Senate Bill 225 would cut benefits by half
State lawmakers will have at least two competing unemployment bills to consider that would change unemployment insurance in Louisiana, bringing either deep cuts or slow increases in benefits to out-of-work residents: House Bill 610 would increase unemployment benefits to rates in line with the rest of the country, while Senate Bill 225 would bring deep cuts to benefits — by as much as half of what an individual can receive under current state law.
The bills come from opposite sides of the political aisle with HB 610 sponsored by Rep. Rodney Lyons, D-Harvey, and SB 225 sponsored by Sen. Mike Reese, R-Leesville. They were pre-filed as state legislators prepare to convene next week at the Baton Rouge Capitol for the 2021 Regular Session, which begins April 12 and ends June 10.
The Democrat’s bill proposes to remove the current caps on the state’s weekly unemployment benefit and replace it with a floor figure that increases each year through 2025. In other words, the new maximum payout would be no less than $247 starting in 2022. It would also sever the connection between the weekly benefit amount and the state’s trust fund balance.
It proposes the following:
“(1) Beginning Jan. 1, 2022, the maximum weekly benefit amount shall be not less than $247.
(2) Beginning Jan. 1, 2023, the maximum weekly benefit amount shall be not less than $300.
(3) Beginning Jan. 1, 2024, the maximum weekly benefit amount shall be not less than $325.
(4) Beginning Jan. 1, 2025, the maximum weekly benefit amount shall be based on the average weekly earnings in the second previous year.”
But perhaps the most critical part of the bill is a section that would establish ultimate limits for weekly payouts: a minimum of 40% and maximum of 66.6% of the state’s average weekly wage. It states, “In no event shall the weekly benefit amount be less than forty percent and no more than sixty-six and two-thirds percent of this state’s average weekly wage as computed by the (revenue estimating) administrator.”
With Louisiana’s current average weekly wage at $940, an individual’s weekly unemployment benefit would be a minimum of $376 and a maximum of $626.
“That would put us on par with Arkansas and Texas,” said Neva Butkus, policy analyst with the Louisiana Budget Project, a nonprofit that promotes policies to benefit low-to-moderate-income families. “Those are the two highest in the southern region.”
Unemployment insurance benefits in Arkansas and Texas are $450 and $520 per week, respectively. Nationwide, the average payout just before the COVID-19 pandemic was $387 per week, according to the Center on Budget and Policy Priorities, a nonprofit, nonpartisan research and policy institute that studies a range of government policies and programs.
Under current law, Louisiana’s average weekly payout is $192, and ultimate maximum is $284, which only takes effect if the state’s unemployment trust fund balance swells to over $1.4 billion. Under Lyons’ bill, an individual’s weekly benefit amount would no longer depend on how well the state has managed its finances.
Reached by email Tuesday, Lyons said he wrote the bill simply because it’s what needs to be done since “Louisiana is lower than most states and hasn’t had a significant change since 2009.”
On the other hand, the bill sponsored by Sen. Reese, a Republican, would make cuts to Louisiana’s unemployment insurance program, which is already considered the worst in the nation by Forbes Advisor. The three worst states for unemployment (Louisiana, Mississippi and Tennessee) also have some of the country’s worst poverty rates. Likewise, the three best (Massachusetts, Hawaii and New Jersey) have some of the lowest percentages of residents in poverty, according to 2019 data from the U.S. Census Bureau.
Senate Bill 225
Compared to Lyons’ legislation, Senate Bill 225 proposes relatively complex formulas that tie an individual’s unemployment benefits to both the trust fund balance and the state’s economic performance during a particular time period.
Reese’s bill calls for a $277 weekly payout to replace the current $247 payout. Just as under current law, those benefit amount figures are adjusted in accordance with a calculation table that factors in the state’s trust fund balance. The bill proposes a $30 increase in each row of the table, capping benefit amounts at $300 per week. But perhaps the most significant part of that legislation appears under the “Duration of Benefits” section.
Under current law, the duration of benefits gives an individual up to 26 weeks of unemployment payouts. Reese’s bill would cut this in half to 12 weeks, and the proposed weekly benefit amounts would not come close to offsetting the impact of this cut.
“Off the cuff, I would say this would be bad for workers,” Butkus, the LBP policy analyst, said. “In short, 12 weeks is not enough, even in times of low unemployment.”
In a phone call Thursday, Reese said he is still working on the legislation and researching what the best numbers might be for Louisiana. The average length of time residents remained on unemployment in 2019 was 15.7 weeks, he said.
“We’re still working on what that number could be or should be,” the senator said. “In pulling in some best practices from other states, maybe at the end of the day, maybe it’s 15 weeks and 20 weeks or 14 weeks and 22 weeks.”
The 12-week duration would apply when the state’s average unemployment rate is at or below 5.5%. The duration would increase by one week for every one-half percentage point above 5.5% with a cap of eight additional weeks, meaning the longest stretch of time an individual could collect unemployment would be 20 weeks — but only during times of economic turmoil where the jobless rate is above 9.5%.
Tying an individual’s weekly unemployment benefit amount to the economy of an entire state can be problematic, Butkus said. For one thing, the state’s overall jobless rate does not accurately reflect many parts of the state such as in the Mississippi Delta region where unemployment and poverty rates are much higher than the rest of the state.
“The Delta is often double the state’s unemployment rate,” Butkus said. “And the experience of a worker in East Carroll Parish looking for a job is much different from a worker in Lafayette. Also, when you’re looking at the state percentage it’s just not an accurate snapshot of how long it takes the average unemployed worker to find a job.”
Reese said he is aware of the problems with using the state’s unemployment average and will consider any better solutions. “The problems that I fully recognize and I’m battling with are that Louisiana is a very unique state,” he said. “This was just the initial filing of the bill” … “We’re looking at the best ways to do that.”
As an owner of many different businesses, Reese employs Louisiana residents in real estate, transportation, storage and other sectors. His career took off in 2001 when he purchased his first company, American Moving and Storage, with a federal USDA loan, according to the Leesville Daily Leader. For years, he was a board member for Fort Polk Progress, which he founded to help maintain the U.S. Army post as the state’s largest employer. Although he has never filed for unemployment himself, he said he knows of people close to him who have.
Some other states follow a model similar to that proposed in Reese’s bill. Florida, for example, offers 12 weeks of benefits but a higher average payout ($236) than Louisiana ($192). Florida is ranked among the worst for both unemployment and poverty, according to data from Forbes and the U.S. Census. Utah has something of a hybrid model, offering only 10 weeks of benefits when unemployment is low; then it increases to up to 26 weeks when unemployment is high, and its average payout is $391 per week. Forbes ranked Utah as 8th in the nation for its program, and census data indicates Utah has the second lowest percentage of residents in poverty.
“I’m trying to make sure we take care of people the best way we possibly can,” the senator said. “If I don’t get numbers that clearly indicate a net benefit for the people of Louisiana, then I’m not going to move forward with the bill.”
Senate Bill 225 would have an implementation schedule that relies on the state recovering from its current jobless rate, which according to the federal Bureau of Labor and Statistics is 7.6%. The legislation would not take effect until Louisiana shows an unemployment rate of 5.5% or better for two full quarters (six months).