Federal UI taxes also pay Federal administrative costs. I would like to turn to our concerns with H.R. 3684. The stated primary purpose of the bill is to remedy insufficient funding of Employment Security programs by Congress. I certainly agree that the States should be fully funded to provide adequate services to job seekers and employers. Transferring the appropriation authority from one body to 53 legislative bodies does not, by itself, provide full funding and may exacerbate the problem.
Most State legislatures meet for only a portion of a year and six meet on a biennial schedule.
The bill would also transfer the responsibility for collecting Federal Unemployment Tax Act taxes, known as FUTA taxes, from the Internal Revenue Service to the States, effective calendar year 2000. The tax would remain a Federal tax, with the States acting as agents for the Treasury Department on a contractual basis. We do not believe that having States collect Federal revenue and having their legislatures appropriate Federal dollars with no required guidelines or standards is the best option for funding administration of these programs. Each of these alternatives has advantages and disadvantages, and we expect further examination of these and other alternatives through the UI dialogue. The bill calls for a wholesale restructuring of the Unemployment Trust Fund, effectively breaking the current Employment Security Administration Account into 53 State accounts.