Easy money

Sunday’s Tulsa World reports that one of many important decisions left to the last week of the legislative session is whether to modernize Oklahoma’s unemployment insurance (UI) system to qualify for $75 million in additional federal stimulus money. According to Governor Brad Henry’s spokesman Paul Sund,

There is no downside to accepting the dollars. If we reject them, there is the risk that Oklahoma businesses may ultimately be asked to pick up the tab if or when unemployment funds run short.

In April, we released an issue brief that points out that Oklahoma needs to make minor changes to qualify for the funding:

  1. Make the “alternative base period” (the period for which earnings are counted to determine unemployment compensation) permanent. Oklahoma adopted an alternative base period in 2002 but it is suspended when the balance of the unemployment trust fund falls. This is a fiscally sound requirement, but it also can cut unemployment benefits when they are needed most.
  2. Expand the definition of “compelling family circumstances” that allow a worker to collect unemployment when leaving a job voluntarily. The new circumstances–domestic violence, transfer of a spouse,  and illness of the worker or family member–help make the UI system better fit today’s families.
  3. Cover workers seeking part-time jobs if their previous work experience is part-time.

Shortly after the stimulus passed, the “UI modernization” became something of a punching bag for Republican governors. They planned on refusing the money since it would be a one-time funding boost that requires potentially costly long-term improvements to the unemployment system.  Here in Oklahoma, Representative Mike Reynolds (R-Oklahoma City) is making the same argument:

The bottom line is, it obligates us to future costs.

The financial–and human– equation is overwhelmingly in Oklahoma’s favor, however. The Oklahoma Employment Securities Commission estimates the three changes listed above would cost less than $3 million per year during economic downturns and $100,000 per year when the alternative base period would have been in place anyway. The $75.9 million in federal funds will pay for the additional costs–and benefits for Oklahoma workers–for years to come.

What happens if we fail to modernize UI? Probably a tax increase on businesses and benefit cuts for unemployed workers. Both are required when balances of the unemployment trust fund fall far and quickly enough. The fund has fallen by more than $100 million since August.

The Legislature thus faces what would seem to be a simple choice. Modernized Unemployment Insurance to help Oklahoma’s working families and fund it with federal money, or let Oklahoma businesses and unemployed workers pick up the tab with higher taxes and smaller benefits.

The World headline reads “State in dilemma over jobless funds.” The Legislature has one simple choice to make: approve UI modernization this week. Take the easy money and help unemployed Oklahomans. There’s no dilemma involved.

Update: SB 1175, which implements the changes needed to the UI program to be eligible for the additional federal money has emerged out of conference committee and last night gained final passage in the Senate on a unanimous 40-0 vote. It now awaits final action in the House.


Paul Shinn

Paul Shinn served as Budget and Tax Senior Policy Analyst with OK Policy from May 2019 until December 2021. Before joining OK Policy, Shinn held budget and finance positions for the Oklahoma House of Representatives, the Department of Human Services, the cities of Oklahoma City and Del City and several local governments in his native Oregon. He also taught political science and public administration at the University of Oklahoma, University of Central Oklahoma, and California State University Stanislaus. While with the Government Finance Officers Association, Paul worked on consulting and research projects for the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and several state agencies and local governments. He also served as policy analyst for CAP Tulsa. He holds a Ph.D. in Political Science from University of Oklahoma and degrees from the University of Oregon and the University of Maryland College Park. He lives in Oklahoma City with his wife Carmelita.

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