

attribute causation, given the many other program changes made by the 

states and federal government, as well as the changes occurring in the 

economy. For more information on our analysis of individual states, see 

appendix V.

However, longer benefit durations may delay 

applications that would eventually be made to other programs, such as 

SSDI.

In the presence of federal UI benefit programs, reducing maximum state 

UI benefit durations affects federal program costs in two opposing ways. 

First, at the front end, claimants use federal benefits earlier than they 

would have absent a state reduction, so the federal government pays 

some costs that states otherwise would have paid. For example, in states 

that reduced the maximum duration of state UI benefits from 26 weeks to 

20 weeks, those claimants who were eligible for benefits for more than 26 

weeks transitioned to federal benefits 6 weeks earlier. In addition, federal 

benefits were paid to some claimants who would not have received any 

federal benefits absent the reduction. Specifically, in states that reduced 

 

67 GAO, Unemployment Insurance: Economic Circumstances of Individuals Who 

Exhausted Benefits, GAO-12-408, (Washington, D.C.: February 17, 2012).

68 Report by the U.S. Congress Joint Economic Committee, Does Unemployment 

Insurance Inhibit Job Search? Report by the U.S. Congress Joint Economic Committee 

(July 2010).

69 Andreas I. Mueller, Jesse Rothstein, and Till M. von Wachter, Unemployment Insurance 

and Disability Insurance in the Great Recession, Working Paper 19672 (National Bureau 

of Economic Research, November 2013).

Duration Reduction 

by States Shifted 

Some Costs from 

States to the Federal 

Government
Page 35 GAO-15-281 Unemployment Insurance

duration to 20 weeks, federal benefits were paid to any eligible claimants 

who exited the program during weeks 21 through 26.

Second, at the back end, federal benefits were not available for as long 

as they would have been absent a reduction in state durations, which 

potentially led to some federal savings. For example, claimants could 

receive up to 67 weeks of federal benefits when the maximum state 

benefit duration was 26 weeks. After a reduction to 20 weeks, those 

claimants could receive a maximum of 52.4 weeks of federal benefits.70

Table 6: Sample Effect on Federal Unemployment Insurance Programs of Reducing 

Maximum State Benefit Duration from 26 to 20 Weeks, as of May 2013

As a result, some of the upfront costs that were shifted to the federal 

government in weeks 21 through 26 are offset by shorter federal benefit 

durations at the back end, as shown in table 6.

Benefit weeks

Prior to reduction, 

cost paid by: 

After reduction, cost 

paid by:

Changes in cost to 

federal government 

(per claimant)

1 - 20 State State 0 

21 - 26 State Federal government + 6 weeks of benefits

27 - 72.4 Federal government Federal government 0 

72.4 - 93 Federal government Eliminated by 

reduction 

-20.6 weeks of 

benefits

Source: GAO analysis of relevant federal law and Congressional Research Service reports. | GAO-15-281

Note: For this table, we assume that 20 weeks of extended benefits and all four tiers of emergency 

benefits are in effect, and that the federal government pays the full cost of extended benefits.

The net cost to the federal government due to the reduction in state 

benefit durations is difficult to measure because the amount and duration 

of federal program benefits depend on both a claimant’s state benefits

and how long he or she is eligible.

71

 

70 This assumes 47 weeks of emergency unemployment compensation and the higher 

level of extended benefits are in effect in both scenarios. According to the Congressional 

Research Service, from November 8, 2009, to September 1, 2012, as much as 99 weeks 

of benefits was available; however, from September 2012-December 2013, 93 weeks was 

the maximum available. 

For example, we found that before 

duration reduction, a claimant who received benefits for 75 weeks—26 

71 While all 9 duration reduction states participated in the federal extended and 

emergency benefit programs, they varied in the timing of their reductions and therefore the 

length of available federal benefits at the time of the reduction (see app. V for more 

information on the federal benefit programs and the duration reduction states). 
Page 36 GAO-15-281 Unemployment Insurance

weeks of state benefits and 49 weeks of federal benefits—would receive 

fewer total weeks of benefits after reduction in state duration to 20 weeks, 

but more weeks of federal benefits. Specifically, the claimant would 

receive 20 weeks from the state, and then 52.4 weeks of federal benefits, 

providing a total of 72.4 weeks of UI benefits. (See fig. 7.)

Figure 7: State and Federal Costs at Selected Unemployment Benefit Durations, Assuming State Reduced Duration from 26 to 

20 Weeks, as of May 2013

Note: Because federal UI program benefit durations have been tied to state UI benefit durations, total 

benefits (state and federal combined) would be available for a maximum of 72.4 weeks in a state that 

had a 20 week maximum. Our analysis assumes that the federal government pays all extended 

benefits, as was the case in May 2013, the last month in which any state qualified for extended 

benefits. 

Over time, some claimants find jobs or exit the program for other reasons.

As a result, there are likely to be fewer claimants receiving benefits at the 

back end of the program than during the front end. Therefore, even 

though state duration reductions may have resulted in fewer weeks of 

federal benefits, costs to the federal government may have increased. In 

other words, the front end cost caused by an earlier transition to federal 
Page 37 GAO-15-281 Unemployment Insurance

programs by more claimants may exceed any savings generated by 

paying fewer weeks of federal benefits to those claimants still receiving 

benefits at the back end of the federal programs.

It is difficult to measure the magnitude of the front end costs and back 

end savings because, while DOL collects aggregate data on benefits 

paid, it does not collect data on weekly benefits at the individual level. 

Nevertheless, using data provided by two states, Missouri and Georgia, 

we found that the earlier transition to federal benefits shifted some costs 

from these states to the federal government.

In order to illustrate the front end cost shift to the federal government for 

one calendar year quarter for the weeks from the end of state benefits 

through week 26, for example, we analyzed data from Missouri and 

Georgia on the number of claimants who received weekly benefits, by 

benefit week.72 For each benefit week beyond the new state maximum 

duration, we multiplied the number of claimants by the average weekly 

benefit amount in each state. Missouri reduced its maximum duration 

from 26 weeks to 20 weeks effective April 2011. Using the average 

weekly benefit amount for claimants in Missouri, we calculated the federal 

government would have paid about $23.7 million in benefits for one 

calendar year quarter for the claimants who received benefits for weeks 

21 through 26.73

 

72 For both Missouri and Georgia, we used data on the number of claimants who collected 

a particular week of benefits during the calendar year quarter before duration reduction. 

For example, in Missouri, 19,290 people collected week 21 of benefits during the first 

quarter of 2011.

See figure 8 for estimated costs to federal programs for 

the first 6 weeks after reduction.

73 This analysis assumes no changes in individual behavior, such as finding employment 

faster due to the reduction in state benefits. In the presence of federal benefits, one would 

not expect such behavioral changes as the claimant still receives benefits regardless of 

the source.
Page 38 GAO-15-281 Unemployment Insurance

Figure 8: Estimated Costs to the Federal Government after Missouri’s 

Unemployment Benefits Duration Reduction, Weeks 21-26

Note: Estimated costs reflect data on actual number of claimants and average weekly benefit 

amounts for the quarter before duration reduction.

Whether front end costs to the federal government were offset by back 

end savings generated by paying fewer weeks of benefits depends on the 

amount the federal government would have paid in the weeks eliminated 

by the reduction in state benefit durations. Specifically, if the federal cost 

of UI benefits for weeks 72.4 through 93 exceeds $23.7 million, then the 

federal government would have realized cost savings by paying benefits 

for weeks 21 to 26 while eliminating benefits in weeks 72.4 through 93. 

Conversely, if the federal cost of benefits for weeks 72.4 through 93 is 

less than $23.7 million, then the federal government would have realized 

cost increases as a consequence of the state duration reduction.74

 

74 As previously mentioned, we analyzed data on benefits up to 26 weeks, in part to 

estimate the affected population. States do collect data on benefits after the 26th week.

 
Page 39 GAO-15-281 Unemployment Insurance

Similarly, Georgia reduced its benefit duration from 26 weeks to a 

variable duration of 14 to 20 weeks, effective July 1, 2012. Using the 

average weekly benefit amount for claimants in Georgia, and assuming a 

maximum duration of 18 weeks, we calculated that the federal 

government would have paid about $27.2 million in benefits that the state 

would previously have paid for the claimants who received benefits for 

weeks 19 through 26, as shown in figure 9.

Figure 9: Estimated Costs to the Federal Government after Georgia’s 

Unemployment Benefits Duration Reduction, Weeks 19-26

Note: Estimated costs reflect data on actual number of claimants and average weekly benefit 

amounts for the quarter before duration reduction.

Our analysis of these 2 states shows that there could be a net cost shift to 

the federal government, perhaps unintended, as a result of state duration 

reductions. As we have previously reported on state policy changes in 

past recessions, knowledge of the unintended consequences of such 

changes—including estimates of the impact on federal costs—can inform 
Page 40 GAO-15-281 Unemployment Insurance

federal assistance to states in future recessions.75 Additionally, in our 

report on best practices in estimating costs, we have noted that cost 

estimates should identify and reflect budgetary uncertainties.76 However, 

DOL has not assessed the extent to which state duration reductions, 

adopted by states in the wake of the recent recession, affected costs to 

the federal government. To do so would require an analysis of weekly 

benefit data for individuals, which are collected by the states, and not by

DOL. Without an analysis of the cost implications of duration reductions, 

DOL and Congress lack information needed to plan for future economic 

downturns and the equitable role of the federal government in the 

federal/state UI partnership. 

The relevant economic literature on UI that we reviewed, including 

analysis by the Congressional Budget Office (CBO), considers the 

benefits to be a source of economic stabilization, by increasing aggregate 

demand through a “multiplier effect” during downturns. The multiplier 

effect is derived from claimants’ tendency to spend a high proportion of 

their benefits. The maximum duration of state benefits has not varied 

substantially since the 1960s, according to CRS.77 We reviewed the 

research that focuses on maximum durations of benefits (federal and 

state benefits combined). To the extent benefits are reduced, such as by 

a shortened benefit period, the effects on gross domestic product (GDP) 

and employment are likely to be negative, although the precise magnitude 

would be difficult to determine.78

Research on the stimulus effects of spending has generally focused on 

estimates of the “multiplier” effect, in this case for UI benefits (see 

sidebar). An increase in UI benefits is an increase in income to claimants, 

who are likely to spend a high proportion of these benefits. The multiplier 

 

75 GAO, State and Local Governments: Knowledge of Past Recessions Can Inform Future 

Federal Fiscal Assistance, GAO-11-401 (Washington, D.C.: March 31, 2011).

76 GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO 09-3SP (Washington, D.C.: March 2009).

77 Katelin P. Isaacs, Unemployment Insurance: Consequences of Changes in State 

Unemployment Compensation Laws, R41859 (Washington, D.C.: Congressional 

Research Service, August 19, 2014).

78 Gross domestic product is the total value of goods and services produced by the people 

of a nation during a year, not including income earned in foreign countries.

Research Suggests 

That Reductions in 

Benefit Duration May 

Lessen UI’s Positive 

Effects on the 

Economy
Page 41 GAO-15-281 Unemployment Insurance

effect captures the effects of this initial spending, as well as the 

subsequent stream of spending by other parties. The UI claimant spends 

benefits, and those who benefit from this spending, in turn, increase their 

own spending, and so on. The sum total of all such ripple effects is 

embodied in estimates of a multiplier associated with the initial spending 

increase. Effects of changes in individual states’ duration could have less 

pronounced effects than national changes.

Experts provide varying estimates of the extent to which an increase in 

government spending causes those whose incomes are directly 

benefited, such as the unemployed, to increase their own spending, and 

by extension increase aggregate demand and GDP. However, estimates 

of the multipliers in the short term are almost always positive. Responding 

in 2011 to a proposed extension of UI benefits, CBO estimated multipliers 

for UI of between .4 and 1.9 using a model that draws from multiple 

schools of thought, including leading models used by other institutions, 

related to proposed extensions of UI benefits.79 A private sector estimate 

also found a positive effect. In 2012, investment firm Moody’s estimated 

the multiplier for UI to be 1.55, also in relation to proposed extensions of 

benefits.80 Both estimates found that the multiplier for UI is generally 

higher than those for other types of spending, such as reductions in 

payroll taxes for workers and employers.81

 

79 Congressional Budget Office, Policies for Increasing Economic Growth and 

Employment in 2012 and 2013, statement of Douglas Elmendorf before the Committee on 

the Budget, United States Senate (Washington, D.C.: November 15, 2011). These 

multiplier estimates were based on a proposed extension of UI benefits. See also 

Congressional Budget Office, Estimated Impact of the American Recovery and 

Reinvestment Act on Employment and Economic Output from October 2012 Through 

December 2012 (Washington, D.C.: February 2013).

80 Moody’s Analytics, Bolstering the Economy: Helping American Families by 

Reauthorizing the Payroll Tax Cut and UI Benefits, testimony of Mark Zandi before the 

Joint Economic Committee (February 7, 2012).

81 For example, CBO’s estimates of the multiplier for UI in 2011 were generally higher 

than that for other categories of spending reviewed, including spending: on household 

assistance, such as reducing workers’ payroll taxes (multiplier estimate: .1 to .9); business 

support, such as reducing employers’ payroll taxes (multiplier estimate: .2 to 1.3); and in 

the form of aid to states (multiplier estimate for non-infrastructure aid: .2 to 1.0). Moody’s 

estimate in 2012 was higher than that for all tax cuts reviewed, both for individuals and 

employers (multiplier estimate: .32 to 1.38), and higher than that for low-income home 

energy assistance (multiplier estimate: 1.13), but lower than that for Supplemental 

Nutrition Assistance Program benefits (multiplier estimate: 1.71).

Multiplier Effect

A multiplier effect represents the expansion in 

GDP or employment related to some change 

in public spending or taxes. A multiplier is a 

way of showing the economic impact of a 

dollar as it moves through the economy. For 

example, a multiplier of 1.5 means that an 

increase in spending by $1 (financed by 

borrowing) expands GDP by $1.50. | GAO-15-

281
Page 42 GAO-15-281 Unemployment Insurance

Moreover, traditional models used by CBO and others have found that 

multipliers are estimated to be greater during downturns than at other 

times, because there is greater potential for stimulus at such times. 

However, there is professional disagreement regarding these models.82

Figure 10: Congressional Budget Office Estimates of the Maximum and Minimum 

Multiplier Effects for Stimulus Provisions of the American Recovery and 

Reinvestment Act of 2009

(See fig. 10.)

Notes: Employment data reflect percentage multiplier effect in terms of full-time equivalent 

employment years. The American Recovery and Reinvestment Act of 2009 included both extensions 

of UI benefits as well as other measures that can stimulate the economy, such as Medicaid financing 

and surface transportation funding. Although CBO did not estimate multipliers for the UI extensions 

separately, they are likely to exhibit the same pattern.

Similarly, some recent studies have estimated the effect on GDP and 

employment of UI benefit terminations, as decreases in benefits can also 

have ripple effects. In 2013, for example, the Council of Economic 

Advisors and DOL used private-sector and CBO estimates to determine 

that discontinuation of federal emergency benefits could reduce GDP by 

 

82 See, for example, Robert Barro, “Keynesian Economics vs. Regular Economics,” Wall 

Street Journal, Aug. 24 2011.
Page 43 GAO-15-281 Unemployment Insurance

.2 to .4 percentage points.83 This report also estimated that terminating 

these federal benefits could result in a potential loss of 240,000 jobs. 

Additionally, in December 2011, using a CBO multiplier, the Joint 

Economic Committee estimated that continuing federal benefits could 

generate up to 400,000 jobs overall.84

Identifying any effects from 9 states’ duration reductions on the economy 

as a whole would be complicated by potentially offsetting factors. For 

example, the effect of a spending decrease in one program, in this case, 

UI, could be mitigated by a spending increase in another program, 

because multipliers work in both directions.

Furthermore, experts disagree on the extent to which an increase in 

government spending may provoke offsetting behavior by other entities, 

based on our review of relevant literature. For example, UI claimants may 

spend their benefits, but taxpayers may reduce their spending in 

anticipation of higher taxes to service government debt, canceling the 

intended stimulus effect.85

With regard to the role UI plays in stabilizing the economy during 

economic downturns, the program stands out as an important component 

of the federal government’s automatic stabilizers. It avoids the 

shortcomings of other types of fiscal stimulus because it is highly targeted 

to individuals with low income and a high likelihood of spending the 

 

83 The Council of Economic Advisers and the Department of Labor, The Economic 

Benefits of Extending Unemployment Insurance (Washington, D.C.: December 2013). The 

Council of Economic Advisers, an agency within the Executive Office of the President, is 

charged with offering the President objective economic advice on domestic and 

international economic policy.

84 Staff of the Chairman of the Joint Economic Committee, The Case for Maintaining 

Unemployment Insurance: Supporting Workers and Strengthening the Economy

(Washington, D.C.: December 2011). The Joint Economic Committee is a bi-partisan, bicameral committee of Congress, charged with reviewing economic conditions and 

recommending improvements in public policy.

85 See, for example, Jane G. Gravelle, Dynamic Scoring for Tax Legislation: A Review of 

Models, R43381 (Washington, D.C.: Congressional Research Service, January 24, 

2014).
Page 44 GAO-15-281 Unemployment Insurance

benefits, and it is timely because it promptly increases in periods of rising 

unemployment and falls as the economy recovers.86

The joint federal and state unemployment partnership provides temporary 

financial relief to individuals who have become unemployed through no 

fault of their own, and stabilizes the economy during economic 

downturns. While states determine the amount and duration of benefits 

paid to individuals through unemployment insurance, their decisions have 

an impact on the federal government’s role and costs. In the recent 

recession and slow recovery, 9 states chose to reduce the maximum 

duration of benefits paid to individuals and, as previously mentioned, 

none of the states that we interviewed reported any restoration of the 

previous maximum duration. As we have shown, these states’ actions will

lead to reductions in total benefits for some claimants. If total benefits 

were reduced, the UI program’s objectives to provide relief to unemployed

individuals and help stabilize the economy during downturns would be 

adversely affected.

The states’ decisions to reduce benefit durations reflect the flexibility 

afforded states that can help them make adjustments appropriate to their 

particular circumstances during challenging economic times. In addition, a 

larger federal role during downturns is consistent with the part that UI 

plays as an economic stabilizer. Yet the state duration reductions also 

had the unintended consequence of recasting the federal role—causing 

the federal programs to fund weeks of benefits that were formerly the 

responsibility of states. Further, these costs were shifted to the federal 

government without necessarily providing more weeks of total benefits for 

the individual. DOL does not have information about the costs shifted to 

the federal government and about the changes in total durations resulting 

from the states’ actions. As we have previously reported on state policy 

changes in past recessions, knowledge of the unintended consequences 

of such changes—including estimates of the impact on federal costs—

can inform federal assistance to states in future recessions. Without an

analysis of the extent to which costs were shifted to the federal 

government as a result of state duration reductions, the agency and 

 

86 We have previously reported that benefit reductions jeopardize the UI program’s ability 

to stabilize the economy during recessions. See GAO, Unemployment Insurance: 

Program’s Ability to Meet Objectives Jeopardized, GAO/HRD-93-107 (Washington, D.C.: 

September 28, 1993).

Conclusions
Page 45 GAO-15-281 Unemployment Insurance

Congress lack information needed to plan for future economic downturns 

and the equitable role of the federal government in the federal/state 

unemployment insurance partnership.

To inform the design of any future federal UI programs, the Secretary of 

Labor should examine the implications of state reductions in maximum UI 

benefit duration on federal UI costs, for example, by modeling the net 

effect of paying federal benefits earlier to more beneficiaries, albeit for a 

possibly shorter period of time, and develop recommendations for the 

program, if appropriate.

We provided a draft of this report to DOL for review and comment. In its 

written comments, reproduced in appendix VI, DOL agreed with our 

recommendation. Specifically, DOL noted that additional study would be 

useful, and indicated it will begin to assess an approach for determining 

the implications of reductions in maximum duration on federal costs. DOL 

noted that measuring the net cost to the federal government is difficult, 

and we acknowledge this difficulty. However, understanding the federal 

cost associated with state duration reductions will inform any proposed 

modifications to the UI federal-state partnership and the balance of costs. 

DOL noted that it has proposed incentives to states to maintain maximum 

durations of 26 weeks, included in the President’s fiscal year 2016 

budget. For example, one proposal would make several changes to the 

extended benefits program, including providing 100 percent federal 

funding for states with 26-week maximum durations. DOL also provided

technical comments, which we incorporated as appropriate.

Additionally, we provided selected state UI agencies with a draft of 

pertinent sections and incorporated their technical comments as 

appropriate. We also asked an external expert to review the report, and 

made technical changes based on this review as appropriate.

Recommendation for 

Executive Action

Agency Comments 

and Our Evaluation
Page 46 GAO-15-281 Unemployment Insurance

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of Labor, 

appropriate congressional committees, and other interested parties. In 

addition, the report will be available at no charge on the GAO website at 

http://www.gao.gov. Please contact me on (202) 512-7215 or at 

sherrilla@gao.gov if you or your staff have any questions about this 

report. Contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this report. Key 

contributors to this report are listed in appendix VII.

Andrew Sherrill

Director, Education, Workforce,

 and Income Security Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 47 GAO-15-281 Unemployment Insurance

To address the objectives of this request, we used a variety of methods. 

Specifically, we

• reviewed relevant federal laws and regulations and state laws, and 

confirmed information regarding state laws with relevant state officials;

• interviewed federal unemployment insurance (UI) program officials 

and state UI officials in 7 states that reduced duration and 4 states 

that did not reduce duration, and in 4 of the 7 states that reduced 

duration, we also interviewed other stakeholders with an interest in UI 

duration, such as employer groups and advocates;

• conducted a cluster analysis using data from the Department of 

Labor’s (DOL) Office of Unemployment Insurance, the Bureau of 

Labor Statistics (BLS), and other sources;

• analyzed data on a range of variables using data from DOL and BLS;

• calculated survival rates (the probability that a claimant will continue 

receiving benefits after a given week) based on data provided to us;

• conducted an economic literature review on key implications of UI 

benefits for individuals; and

• conducted an economic literature review that focused primarily on the 

stimulative effects of UI, and identified reasonable conclusions about 

the likely economic effects of duration reduction.

To identify the circumstances in which states reduced the maximum 

duration of state benefits, we interviewed federal UI program officials and 

state UI officials in 7 of the 9 states that reduced duration and 4 states 

that did not reduce duration (Indiana, Ohio, Tennessee, and Washington). 

We selected Indiana, Ohio, and Tennessee based on their similarity to 

the duration reduction states on certain criteria, including presence of a 

trust fund loan and the size of the loan; geographic location; average high 

cost multiple; total taxable resources; and total unemployment rate. In 

addition, we selected Washington on the basis of expert recommendation

and mention in selected studies. Washington was among a minority of 

states that did not require a federal UI trust fund loan at any point during 

the recession and recovery. The UI officials in Florida and North Carolina 

did not respond to our questions. We also conducted site visits to two 

duration reduction states—Georgia and Michigan—where we interviewed 

a wide range of stakeholders, including employer groups (such as the 

Appendix I: Objectives, Scope, and 

Methodology

Interviews of Federal and 

State UI Officials and 

Other Stakeholders
Appendix I: Objectives, Scope, and 

Methodology

Page 48 GAO-15-281 Unemployment Insurance

state Chambers of Commerce and affiliates of the National Federation of 

Independent Business), legislators who supported and opposed duration 

reduction, academic experts, governor’s workforce policy staff, and 

advocates (such as the National Employment Law Project and similar 

state-level organizations). We selected these states based on the 

magnitude of the duration reduction and the structure of the duration 

reductions (i.e., a mix of flat and variable maximum durations), timing of 

duration reduction, and geographic diversity. In the 2 duration reduction 

states where we were unable to interview UI officials—Florida and North 

Carolina—we interviewed advocates and employer groups. See table 7 

for the range of stakeholders interviewed for each state.

Table 7: Stakeholders Interviewed by State

State 

Unemployment 

insurance 

director/staff 

Governors’ 

workforce policy 

advisor(s)

Employer 

group(s) Legislator(s)

Academic 

expert(s)

Advocacy 

group(s)

Arkansas ✓

Florida ✓ ✓

Georgia ✓ ✓ ✓ ✓ ✓ ✓

Illinois ✓

Indiana ✓

Kansas ✓

Michigan ✓ ✓ ✓ ✓ ✓ ✓

Missouri ✓

North Carolina ✓ ✓ ✓

Ohio ✓

South Carolina ✓

Tennessee ✓

Washington ✓

Source: GAO. | GAO-15-281

In our interviews we asked questions about the circumstances that led to 

duration reduction, trust fund solvency, other recent changes to the UI 

program, estimates of cost savings or individuals affected, broader 

economic effects, and reemployment programs. We also interviewed 

academic experts regarding these topics, including Dr. Jeffrey Wenger, 

University of Georgia; Dr. Christopher J. O’Leary, W.E. Upjohn Institute 

for Employment Research; Dr. Patrick Conway, University of North 

Carolina; Dr. Michael Leachman and Dr. Chad Stone, Center on Budget 

and Policy Priorities; Dr. H. Luke Shaefer, University of Michigan; and Dr. 
Appendix I: Objectives, Scope, and 

Methodology

Page 49 GAO-15-281 Unemployment Insurance

Wayne Vroman, The Urban Institute. In addition, Dr. Vroman reviewed a 

draft of the report.

Additionally, we conducted a cluster analysis using data from DOL’s UI 

program, the Bureau of Labor Statistics (BLS), and other sources. Our 

analysis included numerous variables, including industry composition, 

population over 55, unemployment rates, and trust fund loans. Cluster 

analysis methods assessed the degree to which these variables 

simultaneously were similar within various possible groups of states but 

were different across the groups. We used these methods to identify 

characteristics that were shared among states that reduced duration. 

Cluster analysis allowed us to identify broad, shared patterns among 

states across multiple variables at once, which yielded insights that can 

be more difficult to discern by comparing states on individual 

characteristics one at a time. In this way, cluster analysis can discover 

patterns in data, but they cannot explain why they exist or confirm causeand-effect relationships.

We used a particular form of cluster analysis, known as hierarchical 

agglomerative methods, to identify potential clusters of states and their 

decisions to reduce UI benefits. We selected variables related to program 

benefits and financing, as well as variables exogenous to the program, 

such as states’ capacity to tax, selected state demographic information, 

and state industry composition. After collecting the variables above for all 

50 states and the District of Columbia, we standardized the scales of all 

variables such that each variable’s mean was equal to 0 and its variance 

was equal to 1. Because the natural scales of the variables were 

generally percentages, the specific method of standardization should not 

strongly influence our results. After standardizing the scales, we 

calculated a multivariate Euclidean distance matrix for all variables and 

states. We then applied a hierarchical agglomerative clustering algorithm 

to this distance matrix, which used average linkage methods to form 

various clusters at increasing distances.

We examined the results of the clustering algorithm to identify the 

individual variables that appeared to influence the results strongly. We 

further assessed, in concert with the political homogeneity of the state 

legislature and governorship, the degree to which states in various 

possible clusters reduced UI benefit duration. This allowed us to identify a 

group of benefit reduction states (Arkansas, Florida, Georgia, Missouri, 

North Carolina, and South Carolina) that were similar on the 

characteristics we analyzed, as well as benefit reduction states (Illinois, 

Cluster Analysis of UI and 

BLS Data
Appendix I: Objectives, Scope, and 

Methodology

Page 50 GAO-15-281 Unemployment Insurance

Kansas, and Michigan) that were not similar to this group. In addition, we 

identified comparison states (Indiana, Ohio, and Tennessee) that the 

algorithm clustered with the benefit reduction states but which had not 

reduced benefit duration. The comparison states helped us to examine 

why states in similar circumstances chose not to reduce benefits. For 

more information on the variables we examined, see table 8.

Table 8: Variables Used in Cluster Analysis

Variable Description

Industry composition: Goods Producing Percent of goods-producing employment (i.e., out of total non-farm employment, 

percent employed in construction, manufacturing, and mining and logging), to identify 

industry composition differences

Population 55 and over Percent of population that is 55 or older, to identify demographic differences

Union membership Percent of employed population who are union members

Total taxable resources: dollars per capita A comprehensive measure of all the income flows a state can potentially tax, used by 

the Department of Treasury

Total taxable resources: per capita index A per-capita index of all states’ total taxable resources

Average weekly benefit amount for selected 

quarters

The average benefit amount paid by state UI programs

Total unemployment rate Percent of labor force that is able and available to work and is unable to find suitable 

work, to reflect potential claimant population

Total unemployment rate, change from 

previous year

Percent change in unemployment rate, to reflect economic conditions

Outstanding trust fund loan balance per 

covered employee

To reflect trust fund loan balance on a per-employee basis

Outstanding trust fund loan balance per 

covered employee, change over previous 

year

To reflect change in trust fund loan balance

Recipiency rate for state programs Insured unemployed as a percent of total unemployed, to reflect participation in UI 

Wage replacement ratio Ratio that compares average weekly benefit amount to average wages, to reflect 

generosity of benefits

Average High Cost Multiple The standard measure of trust fund solvency, to measure funding adequacy of UI trust 

funds

Average tax rates on total wages A 5-year average of tax on total wages as a percent, to gauge funding adequacy of UI 

trust funds

Source: GAO. | GAO-15-281 

In addition, we used data from the National Conference of State 

Legislatures to identify the partisan composition of state legislatures and 

governorships when duration reductions were adopted. These data were 

analyzed separately from the cluster analysis, because cluster analysis 

requires continuous, rather than categorical, variables.
Appendix I: Objectives, Scope, and 

Methodology

Page 51 GAO-15-281 Unemployment Insurance

To identify the individual implications of duration reduction, we analyzed 

UI program data on a range of variables using data from DOL’s Office of 

Unemployment Insurance and BLS, including the value of the foregone 

state and federal benefits for individuals who reach the maximum 

duration. We used data from DOL’s Employment and Training 

Administration 5159 (Claims and Payment Activities) and 218 (Benefit 

Rights and Experience) reports, which states submit to DOL on a monthly 

basis. These reports include information on average weekly benefit 

amounts, initial claims, recipiency rates, and exhaustions. For selected 

variables, we analyzed data from 2006, before the recession began, to 

2014, focusing on the 9 duration reduction states and the 4 states we 

selected that did not reduce duration. We also analyzed data from the 

Bureau of Labor Statistic’s Current Population Survey—such as length of 

unemployment—and Local Area Unemployment Statistics—such as 

seasonally adjusted employment rates. The Current Population Survey is 

the nation’s source of official government statistics on employment and 

unemployment, and it is conducted on a monthly basis with about 60,000 

households. The Local Area Unemployment Statistics program provides 

monthly estimates of employment and unemployment for approximately 

7,300 areas.

We calculated survival rates (the probability that a claimant will continue 

receiving benefits after a given week) based on data provided to us by 

Georgia and Missouri. We obtained aggregate data for each quarter on 

the number of claimants receiving state benefits, by benefit week, for 

approximately a year prior to duration reduction through two quarters 

following reduction. We then analyzed data from the quarter closest to 

each state’s policy change that did not appear seasonally inflated, in 

order to estimate a baseline survival function prior to the policy change. 

Michigan provided data from a sample of claims drawn from the time 

period we requested. We used the estimated survival functions to 

estimate the possible impact of reducing maximum benefit duration in 

three ways. First, we calculated the probability that claimants would be 

affected by a maximum duration reduction, equal to the estimated survival 

probability at the new maximum duration. Second, we calculated the total 

number of claimants affected by the policy change, equal to the survival 

probability at the new maximum duration multiplied by the population of 

claimants receiving benefits at the beginning of the quarter. (We did not 

calculate this quantity for Michigan, due to uncertain population sizes 

from which our sample was drawn.) Finally, we calculated the benefit that 

a claimant receiving the average benefit amount in the period shortly 

before the policy change could have expected to lose due to a shorter 

Analysis of Federal and 

State UI Program Data

Calculation of Survival 

Rates
Appendix I: Objectives, Scope, and 

Methodology

Page 52 GAO-15-281 Unemployment Insurance

maximum duration, equal to the survival probability at the new maximum 

duration multiplied by the total benefits received by the average recipient 

over the weeks exceeding the new maximum duration.

We also asked Washington’s state Employment Security Department to 

project the implications of reducing benefits from 26 weeks to 20 weeks, 

using the state’s Benefit Financing Model. According to Washington 

officials, the model was originally developed by Wayne Vroman of the 

Urban Institute as part of an earlier analysis of program solvency 

conducted for Washington in the mid-1990’s. The Washington model has 

continued to be used and supported by the Employment Security 

Department since 2000 with a review of the model completed by Dr. 

Vroman in June 2007,1 and the department also conducts quarterly 

benchmarking on the results. The model was developed to model current 

law projections and legislative changes impacting Washington’s trust fund

account. According to Dr. Vroman, it is an actuarial model, and actuarial 

projections always have an element of uncertainty with the degree of 

uncertainty increasing as the projection extends further into the future. 

Macro factors such as the unemployment rate, the inflation rate and the 

level of statewide employment present major uncertainties.

We also reviewed selected economic literature on key implications of UI 

benefits for individuals, such as labor force attachment, job search 

behavior, poverty reduction, and participation in other federal programs 

such as Social Security Disability Insurance, specifically on the effects of 

changing benefit levels or changing duration of eligibility for benefits. We 

obtained recommendations for studies from internal GAO and external UI 

researchers and policy experts, including DOL officials; searched various 

databases for peer-reviewed journal articles and other publications; and 

reviewed policy and research organization websites for relevant studies. 

Based on this research, we identified reasonable conclusions about the 

likely implications of duration reductions for individuals. As noted in this 

report, research on the questions discussed reaches different 

conclusions.

 

1 Wayne Vroman, Washington’s ESD Actuarial Model and The State’s UI Trust Fund 

Balance (January 2007).

Washington State 

Simulation

Economic Literature 

Review
Appendix I: Objectives, Scope, and 

Methodology

Page 53 GAO-15-281 Unemployment Insurance

To identify what is known about the economic effects of reductions in 

benefit duration, we conducted an economic literature review that focused 

primarily on the stimulative effects of UI, and based on that research, we 

identified reasonable conclusions about the likely economic effects of 

duration reduction. In addition, we interviewed researchers from the 

Congressional Budget Office to understand its economic multiplier model. 

As noted in this report, research on the questions discussed reaches 

different conclusions. We have not done an exhaustive review of the 

voluminous literature on this topic.

Because external data were significant to each of our research objectives, 

we assessed the reliability of the publicly and privately held data obtained 

from federal agencies and an association. To assess the reliability of DOL 

data sets, we administered a survey form that was specifically tailored to 

the system in question and addressed data uses, internal controls, and 

data entry practices. Once each survey was completed, we reviewed 

responses to assess the adequacy of the internal controls and processes 

in place. We determined that each data set was sufficiently reliable for the 

analytical purposes of this report. For data on partisan composition, we 

used data from the National Conference of State Legislatures. For data 

on total taxable resources, we obtained data from the Department of the 

Treasury. For these data sources beyond DOL, we obtained information 

on how the relevant data were generated and maintained and determined 

they were sufficiently reliable for the cluster analysis.

We conducted our work between November 2013 and April 2015 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our

findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Data Reliability
Appendix II: Financial Characteristics of 

Selected States

Page 54 GAO-15-281 Unemployment Insurance

Table 9: Selected Financial Characteristics of States That Reduced Duration and States That Did Not Reduce Duration

Trust fund loans

State 

Trust fund adequacy 

(average high cost 

multiple value) 2007

States with a trust 

fund loan (2010-

2012)

Average loan per 

covered 

employeea

Capacity to tax (Total 

Taxable Resources, per 

capita index) 2010

Duration Reduction States

b

Arkansas .32 ✓ $295 77.5

Florida 1.04 ✓ $280 90.0

Georgia .96 ✓ $194 86.8

Illinois .34 ✓ $437 107.0

Kansas .96 ✓ $0c 98.7

Michigan n/ad ✓ $994 79.0

Missouri .12 ✓ $284 88.5

North Carolina .23 ✓ $661 92.2

South Carolina .26 ✓ $510 76.1

Number with a trust fund loan 9 

Non-Duration Reduction States

All states .79e $359f 102.1

Number with a trust fund loan

g

27

Selected Non-Duration Reduction States

Indiana .29 ✓ $729 89.5

Ohio .12 ✓ $478 85.9

Tennessee .48 ✓ $0c 84.4

Washington 1.54 n/a 107.8

Number with a trust fund loan 3 

Source: GAO analysis of DOL data, Treasury data, and information provided by selected states. GAO-15-281. 

a

For duration reduction states, the amount shown for average loan per covered employee shown is 

the amount as of the fourth quarter before duration reduction became effective. For other states with 

loans, the amount shown is the average loan per covered employee in 2010.

b

The total taxable resources data for 2010 are expressed as per capita, indexed values, with the per 

capita, indexed value for the U.S. overall set at 100.

c

Kansas had a loan of $171 million, but repaid it before duration reduction became effective. 

Tennessee had a loan of about $20 million, but incurred it and repaid it within a single quarter in 

2010.

d

Because average high cost multiple (AHCM) values are derived in part from the trust fund balance, 

they are not calculated for states with loans. As of 2007, Michigan had already incurred a trust fund 

loan.

e

This is the median AHCM value for all states that did not reduce duration.

f

This figure represents the average loan per covered employee for the non-duration reduction states 

that incurred loans.

g

Appendix II: Financial Characteristics of 

Selected States 

This is the median total taxable resources per capita index for all states that did not reduce duration.
Appendix II: Financial Characteristics of 

Selected States

Page 55 GAO-15-281 Unemployment Insurance

Table 10: Maximum Trust Fund Loan Balances, by State

State 

Maximum trust fund loan 

balancea (in millions)

Month and year of maximum 

trust fund loan balance

Alabama

b

$283.0 September 2011

Arkansas $360.0 June 2011

Arizona $421.9 March 2012

California $10,959.0 June 2011

Colorado $578.2 March 2011

Connecticut $809.9 September 2011

Delaware $76.4 December 2012

Florida $2,247.9 March 2011

Georgia $752.3 March 2012

Hawaii $49.5 March 2011

Idaho $202.4 June 2011

Illinois $2,951.0 March 2011

Indiana $2,169.9 March 2011

Kansas $170.8 September 2011

Kentucky $958.0 March 2012

Massachusetts $387.3 September 2010

Maryland $133.8 September 2010

Michigan $3,991.2 March 2011

Minnesota $733.2 September 2011

Missouri $861.2 March 2011

North Carolina $2,819.9 March 2012

New Hampshire $22.9 March 2010

New Jersey $1,991.6 March 2011

Nevada $823.3 March 2012

New York $3,955.1 March 2012

Ohio $2,611.4 June 2011

Pennsylvania $3,761.8 June 2011

Rhode Island $274.0 March 2012

South Carolina $977.7 March 2011

South Dakota $22.7 March 2010

Texas $2,026.0 March 2010

Virginia $467.9 March 2011

Vermont $77.7 June 2012

Wisconsin $1,664.8 March 2011

Source: Department of Labor. | GAO-15-281
Appendix II: Financial Characteristics of 

Selected States

Page 56 GAO-15-281 Unemployment Insurance

Notes: States that incurred and repaid a loan within the same quarter are not shown.

a

Balances shown reflect amounts reported by states on a quarterly basis; actual trust fund loan 

balances may have varied on a monthly basis. For example, according to state officials, Missouri 

reached its actual maximum trust fund loan balance of $883 million in April 2011. Additionally, 

balances shown reflect principal only and do not include interest.

b

When DOL data showed the same maximum trust fund loan balance in 2 or more successive 

quarters, the most recent quarter is shown.

Table 11: Federal Unemployment Tax Act (FUTA) Credit Reductions Due to States 

Having Outstanding Federal Advances

Amount of tax credit reduction, by calendar year

State 2009 2010 2011 2012 2013 2014

Arizona 0.3%

Arkansas 0.3% 0.6% 0.9%

California 0.3% 0.6% 0.9% 1.2%

Connecticut 0.3% 0.6% 0.9% 1.7%

Delaware 0.3% 0.6%

Florida 0.3% 0.6%

Georgia 0.3% 0.6% 0.9%

Illinois 0.3% 

Indiana 0.3% 0.6% 0.9% 1.2% 1.5%

Kentucky 0.3% 0.6% 0.9% 1.2%

Michigan 0.3% 0.6% 0.9% 

Minnesota 0.3% 

Missouri 0.3% 0.6% 0.9%

Nevada 0.3% 0.6%

New Jersey 0.3% 0.6%

New York 0.3% 0.6% 0.9% 1.2%

North Carolina 0.3% 0.6% 0.9% 1.2%

Ohio 0.3% 0.6% 0.9% 1.2%

Pennsylvania 0.3% 

Rhode Island 0.3% 0.6% 0.9%

South Carolina 0.3% a a a

Vermont 0.3%

Virginia 0.3% 

Wisconsin 0.3% 0.6% 0.9%

Source: Department of Labor. | GAO-15-281

a

According to DOL, South Carolina qualified for avoidance of its FUTA tax credit reduction. See 26 

U.S.C. § 3302(g).
Appendix III: Specifications for Variable 

Maximum Durations, Estimated Cost Savings, 

and Additional UI Program Changes for 

Selected States

Page 57 GAO-15-281 Unemployment Insurance

Table 12: State Specifications for Variable Maximum Durations of Unemployment Insurance Benefits 

Description of variable maximum duration

State 

Variable 

maximum

duration (weeks)

Maximum duration 

available (weeks)a Corresponding state unemployment rate

Maximum duration 

following duration 

reduction (weeks)

Maximum duration 

as of October 

2014 (weeks)

Florida 12-23 12 5 percent or less 23 16 b b

13-22 Each .5 percent 

increase in the 

unemployment rate 

above 5 percent 

triggers an additional 

week 

23 10.5 percent or more

Georgia 14-20 14 6.5 percent or less 19 15

15-19 Each .5 percent 

increase in the 

unemployment rate 

triggers an additional 

week 

20 9 percent or more

Kansas 16-26 16 Less than 4.5 percent 20 20

20 4.5 percent to less 

than 6 percent

26 6 percent or more

North 

Carolina

12-20 12 5.5 percent or less 19 14 b b

13-19 Each .5 percent 

increase in the 

unemployment rate 

triggers an additional 

week

20 More than 9 percent

Source: Applicable state laws and information provided by state UI officials. | GAO-15-281

a

Duration is determined annually or semi-annually, depending on state law, in accordance with the 

state’s total unemployment rate.

b

Florida and North Carolina did not provide information about the maximum durations that were in 

effect following duration reduction or as of October 2014. We imputed these durations based on the 

applicable unemployment rates, as calculated by BLS.

Appendix III: Specifications for Variable 

Maximum Durations, Estimated Cost 

Savings, and Additional UI Program 

Changes for Selected States
Appendix III: Specifications for Variable 

Maximum Durations, Estimated Cost Savings, 

and Additional UI Program Changes for 

Selected States

Page 58 GAO-15-281 Unemployment Insurance

Table 13: Estimated Cost Savings Attributable to Duration Reduction and Maximum Loan Balances in Selected States

State 

Year duration 

reduction 

enacted 

Amount of 

reduction

(weeks)

Estimated cumulative cost 

savings since duration 

reduction(millions)

Maximum trust fund 

loan balance

(millions) a

Cumulative cost savings 

as a percent of maximum 

trust fund loan balance b

Arkansas 2011 1 $16.7 $360 4.6

Illinois 2011 1 c $100 $2,951 3.4

Michigan 2011 6 $391 $3,991 9.8

Missouri 2011 6 $387 $861 44.9

Source: GAO analysis of relevant state laws and information provided by states and the Department of Labor. | GAO-15-281. 

Notes: The maximum trust fund loan represents only the amount owed to the federal government, not 

the amount needed in each state to replenish the trust fund. States set their own targets for their trust 

funds. For example, Georgia’s target is $1 billion and Michigan’s is $2.5 billion.

a

State officials in Illinois and Michigan provided cumulative cost savings estimates in October 2014; 

Michigan’s estimate covers the period from January 15, 2012 to June 30, 2014. Totals for the other 

states were calculated by GAO. In Arkansas, officials estimated that duration reduction represented a 

savings of $5 million each year. Missouri officials estimated a cost savings of $108 million each year.

b

The maximum trust fund balances shown are based on quarterly data. Arkansas’ trust fund loan 

balance reached its maximum in the quarter ending in June 2011; Illinois’, in March 2011; Michigan’s, 

in March 2011; and Missouri’s, in March 2011. However, a state’s actual balance may have varied in 

a given month. For example, according to state officials, Missouri reached its maximum trust fund 

loan balance of $883 million in April 2011. Based on this balance, the cost savings for Missouri 

represent 43.8 percent of the maximum trust fund loan balance.

c

Illinois’ duration reduction was only applicable to claims filed in 2012.

Table 14: Additional Financing and Benefit Changes Made by Duration Reduction States

Increases in employer taxes Changes to eligibility

State 

Taxable 

wage 

base

Tax 

rates Surtaxes

Bond 

issue

Reduced 

average 

weekly 

benefit 

amount Monetary Non-monetary

Program 

integrity 

changes

Changes to 

application 

procedures

Arkansas ✓ ✓ ✓ ✓ ✓

Florida ✓ ✓ ✓ ✓

Georgia ✓ ✓ ✓a ✓c ✓ ✓

Illinois ✓a ✓a ✓ ✓

Kansas ✓ ✓ ✓ ✓

Michigan ✓a ✓b ✓c ✓

Missouri ✓d ✓

North 

Carolina

✓ ✓e ✓ ✓

South 

Carolina

✓ ✓ ✓ a a ✓ ✓d ✓ ✓

Source: GAO analysis of information provided by states, the Department of Labor, and GAO review of relevant state laws in selected states, generally confirmed by state officials. Because UI officials in 

Florida and North Carolina did not respond to our questions, we were unable to confirm the information for these states with state officials. The table generally reflects any relevant changes states reported 
Appendix III: Specifications for Variable 

Maximum Durations, Estimated Cost Savings, 

and Additional UI Program Changes for 

Selected States

Page 59 GAO-15-281 Unemployment Insurance

making around the time of duration reduction through October 2014, although for Florida, Kansas, and North Carolina, the table only reflects changes made by the specific piece of legislation that reduced 

duration. I GAO-15-281

a

State officials described these changes as temporary. In some cases, automatic readjustments may 

be tied to the condition of the trust fund balance. For example, according to state officials, in 

Michigan, if the trust fund reaches $2.5 billion for 2 consecutive quarters, the taxable wage base will 

revert from $9,500 to its previous level of $9,000.

b

Michigan issued bonds in the amount of $3.3 billion to repay its loan. Although employers must pay a 

special assessment to repay the bond, the interest rate was more favorable to the state than the 

federal loan would have been, according to state officials. Additionally, officials state that, by repaying 

the federal loan in this way, the state avoided FUTA tax credit reductions for its employers.

c

These states reported changes to work search requirements among the non-monetary eligibility 

changes. In addition, Michigan reported revising the definition of “suitable work” to include positions 

outside the claimant’s experience as long as they pay a common or prevalent wage or meet other 

criteria, and providing for disqualification for chronic absenteeism or negligent loss of credentials, 

such as a commercial driver’s license.

d

These states reported changes to the definition of misconduct among the non-monetary eligibility 

changes.

e

In February 2013, North Carolina enacted legislation that reduced benefit amounts as of July 2013, 

thereby losing eligibility for the emergency benefits program, according to CRS. However, states that 

made changes to their benefit amounts before March 1, 2012 are not subject to the nonreduction 

requirement. Pub. L. No. 112-96, § 2144, 126 Stat. 156, 171 (2012).
Appendix IV: Washington State Simulation 

Using Benefit Financing Model

Page 60 GAO-15-281 Unemployment Insurance

We asked Washington State’s UI agency, the Employment Security 

Department, to project the implications of reducing benefits from 26 

weeks to 20 weeks, using the state’s Benefit Financing Model. The model 

was originally developed by Wayne Vroman of the Urban Institute as part 

of an earlier analysis of program solvency conducted for Washington in 

the mid-1990s. According to state officials, the Washington model has 

continued to be used and supported by the state since 2000 with a review 

of the model completed by Dr. Vroman in June 2007,1

Table 16 below shows the impact of a reduced maximum duration on key 

UI benefit variables in 2013 under two scenarios. The first scenario 

reflects current law assumptions while the proposal shows the same 

benefit variables assuming a 20 weeks maximum duration. Assuming a 

reduction in the maximum duration from 26 weeks to 20 weeks would 

have led to a 9.5 percent reduction in total benefit payments in 2013.

and the state also 

conducts quarterly benchmarking on the results. The model was 

developed to model current law projections and legislative changes 

impacting the UI trust fund account. 

Table 15: Impact of Benefit Reduction on Washington State 2013 Benefits

2013 

UI Variable

Current law (maximum 

duration of 26 weeks)

Alternative scenario 

(maximum duration of 20 

weeks)

Weeks compensated 3,162,052 2,861,657

First payments 195,029 195,029

Exhaustions 70.084 105,323

Exhaustion rate 35.7% 52.2%

Survival rate 96.0% 96.6%

Actual duration 16.3 14.7

Average weekly 

benefit amount

$389.00 $389.00

Total benefits paid $1,230,038,228 $1,113,184,596

Source: GAO analysis of Washington State Employment Security Department data. I GAO-15-281

 

1 Wayne Vroman. Washington’s ESD Actuarial Model and The State’s UI Trust Fund 

Balance, January 2007.

Appendix IV: Washington State Simulation 

Using Benefit Financing Model
Appendix IV: Washington State Simulation 

Using Benefit Financing Model

Page 61 GAO-15-281 Unemployment Insurance

According to state officials, Washington has a system with two taxes. The 

first tax is experience-based and indexed to the benefit ratio. The other is 

a “social tax” that is assessed yearly and is mandated by statute to collect 

the amount required to make sure the UI trust fund remains solvent.

The state UI agency applied the 9.5 percent reduction in weeks 

compensated that was calculated in 2013 to the UI model starting in 

2015. As a result, UI tax collections would be reduced by $381 million 

from 2016 through 2020 and tax rates in all years from 2016 forward 

would also be decreased. The Employment Security Department 

estimated that by 2020, duration reduction would increase the UI trust 

fund balance by $257 million.
Appendix V: Analysis of Individual States

Page 62 GAO-15-281 Unemployment Insurance

Table 16: Highest Tier of Emergency Compensation Benefits Available in Duration 

Reduction States, 2008-2013

State Highest Tier

Tier at Effective Date of 

Duration Reduction

Arkansas Tier III Tier III 

Florida Tier IV Tier IV 

Georgia Tier IV Tier IV 

Illinois Tier IV Tier IV 

Kansas Tier III None

Michigan Tier IV Tier III 

Missouri Tier IV Tier IV 

North Carolina Tier IV Tier I 

South Carolina Tier IV Tier IV 

Source: GAO analysis of DOL data. I GAO-15-281

Note: When 20 weeks of extended benefits are available, claimants could have received up to 

following maximum total weeks: Tier I, 66 weeks; Tier II, 80 weeks; Tier III, 93 weeks; Tier IV, 99 

weeks.

Table 17: Effective Dates of Extended Benefits for Reduction States, 2008-2013

State Effective Dates of Extended Benefits (weeks ending)

Arkansas April 18, 2009 to September 26, 2009

Florida February 28, 2009 to January 2, 2010

May 29, 2010 to May 12, 2012

Georgia February 28, 2009 to April 21, 2012

Illinois April 11, 2009 to June 27, 2009

July 11, 2009 to May 12, 2012

Kansas July 11, 2009 to April 7, 2012

Michigan January 31, 2009 to February 18, 2012

Missouri June 20, 2009 to April 7, 2012

North Carolina January 3, 2009 to May 12, 2012

South Carolina March 14, 2009 to April 7, 2012

Source: GAO analysis of DOL data. I GAO-15-281

We examined economic and UI program data from DOL to see whether 

we could discern any implications the duration reductions may have had 

for individuals. We identified key indicators that describe unemployed 

persons in reduction states in comparison with nonreduction states and 

Appendix V: Analysis of Individual States
Appendix V: Analysis of Individual States

Page 63 GAO-15-281 Unemployment Insurance

with the United States overall, according to our analysis of selected data.1

Table 18: GAO Analysis of Selected 2006-2014 Data and Results

We found that individuals in states that reduced benefit duration were 

more likely to be unemployed for a longer period of time but were less 

likely to be using UI than individuals in other states, particularly after 

duration reductions. Table 18 shows the data we analyzed and 

differences between reduction and non-reduction states, if any.

Data Nationwide trends Duration reduction state trends 

Length of unemployment From 2008 to 2011, the average length of 

unemployment increased in all duration 

reduction states and nonreduction states 

overall.

Length of unemployment for all those unemployed 

decreased after duration reduction in these states.

Duration reduction states generally had longer average 

lengths of unemployment than nonreduction states. 

Labor force participation 

(people working or available 

to work )

Labor force participation has declined at a 

steady rate across the United States since

2006, even as the economy improved 

following the recent recession.

Labor force participation declined following duration 

reduction in most of these states.

Unemployment rate Unemployment has declined at a steady rate 

across the United States since the beginning 

of 2010. 

Unemployment rates declined following duration 

reduction in most of these states.

Duration reduction states, on average, had higher 

unemployment rates than nonreduction states, 

particularly in 2009.

Exhaustion of UI benefits Exhaustion rates increased during the 

recession, but have declined across the 

United States since 2010.

Duration reduction states, on average, had higher 

exhaustion rates than non-reduction states before, 

during, and after the recession. In some states 

exhaustion rates increased after reduction, but in other 

states, rates decreased. 

Average duration on 

unemployment benefits 

Average duration spiked at the beginning of 

2010, but has declined across the United 

States since then, and remained relatively flat 

since the end of 2011.

Average duration on unemployment benefits declined 

in most duration reduction states after 2010. 

Generally, duration reduction states have lower 

average durations than nonreduction states. In some 

states, average duration declined after reduction, but in 

a few states it rose.

Participation in UI (recipiency 

rates, or the percentage of 

people unemployed who are 

collecting unemployment 

benefits that week) 

Recipiency rates have generally declined 

since 2009, with the exception of seasonal 

spikes. 

Duration reduction states generally have lower 

recipiency rates than the average of nonreduction 

states.

This difference increased toward the end of the time 

period we analyzed.

Source: GAO analysis of DOL data. I GAO-15-281

 

1 We analyzed selected data from DOL for all states from 2006 until the middle of 2014. 

We excluded Illinois (which reduced maximum duration to 25 weeks for claims filed in 

2012) and Kansas (which reduced duration for weeks beginning on or after January 1, 

2014, too recently to assess the effects).
Appendix V: Analysis of Individual States

Page 64 GAO-15-281 Unemployment Insurance

Although these distinctions exist, it is not possible to attribute them to the 

duration reductions without controlling for the greater economic context 

and other factors. For example, many of the other factors that likely had 

an effect include the dynamics of the larger economy, availability of 

federal UI benefits, and other changes made to state UI programs during 

the same period.

The economic recovery following the recession affected trends such as 

average duration on UI and average length of unemployment.2

Figure 11: Annual Private-Sector Gross Job Gains and Losses, 1994-2014

The 

national unemployment rate decreased from a high of 10 percent in 

October 2009 to 5.6 percent in September 2014. In addition, the 

magnitude of the recession in terms of the substantial numbers of privatesector jobs lost, and more modest gains in jobs during the recovery, had 

an impact on the trends we analyzed (see fig. 11).

 

2 While a multivariate statistical analysis could, in principle, account for these additional 

variables, this type of analysis was beyond the scope of this report, in part because we 

determined that the duration reductions were too recent and the availability of emergency 

benefits could mitigate any effects of state policies. 

Dynamics of the Larger 

Economy
Appendix V: Analysis of Individual States

Page 65 GAO-15-281 Unemployment Insurance

Furthermore, despite the decline in the unemployment rate, the 

participation rate for the civilian labor force continues to decline to 

historically low levels, reflecting departures from the labor force 

altogether.3

The effects of the changes in state UI benefit durations were mitigated by 

the duration of federal benefits, which were largely available when state 

duration reductions went into effect. For example, the total number of 

weeks available, including federal benefits, reached 46, 53, and 99 weeks 

at different points in time in various states, according to the 

Congressional Research Service. The availability of these federal benefits 

would affect any impact of duration reductions.

UI program changes, such as restrictions on eligibility, could also have

affected participation in the UI program. For example, according to state 

officials, South Carolina’s new definition of “gross misconduct” now 

results in immediate, full disqualification for any claimant engaging in 

certain behaviors, such as illegal drug use during either work or non-work 

hours. Other states, including Georgia, implemented stronger work 

search requirements, according to their UI directors. Florida mandated 

that applications only be done online and that applicants complete a skill 

assessment intended to help develop a reemployment plan, which, 

according to advocates with whom we spoke, could deter some 

individuals from completing their applications.

 

3 The civilian labor force participation rate includes those who are employed and those 

who are unemployed but actively looking for work. According to BLS, in January 2004, the 

civilian labor force participation rate was 66.1 percent. By January 2015, it had fallen to 

just under 63 percent. According to BLS, a major factor for the downward pressure on the 

labor force participation rate is the aging of the baby-boom generation. However, the 

decline in labor force participation is not fully explained by the aging of the population, and 

economists disagree about other factors that may contribute to the decline.

Availability of Federal Benefits

Other UI Program Changes
Appendix VI: Comments from the Department 

of Labor

Page 66 GAO-15-281 Unemployment Insurance

Appendix VI: Comments from the 

Department of Labor
Appendix VI: Comments from the Department 

of Labor

Page 67 GAO-15-281 Unemployment Insurance
Appendix VII: GAO Contact and Staff 

Acknowledgments

Page 68 GAO-15-281 Unemployment Insurance

Andrew Sherrill (202) 512-7215 or sherrilla@gao.gov

In addition to the contact named above, Nagla’a El-Hodiri (Assistant 

Director), Chris Morehouse (Analyst-in-Charge), Susan Aschoff, James 

Bennett, Susan Bernstein, Jesse Elrod, Alex Galuten, Susan Offutt, 

Kirsten Lauber, Kathy Leslie, Max Sawicky, Linda Siegel, Amy Sweet, 

Jeff Tessin, and Frank Todisco made significant contributions to this 

report. 

Appendix VII: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments:
Related GAO Products

Page 69 GAO-15-281 Unemployment Insurance

Unemployed Older Workers: Many Experience Challenges Regaining 

Employment and Face Reduced Retirement Security. GAO-12-445. 

Washington, D.C.: April 25, 2012.

Unemployment Insurance: Economic Circumstances of Individuals Who 

Exhausted Benefits. GAO-12-408. Washington, D.C.: February 17, 2012.

State and Local Governments: Knowledge of Past Recessions Can 

Inform Future Federal Fiscal Assistance. GAO-11-401. Washington, D.C.: 

March 31, 2011.

Unemployment Insurance Trust Funds: Long-standing State Financing 

Policies Have Increased Risk of Insolvency. GAO-10-440. Washington, 

D.C.: April 14, 2010.

Unemployment Insurance: Low-Wage and Part-Time Workers Continue 

to Experience Low Rates of Receipt. GAO-07-1147. Washington, D.C.: 

September 7, 2007.

Unemployment Insurance: More Guidance and Evaluation of WorkerProfiling Initiative Could Help Improve State Efforts. GAO-07-680. 

Washington, D.C.: June 14, 2007.

Unemployment Insurance: States’ Tax Financing Systems Allow Costs to 

Be Shared among Industries. GAO-06-769. Washington, D.C.: July 26, 

2006.

Unemployment Insurance: Enhancing Program Performance by Focusing 

on Improper Payments and Reemployment Services. GAO-06-696T. 

Washington, D.C.: May 4, 2006.

Unemployment Insurance: Factors Associated with Benefit Receipt.

GAO-06-341. Washington, D.C.: March 7, 2006.

Unemployment Insurance: Better Data Needed to Assess Reemployment 

Services for Claimants. GAO-05-413. Washington, D.C.: June 24, 2005.

Unemployment Insurance: Increased Focus on Program Integrity Could 

Reduce Billions in Overpayments. GAO-02-697. Washington, D.C.: July 

12, 2002.

Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is 

Limited. GAO-01-181. Washington, D.C.: December 29, 2000.

Related GAO Products
Related GAO Products

Page 70 GAO-15-281 Unemployment Insurance

Unemployment Insurance: Program’s Ability to Meet Objectives 

Jeopardized. GAO/HRD-93-107. Washington, D.C.: September 28, 1993.

Unemployment Insurance: Trust Fund Reserves Inadequate to Meet 

Recession Needs. GAO/HRD-90-124. Washington, D.C.: May 31, 1990.

(131282)
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