I
105TH CONGRESS
2D SESSION
H. R. 3684
To amend the Internal Revenue Code of 1986, the Social Security Act,
the Wagner-Peyser Act, and the Federal-State Extended Unemployment
Compensation Act of 1970 to improve the method by which Federal
unemployment taxes are collected; to improve the method by which funds
are provided from Federal unemployment tax revenue for employment
security administration, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 1, 1998
Mr. SHAW (for himself, Mr. COLLINS, Mr. SUNUNU, and Mr. PORTMAN) intro-
duced the following bill; which was referred to the Committee on Ways
and Means, and in addition to the Committee on Education and the
Workforce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986, the Social
Security Act, the Wagner-Peyser Act, and the Federal-
State Extended Unemployment Compensation Act of
1970 to improve the method by which Federal unemploy-
ment taxes are collected; to improve the method by which
funds are provided from Federal unemployment tax reve-
nue for employment security administration, and for
other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Employment Security Financing Act of 1998’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—AMENDMENTS TO THE INTERNAL REVENUE CODE OF
1986
Sec. 101. Repeal of surtax.
Sec. 102. Conforming amendments to section 3304(a).
Sec. 103. Additional requirements for approval of State laws.
Sec. 104. Conforming amendments to section 3304(c).
Sec. 105. State unemployment fund defined.
Sec. 106. Definition of State ESAA.
Sec. 107. Collection of FUTA tax by State agencies.
Sec. 108. Payment of FUTA tax to State agencies.
Sec. 109. Repealer.
TITLE II—UNEMPLOYMENT TRUST FUND ACCOUNTS
Sec. 201. Establishment of unemployment accounts.
Sec. 202. Repeal of subsections (a) and (b) of section 901 of the Social Secu-
rity Act.
Sec. 203. Expenditures for administration.
Sec. 204. Transfer of amounts attributable to reduced credits.
Sec. 205. Establishment of revolving fund.
Sec. 206. Treatment of excess ESAA amounts.
Sec. 207. Treatment of excess FUA amounts.
Sec. 208. Repeal of reporting requirement.
Sec. 209. Termination of Extended Unemployment Compensation Account.
Sec. 210. Treatment of amounts elected by ineligible States.
Sec. 211. Use of Reed Act funds.
Sec. 212. Provisions relating to establishment of Unemployment Trust Fund.
Sec. 213. Separate book accounts.
Sec. 214. Payments to State agencies and Railroad Retirement Board.
Sec. 215. Repeal of EUCA account and transfers.
Sec. 216. Repeal of interfund borrowing authority.
TITLE III—GRANTS TO STATES FOR EMPLOYMENT SECURITY
ADMINISTRATION
Sec. 301. Repeal of sections 301 and 302 of the Social Security Act.
Sec. 302. State requirements.
Sec. 303. Interpretation of methods of administration requirement.
TITLE IV—EXTENDED UNEMPLOYMENT COMPENSATION ACT OF
1998
Sec. 401. Extended Unemployment Compensation Act of 1998.
TITLE V—FEDERAL EMPLOYMENT SECURITY SERVICE
Sec. 501. Amendment to statement of purposes.
Sec. 502. Purpose of Employment Security Service.
Sec. 503. Transfer of real property.
Sec. 504. Repeal of Federal appropriations authority.
Sec. 505. Use of public employment service funds.
Sec. 506. Repeal of Federal use of funds requirements.
Sec. 507. Repeal of Federal planning and fiscal requirements.
TITLE VI—ADVANCES TO STATE UNEMPLOYMENT
COMPENSATION BENEFIT ACCOUNTS
Sec. 601. Transfers from the Federal Unemployment Account.
Sec. 602. Use of transferred funds.
Sec. 603. Determination of interest rate.
Sec. 604. Revolving loan fund.
TITLE VII—CONFORMING AMENDMENTS
Sec. 701. Conforming amendment to definitional provision.
Sec. 702. Balanced budget amendments.
Sec. 703. Repeal of Federal unemployment tax amendment.
TITLE I—AMENDMENTS TO THE
INTERNAL 
REVENUE 
CODE
OF 1986
SEC. 101. REPEAL OF SURTAX.
Section 3301 of the Internal Revenue Code of 1986
is amended to read as follows:
‘‘SEC. 3301. RATE OF TAX.
‘‘There is hereby imposed on every employer (as de-
fined in section 3306(a)) for each calendar year an excise
tax, with respect to having individuals in his employ, equal
to—
‘‘(1) 6.2 percent in the case of calendar years
1988 through 2003; or
‘‘(2) 6.0 percent in the case of calendar year
2004 and each calendar year thereafter;
of the total wages (as defined in section 3306(b)) paid
by him during the calendar year with respect to employ-
ment (as defined in section 3306(c)). Effective for cal-
endar year 2000 and each calendar year thereafter, the
tax, including accounts receivable from prior years, shall
be collected by the State agencies responsible for adminis-
tration of the State unemployment compensation law as
agents for the Secretary of the Treasury. Amounts col-
lected for years prior to calendar year 2003 by each State
agency responsible for administration of the State unem-
ployment compensation law shall be immediately deposited
in the Employment Security Administration Account es-
tablished pursuant to section 904 of the Social Security
Act. Amounts collected for calendar year 2003 and years
thereafter shall be immediately deposited in the State’s
Employment Security Administration Account established
pursuant to section 904 of the Social Security Act.
Amounts collected after January 1, 2000, by the Internal
Revenue Service shall be immediately deposited in the Em-
ployment Security Transition Account within the Unem-
ployment Trust Fund established pursuant to section 904
of the Social Security Act.’’
SEC. 102. CONFORMING AMENDMENTS TO SECTION 3304(a).
(a) LIMITATION ON USE OF FUNDS.—Paragraph (4)
of section 3304(a) of the Internal Revenue Code of 1986
is amended to read as follows:
‘‘(4) all money withdrawn from the unemploy-
ment compensation benefit account of the unemploy-
ment fund of the State shall be used solely in the
payment of unemployment compensation, exclusive
of expenses of administration, and for refunds of
sums erroneously paid into such fund and refunds
paid in accordance with the provisions of section
3305(b); except that—
‘‘(A) an amount equal to the amount of
employee payments into the unemployment fund
of a State may be used in the payment of cash
benefits to individuals with respect to their dis-
ability, exclusive of expenses of administration;
‘‘(B) the amounts specified by section
903(c)(2) of the Social Security Act may, sub-
ject to the conditions prescribed in such section,
be used for expenses incurred by the State for
administration of its unemployment compensa-
tion law and public employment offices;
‘‘(C) nothing in this paragraph shall be
construed to prohibit deducting an amount
from unemployment compensation otherwise
(c) EFFECTIVE DATE.—This section shall become ef-
fective on November 1, 1999.
SEC. 103. ADDITIONAL REQUIREMENTS FOR APPROVAL OF
STATE LAWS.
(a) IN GENERAL.—Section 3304(a) of the Internal
Revenue Code of 1986 is amended by striking ‘‘and’’ at
the end of paragraph (18), by striking the period at the
end of paragraph (19) and inserting a semicolon, and by
adding after paragraph (19) the following new para-
graphs:
‘‘(20) funds provided to such State under title
IX of the Social Security Act for public employment
services shall be used—
‘‘(A) for determining whether individuals
claiming unemployment compensation under
State laws conforming to section 3304 are
available to accept suitable work and have not
refused suitable work as prescribed by the State
unemployment compensation law;
‘‘(B) for job search and placement services
to individuals claiming unemployment com-
pensation benefits and other job seekers includ-
ing counseling, testing, occupational and labor
market information, assessment, and referral to
employers; and
‘‘(C) for appropriate recruitment services
and special technical services for employers;
‘‘(21) the State agency responsible for adminis-
tration of the State unemployment compensation law
shall submit annual reports to the governor of the
State providing information on services and out-
comes. Such reports shall include information with
respect to—
‘‘(A) the proportion of the individuals
claiming compensation provided employment
services in accord with titles III and IX of the
Social Security Act;
‘‘(B) the proportion of employers provided
employment services in accord with titles III
and IX of the Social Security Act;
‘‘(C) information regarding referrals and
placements provided in accord with titles III
and IX of the Social Security Act; and
‘‘(D) information on other services such as
counseling and testing provided in accord with
titles III and IX of the Social Security Act; and
‘‘(22) the State agency responsible for adminis-
tration of the State unemployment compensation law
shall, effective for calendar year 2000 and each cal-
endar year thereafter, collect the Federal unemploy-
ment tax imposed pursuant to section 3301 as the
agent of the Secretary of the Treasury.’’
(b) EFFECTIVE DATE.—This section shall take effect
January 1, 2000.
SEC. 104. CONFORMING AMENDMENTS TO SECTION 3304(c).
Subsection (c) of section 3304 of the Internal Reve-
nue Code of 1986 is amended as follows:
‘‘(c) CERTIFICATION.—On October 31 of each tax-
able year, the Secretary of Labor shall certify to the Sec-
retary of the Treasury each State whose law he has pre-
viously approved, except that he shall not certify any State
which, after reasonable notice and opportunity for hearing
to the State agency, the Secretary of Labor finds has
amended its law so that it no longer contains the provi-
sions specified in subsection (a) or has with respect to the
12-month period ending on such October 31 failed to com-
ply substantially with any such provision in such sub-
section. No finding of a failure to comply substantially
with any provision in paragraph (5) of subsection (a) shall
be based on an application or interpretation of State law—
‘‘(1) until all administrative review provided for
under the laws of the State has been exhausted,
‘‘(2) with respect to which the time for judicial
review provided by the laws of the State has not ex-
pired, or
‘‘(3) with respect to which any judicial review
is pending.
On October 31 of any taxable year, the Secretary of Labor
shall not certify any State which, after reasonable notice
and opportunity for hearing to the State agency, the Sec-
retary of Labor finds has failed to amend its law so that
it contains each of the provisions required by law to be
included therein (including provisions relating to the Ex-
tended Unemployment Compensation Act of 1998, as re-
quired under subsection (a)(11)), or has, with respect to
the twelve-month period ending on such October 31, failed
to comply substantially with any such provision.’’
SEC. 105. STATE UNEMPLOYMENT FUND DEFINED.
Subsection (f) of section 3306 of the Internal Reve-
nue Code of 1986 is amended, effective October 1, 1999,
to read as follows:
‘‘(f) For purposes of this chapter, the term ‘unem-
ployment fund’ means a special fund, established under
a State law and administered by a State agency, for the
payment of compensation. Any sums standing to the un-
employment benefit accounts of the State agency in the
Unemployment Trust Fund established by section 904 of
the Social Security Act shall be deemed to be a part of
the unemployment fund of the State, and no sums paid
out of the Unemployment Trust Fund to such State agen-
cy shall cease to be a part of the unemployment fund of
the State until expended by such State agency. An unem-
ployment fund shall be deemed to be maintained during
a taxable year only if throughout such year, or such por-
tion of the year as the unemployment fund was in exist-
ence, no part of the moneys of such fund was expended
for any purpose other than the payment of compensation
and for refunds of sums erroneously paid into such fund
and refunds paid in accordance with the provisions of sec-
tion 3305(b); except that—
‘‘(1) an amount equal to the amount of em-
ployee payments into the unemployment compensa-
tion benefit account within the fund of a State may
be used in the payment of cash benefits drawn from
the unemployment compensation benefit account of
the State within the unemployment trust fund to in-
dividuals with respect to their disability, exclusive of
expenses of administration;
‘‘(2) the amounts specified by section 903(c)(2)
of the Social Security Act may, subject to the condi-
tions prescribed in such section, be used for ex-
penses incurred by the State for administration of
its unemployment compensation law, and public em-
ployment services;
‘‘(3) nothing in this subsection shall be con-
strued to prohibit deducting any amount from unem-
ployment compensation otherwise payable to an indi-
vidual and using the amount so deducted to pay for
health insurance, or the withholding of Federal,
State, or local individual income tax, if the individ-
ual elected to have such deduction made and such
deduction was made under a program approved by
the Secretary of Labor;
‘‘(4) amounts may be deducted from unemploy-
ment benefits drawn from the State’s unemployment
compensation benefit account within the unemploy-
ment trust fund and used to repay overpayments as
provided in section 303(g) of the Social Security
Act;
‘‘(5) amounts may be withdrawn from the
State’s unemployment compensation benefit account
within the unemployment trust fund for the payment
of short-time compensation under a plan approved
by the Secretary of Labor; and
‘‘(6) amounts may be withdrawn from the
State’s unemployment compensation benefit account
within the unemployment trust fund for the payment
of allowances under a self-employment assistance
program (as defined in subsection (t)).’’
SEC. 106. DEFINITION OF STATE ESAA.
Section 3306 of the Internal Revenue Code of 1986
is amended, effective October 1, 1999, by adding at the
end the following new subsection:
‘‘(u) STATE EMPLOYMENT SECURITY ADMINISTRA-
TION ACCOUNT.—For purposes of this chapter, the term
‘State Employment Security Administration Account’
means a special account within the Unemployment Trust
Fund established pursuant to section 904 of the Social
Security Act for the purpose of providing administrative
funds to pay the cost of services performed by the State
agency in accord with section 3304 of this subtitle and
titles III and IX of the Social Security Act. No sums paid
out of the account to the State agency shall cease to be
a part of the Unemployment Trust Fund until expended
by such State agency.’’
SEC. 107. COLLECTION OF FUTA TAX BY STATE AGENCIES.
Subsection (a) of section 3501 of the Internal Reve-
nue Code of 1986 is amended, effective October 1, 1999,
to read as follows:
‘‘(a) GENERAL RULE.—(1) The taxes imposed by this
subtitle shall be collected by the Secretary and shall be
paid into the Treasury of the United States as internal-
revenue collections, except that effective for calendar year
2000 and calendar years thereafter the tax imposed by
section 3301 shall be collected by the State agencies re-
sponsible for administration of the State unemployment
law as agents for the Secretary. Amounts collected by each
State agency shall be paid into the treasury to the credit
of the State employment security administration account
of the State as prescribed in section 3301 of this Act and
titles III and IX of the Social Security Act. Amounts col-
lected by the Internal Revenue Service after January 1,
2000, with respect to the tax imposed by section 3301
shall be paid into the Treasury to the credit of the employ-
ment security transition account within the unemployment
trust fund established pursuant to section 904 of the So-
cial Security Act.
‘‘(2) The Secretary is authorized to enter into agree-
ments with the State agencies administering State unem-
ployment compensation laws to assist with the administra-
tion of the Federal Unemployment Tax Act (26 U.S.C.
3301 et seq.).’’
SEC. 108. PAYMENT OF FUTA TAX TO STATE AGENCIES.
The last sentence of section 6157(a) of the Internal
Revenue Code of 1986 is amended, effective October 1,
1999, to read as follows:
‘‘The tax for any calendar quarter or other period shall
be computed as provided in subsection (b) and the tax as
so computed shall, except as otherwise provided in sub-
section (c), be paid, effective for calendar year 2000 and
calendar years thereafter, to the State agency responsible
for administration of the State unemployment compensa-
tion law as the agent of the Secretary. Such taxes shall
be paid quarterly.’’
SEC. 109. REPEALER.
Paragraph (2) of section 6201(b) of the Internal Rev-
enue Code of 1986 is repealed.
TITLE II—UNEMPLOYMENT
TRUST FUND ACCOUNTS
SEC. 201. ESTABLISHMENT OF UNEMPLOYMENT ACCOUNTS.
(a) IN GENERAL.—Title IX of the Social Security Act
is amended by adding at the end the following new section:
‘‘STATE EMPLOYMENT SECURITY ADMINISTRATION
ACCOUNTS
‘‘SEC. 911. There are hereby established in the Un-
employment Trust Fund, the following accounts:
‘‘(1) A State Employment Security Administra-
tion Account for each State.
‘‘(A) There is hereby appropriated to the
unemployment trust fund for credit to the em-
ployment security administration account for
each State—
‘‘(i) for the fiscal year ending Septem-
ber 30, 2004, and for each fiscal year
thereafter, an amount equal to one hun-
dred percent of the Federal unemployment
tax, including interest, penalties and addi-
tions to the tax, received from collection of
the tax and covered into the State’s ac-
count; and
‘‘(ii) any amounts transferred to the
account pursuant to this section and sec-
tions 902 and 903.
‘‘(B) Two percent of the amount collected
and deposited into each State employment secu-
rity administration account pursuant to sub-
section (a)(1)(A)(i) shall be transferred by the
Treasury of the United States beginning the
end of the month following January 1, 2003,
and each month thereafter to the supplemental
employment security administration account es-
tablished pursuant to this section and section
904.
‘‘(C) Two percent of the amount collected
and deposited into each State employment secu-
rity administration account pursuant to sub-
section (a)(1)(A)(i) shall be transferred by the
treasury beginning the end of the month follow-
ing January 1, 2003, and each month there-
after to the Secretary of Labor employment se-
curity administration account established pur-
suant to this section and section 904.
‘‘(2)(A) A Supplemental Employment Security
Administration Account for the administration of
employment security programs in accord with titles
III and IX of this Act and section 3304 of the Inter-
nal Revenue Code of 1986 by States whose average
civilian labor force populations number less than
1,000,000.
‘‘(B) There is hereby appropriated to the unem-
ployment trust fund for credit to the supplemental
employment security administration account, for the
fiscal year ending September 30, 2004, and for each
fiscal year thereafter—
‘‘(i) an amount equal to 100 percent of the
amount transferred pursuant to subsection
(a)(1)(B); and
‘‘(ii) amounts transferred to the account
pursuant to section 901(f)(3)(C) and (D) and
sections 902 and 903.
‘‘(3)(A) The Secretary of Labor Employment
Security Administration Account for the Secretary
of Labor in carrying out administrative duties as
prescribed in titles III and IX of this Act, and chap-
ter 23 of the Internal Revenue Code of 1986.
‘‘(B) There is hereby appropriated to the Un-
employment Trust Fund for credit to the Secretary
of Labor Employment Security Administration Ac-
count, for the fiscal year ending September 30,
2004, and for each fiscal year thereafter an amount
equal to 100 percent of the amount transferred pur-
suant to subsection (a)(1)(C).
‘‘USE OF SPECIAL ADMINISTRATIVE FUNDS
‘‘SEC. 912. There are hereby authorized to be made
available for expenditure out of the employment security
administration accounts maintained by the Treasury for
each State for fiscal years 2000 through 2003 such
amounts, not to exceed $245,000,000 for each year, as
are requested by the States from their respective State
employment security administration accounts, subject to
appropriation by the legislative body of each State to be
used for—
‘‘(1) determining whether individuals claiming
unemployment compensation under State laws con-
forming to section 3304 are available to accept suit-
able work and have not refused suitable work as pre-
scribed by the State unemployment law;
‘‘(2) job search and placement services to indi-
viduals claiming unemployment compensation bene-
fits and other job seekers including counseling, test-
ing, occupational and labor market information, as-
sessment, and referral to employers;
‘‘(3) appropriate recruitment services and spe-
cial technical services for employers; and
‘‘(4) collection of the Federal Unemployment
Tax imposed pursuant to section 3301 et seq. of the
Internal Revenue Code.
Such amounts shall be available for State appropriation
in addition to amounts otherwise appropriated by Con-
gress.’’.
(b) CONFORMING AMENDMENT.—The table of con-
tents at the beginning of title IX of the Social Security
Act is amended by adding at the end the following new
item:
‘‘Sec. 911. State employment security administration accounts.’’.
(c) EFFECTIVE DATE.—This section shall take effect
October 1, 1999.
SEC. 202. REPEAL OF SUBSECTIONS (a) AND (b) OF SECTION
901 OF THE SOCIAL SECURITY ACT.
Subsections (a) and (b) of section 901 of the Social
Security Act are repealed, effective October 1, 2003.
SEC. 203. EXPENDITURES FOR ADMINISTRATION.
Subsection (c) of section 901 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Administrative Expenditures
‘‘(c)(1) There are hereby authorized to be made avail-
able for expenditure out of the employment security ad-
ministration accounts maintained by the treasury for the
States, effective for the Federal fiscal year beginning Oc-
tober 1, 2003, and each fiscal year thereafter, such
amounts as are requested by the States from their respec-
tive State employment security administration accounts,
subject to appropriation by the legislative body of each
State (not in excess of one hundred forty percent of the
amount appropriated to the State agency from Federal
employment security funds for the 12-month period end-
ing September 30 of the previous year), for the purpose
of—
‘‘(A) assisting the State in the administration
of its unemployment compensation laws as provided
in title III of the Social Security Act (including ad-
ministration pursuant to agreements under any Fed-
eral unemployment compensation law),
‘‘(B) providing public employment services in
accordance with section 7 of the Wagner-Peyser Act,
‘‘(C) carrying into effect section 4103 of title
38, United States Code,
‘‘(D) collection of amounts due under the provi-
sions of the Federal Unemployment Tax Act (26
U.S.C. 3301 et seq.), and
‘‘(E) administration of statistical programs es-
sential for development of estimates of the gross do-
mestic product and other national statistical series,
including those related to employment and unem-
ployment.
Amounts requested by the State but not appropriated by
the State legislative body for the fiscal year for which such
amounts are requested shall be transferred to the State’s
unemployment compensation benefit account as of the be-
ginning of the following Federal fiscal year.
‘‘(2) There are hereby authorized to be made avail-
able for expenditure by States whose average civilian labor
force populations number less than one million, amounts
out of the supplemental employment security administra-
tion account, $5,000,000 for each of fiscal years 2000
through 2003—
‘‘(A) for determining whether individuals claim-
ing unemployment compensation under State laws
conforming to section 3304 of the Internal Revenue
Code of 1986 (26 U.S.C. 3304) are available to ac-
cept suitable work and have not refused suitable
work as prescribed by the State unemployment com-
pensation law;
‘‘(B) for job search and placement services to
individuals claiming unemployment compensation
benefits and other job seekers including counseling,
testing, occupational and labor market information,
assessment, and referral to employers; and
‘‘(C) for appropriate recruitment services and
special technical services for employers.
Such amounts shall be available for State appropriation
in addition to amounts otherwise appropriated by Con-
gress.
‘‘(3) There are hereby authorized to be made avail-
able for expenditure by States whose average civilian labor
force populations number less than one million, amounts
out of the supplemental employment security administra-
tion account for the fiscal year ending September 30,
2004, and for each year thereafter. Such amounts shall
be allocated to the States by the Council of States with
Lesser Populations, subject to appropriation by the legis-
lative body of each State for the purpose of—
‘‘(A) administration of the State’s unemploy-
ment compensation laws;
‘‘(B) providing public employment services in
accord with section 7 of the Wagner-Peyser Act;
‘‘(C) administration of section 4103 of title 38,
United States Code;
‘‘(D) collection of amounts due under the Fed-
eral Unemployment Tax Act (26 U.S.C. 3301 et
seq.); and
‘‘(E) administration of statistical programs es-
sential for development of estimates of the gross do-
mestic product and other national statistical series,
including those related to employment and unem-
ployment.
‘‘(4)(A) The Council of States with Lesser Popu-
lations is hereby established for the purpose of determin-
ing the methodology by which amounts available from the
Supplemental Employment Security Administration Ac-
count are to be allocated. The council shall be composed
of one representative appointed by the governor of each
State with an average civilian labor force which numbers
less than one million for the calendar year ending prior
to the Federal fiscal year for which allocations are to be
made. The council shall be reconstituted each year prior
to the beginning of the ensuing Federal fiscal year.
‘‘(B) The council shall determine amounts to be allo-
cated to the States, except that no State’s allocation for
any fiscal year, when added to the amount available pursu-
ant to section 901(b)(1) of this title, shall be less than
the amount appropriated to such State from the employ-
ment security administration account for fiscal year 1995.
‘‘(C) The council shall notify the Secretary of the
Treasury prior to each fiscal year of the amounts to be
allocated to each State. If the council fails to determine
amounts to be allocated for a fiscal year, such amounts
shall be carried over and maintained in the Supplemental
Employment Security Administration Account and may be
allocated by the council for following Federal fiscal years.
‘‘(D) Amounts allocated by the council, but not ap-
propriated by the State legislative body for the fiscal year
for which allocation was made, shall be transferred to the
State Employment Security Administration Accounts of
all States as of the beginning of the following Federal fis-
cal year. Each State’s share of the funds to be transferred
shall bear the same ratio to the total amount to be so
transferred as the amount of wages subject to tax under
section 3301 of the Internal Revenue Code of 1986 during
the preceding calendar year which are determined by the
Secretary of Labor to be attributable to the State, bears
to the total amount of wages subject to such tax during
such year.
‘‘(5)(A) There are hereby authorized to be made
available for expenditure out of the Secretary of Labor
Employment Security Administration Account for the fis-
cal year ending September 30, 2004, and for each fiscal
year thereafter such amounts (not in excess of one hun-
dred forty percent of the amount appropriated by Con-
gress for the Department of Labor from the Employment
Security Administration Account for the prior year) as
Congress may deem appropriate for the necessary ex-
penses of the Department of Labor for the performance
of its functions under—
‘‘(i) this title and titles III and XII of the So-
cial Security Act,
‘‘(ii) the Federal Unemployment Tax Act (26
U.S.C. 3301 et seq.),
‘‘(iii) chapter 41 (except section 4103) of title
38, United States Code,
‘‘(iv) Federal unemployment compensation laws
effective as of October 1, 1998,
‘‘(v) administration of statistical programs es-
sential for development of estimates of the gross do-
mestic product and other national statistical series,
including those related to employment and unem-
ployment,
‘‘(vi) establishment and maintenance of the em-
ployment security system in accordance with the
Wagner-Peyser Act, and
‘‘(vii) payments of the Federal share of annual
amortization costs of the unfunded liability for the
State employment security agencies with independ-
ent retirement plans as determined by the Secretary
of Labor.
‘‘(B) Amounts appropriated under this paragraph, if
not obligated within the fiscal year for which appropriation
was made, shall be transferred to the State employment
security administration accounts. Each State’s share shall
be determined as provided for distribution of funds from
the employment security transition account pursuant to
subsection (e)(3)(D).
‘‘(C) The term ‘necessary expenses’, as used in this
paragraph, shall include the expense of reimbursing a
State for salaries and other expenses of employees of such
State temporarily assigned or detailed to duty with the
Department of Labor and of paying such employees for
travel expenses, transportation of household goods, and
per diem in lieu of subsistence while away from their regu-
lar duty stations in the State, at rates authorized by law
for civilian employees of the Federal Government.
‘‘(6) The Secretary of the Treasury is directed, for
the fiscal year ending September 30, 2004, and each fiscal
year thereafter, to pay from the Secretary of Labor Em-
ployment Security Administration Account into the treas-
ury as miscellaneous receipts the amount determined by
the Secretary of Labor to be allocated to the treasury de-
partment to cover costs of the Department of the Treasury
for the performance of its functions under—
‘‘(A) this title and titles III and XII of this
chapter, including the expenses of banks for servic-
ing unemployment benefit payment and clearing ac-
counts which are offset by the maintenance of bal-
ances of treasury funds with such banks,
‘‘(B) the Federal Unemployment Tax Act (26
U.S.C. 3301 et seq.), and
‘‘(C) any Federal unemployment compensation
law with respect to which responsibility for adminis-
tration is vested in the Secretary of Labor.’’
SEC. 204. TRANSFER OF AMOUNTS ATTRIBUTABLE TO RE-
DUCED CREDITS.
Subsection (d) of section 901 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Additional Tax Attributable to Reduced Credits
‘‘(d)(1) The Secretary of the Treasury is directed to
transfer from the employment security administration ac-
count of each State subject to the reduced credits provi-
sion of section 3302(c)(3) of the Internal Revenue Code
of 1986—
‘‘(A) to the Federal Unemployment Account, an
amount equal to the amount by which—
‘‘(i) 100 percent of the additional tax re-
ceived under the Federal Unemployment Tax
Act (26 U.S.C. 3301 et seq.) with respect to
the State by reason of the reduced credits pro-
visions of section 3302(c)(3) of such Act (26
U.S.C. 3302(c)(3)) and covered into the treas-
ury for the repayment of advances made to the
State under section 1321 of this title, exceeds
‘‘(ii) the amount transferred to the account
of such State pursuant to subparagraph (B) of
this paragraph. Any amount transferred pursu-
ant to this subparagraph shall be credited
against, and shall operate to reduce, that bal-
ance of advances, made under section 1321 of
this title to the State, with respect to which em-
ployers paid such additional tax; and
‘‘(B) to the unemployment compensation benefit
account (in the unemployment trust fund) of the
State with respect to which employers paid such ad-
ditional tax, an amount equal to the amount by
which such additional tax received and covered into
the treasury exceeds that balance of advances, made
under section 1321 of this title to the State, with re-
spect to which employers paid such additional tax.
‘‘(2) Transfers under this subsection shall be as of
the beginning of the month succeeding the month in which
the moneys were credited to the employment security ad-
ministration account of the State.’’
SEC. 205. ESTABLISHMENT OF REVOLVING FUND.
Subsection (e) of section 901 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Revolving Fund
‘‘(e)(1) There is hereby established in the treasury
a revolving fund within the Federal Unemployment Ac-
count established pursuant to section 904 of the Social
Security Act which shall be available to make the advances
authorized by this subsection. There are hereby authorized
to be appropriated, without fiscal year limitation, to such
revolving fund such amounts as may be necessary for the
purposes of this section.
‘‘(2) The Secretary of the Treasury is directed to ad-
vance at the request of a State from the revolving fund
to the State Employment Security Administration Account
maintained for the State such amounts as may be re-
quested for the purposes set forth in titles III and IX of
the Social Security Act and section 3304 of the Internal
Revenue Code of 1986.
‘‘(3) Advances to the State Employment Security Ad-
ministration Account of a State made under this sub-
section shall bear interest until repaid at a rate equal to
the average rate of interest (computed as of the end of
the calendar month next preceding the date of such ad-
vance) borne by all interest-bearing obligations of the
United States then forming a part of the public debt; ex-
cept that where such average rate is not a multiple of one-
eighth of 1 percent, the rate of interest shall be the mul-
tiple of one-eighth of 1 percent next lower than such aver-
age rate.
‘‘(4) Advances to the State Employment Security Ad-
ministration Account of a State made under this sub-
section, plus interest accrued thereon, shall be repaid by
the State, and may be repaid at the request of a State
by the transfer, from the State Employment Security Ad-
ministration Account of such State to the revolving fund.
Any amount transferred as a repayment under this para-
graph shall be credited against, and shall operate to re-
duce, any balance of advances (plus accrued interest) re-
payable under this subsection.’’
SEC. 206. TREATMENT OF EXCESS ESAA AMOUNTS.
Section 901 of the Social Security Act is amended
by adding at the end the following new subsection:
‘‘Treatment of Excess ESAA Amounts
‘‘(f)(1) The Secretary of the Treasury shall determine
as of the close of the fiscal year ending September 30,
2001, and each fiscal year thereafter, the excess and the
net balance of amounts in the State Employment Security
Administration Account maintained for each State.
‘‘(2) The excess in the State Employment Security
Administration Account for each State as of the close of
any fiscal year is the amount by which the net balance
in such account as of such time (after the application of
sections 902 and 903 of this title and paragraph (3)(B)
of this subsection) exceeds the net balance in the State
Employment Security Administration Account for such
State as of the close of the previous fiscal year.
‘‘(3)(A) The excess in the State Employment Security
Administration Account of each State determined as pro-
vided in paragraph (2) as of the close of any fiscal year
ending after September 30, 2005, not to exceed one hun-
dred forty percent of the net balance at the close of the
previous fiscal year, shall be retained (as of the beginning
of the succeeding fiscal year) in the State Employment
Security Administration Account for the State.
‘‘(B) The amount of the excess determined not to be
retained as provided in paragraph (3)(A) as of the close
of any fiscal year ending after September 30, 2005, shall
be transferred (as of the beginning of the succeeding fiscal
year) to the unemployment compensation benefit account
of the State in the unemployment trust fund.
‘‘(C)(i) At the close of each of fiscal years 1999
through 2002, there shall be transferred to the Supple-
mental Employment Security Administration Account, out
of the Employment Security Administration Account,
$5,000,000—
‘‘(I) for determining whether individuals claim-
ing unemployment compensation under State laws
conforming to section 3304 of the Internal Revenue
Code of 1986 are available to accept suitable work
and have not refused suitable work as prescribed by
the State unemployment compensation law;
‘‘(II) for job search and placement services to
individuals claiming unemployment compensation
benefits and other job seekers including counseling,
testing, occupational and labor market information,
assessment, and referral to employers;
‘‘(III) for appropriate recruitment services and
special technical services for employers; and
‘‘(IV) for collection of the Federal unemploy-
ment tax imposed pursuant to section 3301.
‘‘(ii) At the close of each of fiscal years 1999 through
2002, there shall be transferred to the State Employment
Security Administration Accounts, out of the Employment
Security Administration Account, $245,000,000—
‘‘(I) for determining whether individuals claim-
ing unemployment compensation under State laws
conforming to section 3304 of the Internal Revenue
Code of 1986 (26 U.S.C. 3304) are available to ac-
cept suitable work and have not refused suitable
work as prescribed by the State unemployment com-
pensation law;
‘‘(II) for job search and placement services to
individuals claiming unemployment compensation
benefits and other job seekers including counseling,
testing, occupational and labor market information,
assessment, and referral to employers;
‘‘(III) for appropriate recruitment services and
special technical services for employers; and
‘‘(IV) for FUTA collection.
‘‘(iii) Each State’s share of the funds to be trans-
ferred to the State Employment Security Administration
Accounts shall bear the same ratio to the total amount
to be transferred to such accounts as the amount of wages
subject to tax under section 3301 et seq. of the Internal
Revenue Code of 1986 during the preceding calendar year
which are determined by the Secretary of Labor to be at-
tributable to the State, bears to the total amount of wages
subject to such tax during such year.
‘‘(D) As of the close of the fiscal year ending Septem-
ber 30, 2003, 96 percent of the amount in the employment
security administration account shall be transferred as of
October 1, 2003, to the State Employment Security Ad-
ministration Accounts of the States, 2 percent shall be
transferred as of October 1, 2003, to the Supplemental
Employment Security Administration Account, and two
percent shall be transferred as of October 1, 2003, to the
Secretary of Labor Employment Security Administration
Account. Each State’s share of the funds to be transferred
to the State Employment Security Administration Ac-
counts shall bear the same ratio to the total amount to
be transferred to such accounts as the amount of wages
subject to tax under section 3301 et seq. of the Internal
Revenue Code of 1986 during the preceding calendar year
which are determined by the Secretary of Labor to be at-
tributable to the State, bears to the total amount of wages
subject to such tax during such year. Such amounts shall
be available for the purposes set forth in subsection (b)(1).
‘‘(E) As of October 31, 1999, and the end of each
month thereafter, 96 percent of the amount in the Em-
ployment Security Transition Account shall be transferred
to the State Employment Security Administration Ac-
counts of the States, 2 percent shall be transferred to the
Supplemental Employment Security Administration Ac-
count, and two percent shall be transferred to the Sec-
retary of Labor Employment Security Administration Ac-
count. Each State’s share of the funds to be transferred
to the State Employment Security Administration Ac-
counts shall bear the same ratio to the total amount to
be transferred to such accounts as the amount of wages
subject to tax under section 3301 et seq. of the Internal
Revenue Code of 1986 during the preceding calendar year
which are determined by the Secretary of Labor to be at-
tributable to the State, bears to the total amount of wages
subject to such tax during such year.
‘‘(4) For the purposes of this section, the net balance
in the employment security administration account and
the State Employment Security Administration Account
maintained for each State as of any time is the amount
in such account as of such time reduced by the sum of
the balance of advances (plus interest accrued thereon)
then repayable to the revolving fund established by sub-
section (d) of this section. The net balance in the State
Employment Security Administration Account maintained
for each State as of the beginning of any fiscal year shall
be determined after the disposition of the excess in such
account as of the close of the preceding fiscal year.’’
SEC. 207. TREATMENT OF EXCESS FUA AMOUNTS.
Effective September 30, 2003, section 902 of the So-
cial Security Act is amended by striking subsections (a)
and (b) and inserting the following:
‘‘Treatment of Excess Amounts in the Federal
Unemployment Account
‘‘(a) The amount, if any, by which the amount in the
Federal Unemployment Account as of the close of the fis-
cal year ending September 30, 2003, and any fiscal year
thereafter exceeds the amount (determined by the Sec-
retary of Labor) equal to 0.25 percent of the total wages
subject (determined without limitation on amount) to con-
tributions under all State unemployment compensation
laws for the calendar year ending during the fiscal year
for which the excess is determined shall be transferred to
the State Employment Security Administration Account
of each State as of the beginning of the following fiscal
year.
‘‘State Allocation Formula
‘‘(b) Each State’s share of the funds to be transferred
under paragraph (a) of this section shall bear the same
ratio to the total amount to be so transferred as the
amount of wages subject to tax under section 3301 of the
Internal Revenue Code of 1986 during the preceding cal-
endar year which are determined by the Secretary of
Labor to be attributable to the State, bears to the total
amount of wages subject to such tax during such year.’’
SEC. 208. REPEAL OF REPORTING REQUIREMENT.
Subsection (c) of section 902 of the Social Security
Act is repealed.
SEC. 209. TERMINATION OF EXTENDED UNEMPLOYMENT
COMPENSATION ACCOUNT.
Subsection (a) of section 903 of the Social Security
Act is amended, effective September 30, 2003, to read as
follows:
‘‘Termination of Extended Unemployment Compensation
Account
‘‘(a)(1) As of the close of the fiscal year ending Sep-
tember 30, 2003, the excess in the Extended Unemploy-
ment Compensation Account shall be transferred to the
State Employment Security Administration Accounts of
the States and the remaining balance in the Extended Un-
employment Compensation Account shall be transferred to
the Unemployment Compensation Benefit Accounts of the
States in the unemployment trust fund, except as provided
in subsection (b) of this section.
‘‘(2) Each State’s share of the excess to be distrib-
uted to State Employment Security Administration Ac-
counts and the balance to be transferred to the State Em-
ployment Security Benefit Account under this subsection
as of October 1, 2003—
‘‘(A) shall be determined by the Secretary of
Labor and certified by such Secretary to the Sec-
retary of the Treasury before such date, and
‘‘(B) shall bear the same ratio to the total
amount to be so transferred as—
‘‘(i) the amount of wages subject to tax
under section 3301 of the Internal Revenue
Code of 1986 during the preceding calendar
year which are determined by the Secretary of
Labor to be attributable to the State, bears to
‘‘(ii) the total amount of wages subject to
such tax during such year.’’
SEC. 210. TREATMENT OF AMOUNTS ELECTED BY INELI-
GIBLE STATES.
Subsection (b) of section 903 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Treatment of Amounts Elected by Ineligible States
‘‘(b)(1) If the Secretary of Labor finds that on Octo-
ber 1 of any fiscal year—
‘‘(A) a State is not eligible for certification
under section 303 of this title, or
‘‘(B) the law of a State is not approvable under
section 3304 of the Federal Unemployment Tax Act
(26 U.S.C. 3304), then the amount available for
transfer to such State’s unemployment compensation
benefit account in the unemployment trust fund
shall, in lieu of being so transferred, be transferred
to the Federal unemployment account as of the be-
ginning of such October 1. If, during the fiscal year
beginning on such October 1, the Secretary of Labor
finds and certifies to the Secretary of the Treasury
that such State is eligible for certification under sec-
tion 303 of this title, and the law of such State is
approvable under such section 3304, the Secretary
of the Treasury shall transfer such amount from the
Federal unemployment account to the unemployment
compensation benefit account of such State in the
unemployment trust fund. If the Secretary of Labor
does not so find and certify to the Secretary of the
Treasury before the close of such fiscal year then
the amount which was available for transfer to such
State’s unemployment compensation benefit account
as of October 1 of such fiscal year shall (as of the
close of such fiscal year) become part of the Federal
unemployment account.
‘‘(2) The amount which, but for this paragraph,
would be transferred to the unemployment compensation
benefit account of a State under subsection (a) of this sec-
tion or paragraph (1) of this subsection shall be reduced
(but not below zero) by the balance of advances made to
the State under section 1321 of this title. The sum by
which such amount is reduced shall—
‘‘(A) be transferred to or retained in (as the
case may be) the Federal unemployment account,
and
‘‘(B) be credited against, and operate to re-
duce—
‘‘(i) first, any balance of advances made
before September 13, 1960, to the State under
section 1321 of this title, and
‘‘(ii) second, any balance of advances made
on or after September 13, 1960, to the State
under section 1321 of this title.’’
SEC. 211. USE OF REED ACT FUNDS.
Subsection (c) of section 903 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Use of Reed Act Funds
‘‘(c)(1) Except as provided in paragraph (2),
amounts transferred to the unemployment compensation
benefit account of a State pursuant to subsections (a) and
(b) of this section shall be used only in the payment of
cash benefits to individuals with respect to their unem-
ployment, exclusive of expenses of administration.
‘‘(2) A State may, pursuant to a specific appropria-
tion made by the legislative body of the State, use money
withdrawn from its unemployment compensation benefit
account in the payment of expenses incurred by it for the
administration of its unemployment compensation law and
public employment services if and only if—
‘‘(A) the purposes and amounts were specified
in the law making the appropriation,
‘‘(B) the appropriation law did not authorize
the obligation of such money after the close of the
two-year period which began on the date of enact-
ment of the appropriation law,
‘‘(C) the money is withdrawn and the expenses
are incurred after such date of enactment, and
‘‘(D)(i) the appropriation law limits the total
amount which may be obligated under such appro-
priation at any time to an amount which does not
exceed, at any such time, the amount by which—
‘‘(I) the aggregate of the amounts trans-
ferred to the Unemployment Compensation
Benefit Account of such State pursuant to sub-
section (a) and (b) of this section, exceeds
‘‘(II) the aggregate of the amounts used by
the State pursuant to this subsection and
charged against the amounts transferred to the
Unemployment Compensation Benefit Account
of such State, and
‘‘(ii) for purposes of clause (I), amounts used
by a State for administration shall be chargeable
against transferred amounts at the exact time the
obligation is entered into
‘‘(E) the use of the money shall be accounted
for in accordance with standards established by each
State. Proceeds from the sale or transfer of real
property and other capital assets which were origi-
nally purchased with Federal funds provided under
titles III or IX of the Social Security Act, may be
used by a State agency administering State law in
accord with titles III and IX of the Social Security
Act (42 U.S.C. 501; and 42 U.S.C. 1101) and sec-
tion 3304 of the Internal Revenue Code of 1986 (26
U.S.C. 3301 et seq.) to purchase or otherwise ac-
quire real property or other capital assets for a pe-
riod of two years after the date of sale or transfer.
Proceeds from the sale or transfer of real property
remaining after such two year period shall be depos-
ited in the State’s Employment Security Administra-
tion Account established pursuant to section 904 of
the Social Security Act (42 U.S.C. 1104).
‘‘(3)(A) If—
‘‘(i) amounts transferred to the Unemployment
Compensation Benefit Account of a State pursuant
to subsections (a) and (b) of this section were used
in payment of unemployment benefits to individuals;
and
‘‘(ii) the Governor of such State submits a re-
quest to the Secretary of Labor that such amounts
be restored under this paragraph, then the amounts
described in clause (i) shall be restored to the status
of funds transferred under subsections (a) and (b)
of this section which have not been used by eliminat-
ing any charge against amounts so transferred for
the use of such amounts in the payment of unem-
ployment benefits.
‘‘(B) Subparagraph (A) shall apply only to the extent
that the amounts described in clause (i) of such subpara-
graph do not exceed the amount then in the State’s Unem-
ployment Compensation Benefit Account.
‘‘(C) Subparagraph (A) shall not apply if the State
has a balance of advances made to its Unemployment
Compensation Benefit Account under subchapter XII of
this chapter.
‘‘(D) If the Secretary of Labor determines that the
requirements of this paragraph are met with respect to
any request, the Secretary shall notify the Governor of the
State that such requirements are met with respect to such
request and the amount restored under this paragraph.
Such restoration shall be as of the first day of the first
month following the month in which the notification is
made.’’
SEC. 212. PROVISIONS RELATING TO ESTABLISHMENT OF
UNEMPLOYMENT TRUST FUND.
Subsection (a) of section 904 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Establishment, Etc.
‘‘(a) There is hereby established in the Treasury of
the United States a trust fund to be known as the Unem-
ployment Trust Fund (hereinafter in this subchapter
called the ‘Fund’). The Secretary of the Treasury is au-
thorized and directed to receive and hold in the Fund all
moneys deposited therein by a State agency from a State
unemployment fund. All moneys in the form of contribu-
tions and payments in lieu of contributions under the
State law shall be deposited into the State’s Unemploy-
ment Compensation Benefit Account established pursuant
to this section. All moneys collected by a State agency
under the provisions of the Federal Unemployment Tax
Act (26 U.S.C. 3301 et seq.) and moneys transferred or
deposited under other sections of this title or chapter 23
of the Internal Revenue Code of 1986 shall be deposited
into the State’s Employment Security Administration Ac-
count. All moneys collected by the Internal Revenue Serv-
ice after January 1, 2000, under the provisions of the
Federal Unemployment Tax Act (26 U.S.C. 3301 et seq.)
shall be deposited into the Employment Security Transi-
tion Account of the fund. Moneys collected by the railroad
retirement board shall be deposited to the credit of the
railroad unemployment insurance account or the railroad
unemployment insurance administration fund.’’
SEC. 213. SEPARATE BOOK ACCOUNTS.
Subsection (e) of section 904 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Separate Book Accounts
‘‘(e)(1) The Fund shall be invested as a single fund,
but the Secretary of the Treasury shall maintain a sepa-
rate book account for the Employment Security Transition
Account, each State Agency Unemployment Compensation
Benefit Account, the Employment Security Administra-
tion Account for each State, the Supplemental Employ-
ment Security Administration Account, the Secretary of
Labor Employment Security Administration Account, the
Federal Unemployment Account, the railroad unemploy-
ment insurance account, and the railroad unemployment
insurance administration fund and shall credit quarterly
(on March 31, June 30, September 30, and December 31,
of each year) to each account, on the basis of the average
daily balance of such account, a proportionate part of the
earnings of the Fund for the quarter ending on such date.
For the purpose of this subsection, the average daily bal-
ance shall be computed—
‘‘(A) in the case of any State Unemployment
Compensation Benefit Account, by reducing (but not
below zero) the amount in the account by the bal-
ance of advances made to the State under section
1321 of this title, and
‘‘(B) in the case of the Federal Unemployment
Account—
‘‘(i) by adding to the amount in the ac-
count the aggregate of the reductions under
paragraph (1), and
‘‘(ii) by subtracting from the sum so ob-
tained the balance of advances made under sec-
tion 1323 of this title to the account.
‘‘(2) There is hereby established within the unemploy-
ment trust fund, an Employment Security Transition Ac-
count for the purpose of receiving moneys collected under
the Federal Unemployment Tax Act (26 U.S.C. 3301 et
seq.), by the Internal Revenue Service, and transferring
such moneys to other accounts within the unemployment
trust fund as prescribed by title IX of the Social Security
Act (42 U.S.C. 1101 et seq.).’’
SEC. 214. PAYMENTS TO STATE AGENCIES AND RAILROAD
RETIREMENT BOARD.
Subsection (f) of section 904 of the Social Security
Act is amended, effective October 1, 1999, to read as fol-
lows:
‘‘Payments to State Agencies and Railroad Retirement
Board
‘‘(f) The Secretary of the Treasury is authorized and
directed to pay out of the Fund to any State agency such
amount as it may duly requisition. The Secretary of the
Treasury is authorized and directed to make such pay-
ments out of the railroad unemployment insurance ac-
count for the payment of benefits, and out of the railroad
unemployment insurance administration fund for the pay-
ment of administrative expenses, as the Railroad Retire-
ment Board may duly certify, not exceeding the amount
standing to the credit of such account or such fund, as
the case may be, at the time of such payment.’’
SEC. 215. REPEAL OF EUCA ACCOUNT AND TRANSFERS.
Section 905 of the Social Security Act is amended,
effective October 1, 1999, to read as follows:
‘‘Terms of Transfer of EUCA Funds to State Accounts
‘‘SEC. 905. Amounts, if any, in the Extended Unem-
ployment Compensation Account at the close of the fiscal
year ending September 30, 2003, and every fiscal year
thereafter, shall be transferred to the Unemployment
Compensation Benefit Accounts of the States in the Un-
employment Trust Fund as of the beginning of the follow-
ing fiscal year. Each State’s share shall be determined
using the formula set forth in section 903(a)(2)(B).’’
SEC. 216. REPEAL OF INTERFUND BORROWING AUTHORITY.
Section 910 of the Social Security Act is repealed.
TITLE III—GRANTS TO STATES
FOR EMPLOYMENT SECURITY
ADMINISTRATION
SEC. 301. REPEAL OF SECTIONS 301 AND 302 OF THE SOCIAL
SECURITY ACT.
(a) IN GENERAL.—Sections 301 and 302 of the So-
cial Security Act are repealed.
(b) CONFORMING AMENDMENT.—The table of con-
tents for title III of the Social Security Act is amended
by striking the items relating to sections 301 and 302.
(c) EFFECTIVE DATE.—This section shall take effect
October 1, 2003.
SEC. 302. STATE REQUIREMENTS.
(a) CONFORMITY REQUIREMENTS.—Effective Octo-
ber 1, 1999, subsection (a) of section 303 of the Social
Security Act is amended by striking ‘‘The Secretary’’
through ‘‘for—’’ and inserting the following: ‘‘As of Octo-
ber 31 each year, at the time of the certification prescribed
under section 3304(c) of the Internal Revenue Code of
1986 (26 U.S.C. 3304(c)), the Secretary of Labor shall
certify whether each State’s law includes provision
for—’’.
(b) LIMITATION
ON USE
OF BENEFIT ACCOUNT
FUNDS.—Effective October 1, 1999, paragraph (5) of sec-
tion 303(a) of the Social Security Act is amended to read
as follows:
‘‘(5) Expenditure of all money withdrawn from
the State’s Unemployment Compensation Benefit
Account within the unemployment fund of such
State, in the payment of unemployment compensa-
tion, exclusive of expenses of administration, and for
refunds of sums erroneously paid into such fund and
Unemployment Compensation Benefit Accounts
on the last day of the last calendar quarter of
the immediately preceding calendar year, by
‘‘(B) the aggregate of the average daily
balances of the State Unemployment Com-
pensation Benefit Accounts for such quarter as
determined under section 904(e) of the Social
Security Act.
‘‘(5) Interest required to be paid under para-
graph (1) shall not be paid (directly or indirectly) by
a State from amounts in its Unemployment Com-
pensation Benefit Account. If the Secretary of Labor
determines that any State action results in the pay-
ing of such interest directly or indirectly (by an
equivalent reduction in State unemployment taxes or
otherwise) from such Unemployment Compensation
Benefit Account, the Secretary of Labor shall not
certify such State’s unemployment compensation law
under section 3304 of the Internal Revenue Code of
1986. Such noncertification shall be made in accord-
ance with section 3304(c) of such Code.’’
SEC. 604. REVOLVING LOAN FUND.
Effective October 1, 1999, section 1203 of the Social
Security Act is amended to read as follows: