1 CALIFORNIA Employment Development Department CEAC Annual Conference – May 14, 2009

2 CALIFORNIA Employment Development Department DISCUSSION POINTS  Federal & State Legislation  Trust Fund Forecast  Governor’s Solvency Proposal  Workload  Additional Customer Service Efforts  UI Automated System Enhancements

3 FEDERAL & STATE LEGISLATION IMPACTING THE UNEMPLOYMENT INSURANCE (UI) PROGRAM FEDERAL LEGISLATION  HOUSE OF REPRESENTATIVES (H.R. 1) American Recovery and Reinvestment Act of 2009 (ARRA) Public Law STATE LEGISLATION  ASSEMBLY BILL 23, THIRD EXTRAORDINARY SESSION (ABX3-23) Extended Benefits  ABX3-29 Alternate Base Period, Approved Training Notice, and Appeal by Telephone  ASSEMBLY BILL (AB) 1298 Wage Disregard and Taxable Wage Base Increase  SENATE BILL (SB) 222 Taxable Wage Base Increase  ABX3-32 Lay off Notices to School Employees

4 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law  Signed into law on February 17, 2009  Multiple UI provisions designed to assist the unemployed  Employment service (ES) operations  Suspension of federal tax on unemployment benefits  Extended benefits (EUC, FED-ED)  Additional benefits  Assistance to states with federal loans  Special funding to “modernize” UI

5 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law EMPLOYMENT SERVICE OPERATIONS  $400 million appropriation  At least $250 million must be spent on reemployment services for UI claimants

6 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law SUSPENSION OF TAX ON UI BENEFITS  UI benefits is considered taxable income by the federal government  This Act suspends the federal income tax on the first $2,400 of UI benefits for the 2009 tax year  UI benefits not taxed by the State of California

7 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law EXTENDED BENEFITS Emergency Unemployment Compensation (EUC)  Extends the final filing dates of EUC benefits (first and second extensions)  If the economy stays down, it is likely that the EUC will be extended by the lawmakers EUC ActivityPrior EUC Provision HR 1 EUC Provision Final Filing Date March 31, 2009December 31, 2009 Final Payment Date August 27, 2009June 30, 2010

8 House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law EXTENDED BENEFITS Federal-State Extended Duration Benefits (FED-ED)  Provides for a temporary 100 percent federal funding of FED-ED (essentially a third extension)  Up to a maximum of 20 additional weeks  Effective date: February 22, 2009 FEDERAL LEGISLATION

9 House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law ADDITIONAL BENEFITS  Known as Federal Additional Compensation (FAC)  Provides an additional $25 of UI benefits per week  Additional benefits began on February 22, 2009  Payable for eligible claims filed before January 1, 2010, with a “sunset” or last payment date of June 30, 2010  Training Extension (TE) claims are not eligible

10 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law ASSISTANCE TO STATES WITH FEDERAL LOANS (States who have to borrow from the federal government to continue paying UI benefits)  Provides for an interest-free Title XII loan and no accrual of interest for insolvent states through December 21, 2010  States who borrowed before enactment of HR 1 do not have to pay interest which is due in 2009 and 2010

11 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law SPECIAL FUNDING TO “MODERNIZE” UI  UI Modernization Act  $7 billion appropriation as incentive payments for states to “modernize” their respective UI programs  1/3 –states must have an alternate base period (ABP)  2/3 –states must meet two of four eligibility provisions  $500 million distribution to all states in Federal Fiscal Year 2009 for specified administrative expenses  California received approximately $60 million

12 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law SPECIAL FUNDING TO “MODERNIZE” UI $7 Billion Incentive Payments (First 1/3 Requirement)  States must have an ABP  Base period must include the most recently completed calendar quarter if a claimant does not qualify for a UI claim using the current base period (the first 4 of the last 5 calendar quarters)  Allows most recent entrants to the labor market to collect UI  This is a controlling requirement which means states must have an ABP in place to qualify for the rest of the payments (2/3)  California’s share is about $279 million

13 FEDERAL LEGISLATION House of Representatives (HR) 1 American Recovery and Reinvestment Act of 2009 Public Law SPECIAL FUNDING TO “MODERNIZE” UI $7 Billion Incentive Payments (2/3 Requirement)  States must have two of four eligibility provisions  Eligibility for part-time workers  Allowable separation from work based on “compelling family reasons” including domestic violence, illness of an immediate family member, spousal relocation  UI benefits for individuals enrolled in training  Dependent’s allowance  California’s share is about $559 million

14 STATE LEGISLATION Assembly Bill 23, Third Extraordinary Session (ABX3-23) Extended Benefits (Coto and Arambula)  Signed into law on March 27, 2009  Allows FED-ED claims to be filed effective February 22, 2009  Provides up to 20 weeks of extended benefits (essentially a third extension)  Uses the Total Unemployment Rate (TUR) as trigger for extended benefits  Funded 100% by the federal government

15 STATE LEGISLATION Assembly Bill 29, Third Extraordinary Session (ABX3-29) Alternate Base Period, Approved Training Notice, Appeal by Telephone (Coto and Garrick)  Signed into law on March 27, 2009  Provides an ABP  Available for UI claims filed effective April 3, 2011  Allows claimants who do not monetarily qualify for a valid claim (under the regular BP) to use more recent wages  Requires the Department to notify BP employers of potential benefits while in approved training  Requires the Appeals Board to permit appeals by telephone

16 STATE LEGISLATION Assembly Bill (AB) 1298 Wage Disregard and Taxable Wage Base Increase (Coto)  Referred to Committee on Insurance on March 31, 2009  Would increase the amount of wages that are not deductible from the weekly UI benefits (wage disregard) from the greater of $25 or 25% to the greater of $200 or 25%  Would increase the current taxable wage base (TWB) of $7,000 to $16,000 for 2009  Would index the TWB based on the State’s average weekly wage for 2010 and beyond  Would increase the employers’ tax rates by amending the employer’s tax schedule, increasing the maximum tax rate from 5.4% to 7.5%  Would increase the new employer rate from 3.4% to 4.5%

17 STATE LEGISLATION Senate Bill (SB) 222 Taxable Wage Base Increase (Ducheny)  Referred to two committees on March 9, 2009  Committee on Labor and Industrial Relations  Committee on Revenue and Taxation  Set for hearing on April 22, 2009, but was postponed  Would increase the current TWB of $7,000 to $21,000

18 STATE LEGISLATION Assembly Bill 32, Third Extraordinary Session (ABX3-32) Lay off Notices to School Employees (Silva)  Referred to Committee on Education on April 27, 2009; hearing was cancelled at the author’s request on May 6, 2009  Would temporarily extend the date school districts must notify employees of the termination of their employment from before May 15, 2009, to before June 15, 2009  The change would only be in effect for 2009

19 TRUST FUND FORECAST October, *2009*2010* UI Taxes Paid by Employers $4.8 billion$4.6 billion$4.7 billion$4.8 billion UI Benefits Paid $5.1 billion$6.8 billion$8.0 billion$7.6 billion Trust Fund Balance $2.4 billion$0.6 billion-$2.4 billion-$4.9 billion * The figures for these years are projections from the October 2008 forecast. Estimates do not include the $25 FAC or the extended benefits. A new forecast with updated figures will be released this month.

20 GOVERNOR’S SOLVENCY PROPOSAL REVENUE PROVISIONS  Increase the taxable wage ceiling from $7,000 to $10,500  Increase the tax rates on each of the tax schedules and eliminate the lowest tax schedule (AA)  Would increase the maximum tax rate from 5.4% to 7%  With a 15% emergency solvency surcharge, the maximum rate would increase from 6.2% to 8.1%  Increase the new employer rate from 3.4% to 4.3%  Increase the revenue for the Employment Training Fund from 0.1% on the first $7,000 in earnings to 0.1% on the first $10,500 in earnings NOTES: Revenue increase from taxable wage ceiling and tax rate increases: $4.14 billion in 2010 Revenue increase from the Employment Training Fund: $30 million

21 GOVERNOR’S SOLVENCY PROPOSAL BENEFIT PROVISIONS—part 1  Increase the monetary eligibility requirements from $1,125 base period earnings or $1,300 single quarter earnings to $2,400 base period earnings or $3,200 single quarter earnings. $2,400 in earnings equates to 7.5 weeks of full-time work at the State minimum wage ($8 per hour).  Savings: $92.4 million annually  Decrease the replacement rate for benefit payments from 50 percent to 45 percent for individuals who earn more than $15 per hour.  Savings: $200 million annually

22 GOVERNOR’S SOLVENCY PROPOSAL BENEFIT PROVISIONS—part 2  Increase the penalty for individuals disqualified for quitting work without good cause or being terminated from work with good cause. Currently, an individual has to return to work and earn five times his or her weekly benefit amount. Under the Governor’s proposal, an individual would have to return to work and earn five times his or her weekly benefit amount and five weeks would have to elapse.  Savings: Unknown

23 INCREASED UI WORKLOAD Week Ending 5/3/08 Week Ending 5/2/09* Difference % Change Initial Claims 52,169111,57759,408114% Internet Claims 21,10554,13133,026156% Internet Inquiries 82945,65244,8235,407% * Includes extended benefits

24 INCREASED UI WORKLOAD (1 ST QTR) Total Initial Claims Filed 2,474,9793,588,4091,421,866 Total Continued Claims Filed 20,691,80131,047,14913,970,653 Total Amount Paid (all programming including FAC) $5,123,220,511$8,107,084,517$3,905,734,807  Recently, the average UI benefits paid per day is approximately $77 million  Biggest payment day in UI program history: April 8, 2009  $129 million total UI benefits paid  215,122 UI checks were issued

25 INCREASED UI WORKLOAD WORKSHARING PROGRAM  Allows for the payment of Work Sharing Unemployment Insurance benefits to individuals whose wages and hours have been reduced. The program is considered a temporary and practical alternative to layoffs.  The volume of Work Share program claims have tripled over 2008 claim volumes in the first four months of  In 2008, January through April, EDD processed 26,704 Work Share claims.  In 2009 in the same time period, the EDD has processed over 72,000 Work Share claims.

26 INCREASED UI WORKLOAD HIRING  The EDD is hiring additional staff, including temporary hires to fill in while new permanent staff are in training  Hired more than 600 staff in the UI program since January 2009  Plans to hire additional 500 staff by June 30, 2009  Restructuring and modernizing UI training programs to improve capacity to serve our customers

27 ADDITIONAL CUSTOMER SERVICE EFFORTS  Automatic filing of Extended Unemployment Compensation (EUC) and FED-ED claims for claimants who are continuously collecting benefits  As of March 21, 2009, UI Call Centers are open on Saturdays from 10 am to 2 pm. EDD staff are assisting customers by using the Internet applications for claim filing and for claim inquiries (intake only). UI Call Centers are also open until 6 pm. Monday through Friday  As of May 2, 2009, 35 Workforce Services offices are also open on Saturdays from 10 am to 2 pm

28 ADDITIONAL CUSTOMER SERVICE EFFORTS  Developed new “Tip Sheets” that provide helpful information about the UI program to assist customers.  Implemented a “UI Navigator” program in the local Workforce Services offices that provides enhanced services to UI clients seeking assistance with their claims.

29 UI AUTOMATED SYSTEM ENHANCEMENTS  UI Modernization  Call center system replacement/expansion  Continued claims redesign  New database platform for UI systems  Enables ABP implementation  Reduces cost for future system enhancements

30 QUESTIONS?