FUTA generally determines covered employment, and imposes certain requirements on state programs, but states generally determine individual qualification requirements, eligibility, weekly benefit amounts, and the duration of benefits. The surtax was first passed in 1976 to restore depleted state UI accounts and was suppose to expire in 1987. Since 1987, the surtax has been extended four times primarily to fund extended benefit programs and is now suppose to expire in 1998. The revenue raised by FUTA is designated for UI administration and maintaining a system of ES offices. Portions of FUTA revenues also fund the federal half of the Extended Benefits Program.
State legislatures determine the tax rate and the taxable wage base.
State UI tax revenues fund their weekly UI benefit payments and the state half of the Extended Benefit Program. Like the Social Security Trust Fund, any positive balance in the UI Trust Fund effectively is used to fund other federal programs for as long as there is the federal budget is running a deficit. The federal government was to set broad parameters for the system, provide adequate and equitable funding for state administration, and oversee state law and operations to ensure compliance and conformity. The states were to be responsible for carrying out the program while complying with all federal laws and regulations, as well as their own state requirements. Over the years, several serious problems have developed with this bifurcated arrangement.