Funding & Taxes

These resources provide the necessary information to evaluate each state’s UI funding system, including UI payroll taxes and the stability of a state’s UI funding.

With a 2008 recession or slowdown likely, Unemployment Insurance Financing: Examining State Trust Funds Facing Recession, provides a state-by-state report on where state UI trust funds are in terms of basic measures of solvency. This briefing paper explains the basic terminology of UI financing and examines why overall solvency is worse now than it was prior to the 2001 recession. The paper discusses fundamental UI financing policies that states should follow to build adequate trust fund reserves and avoid facing future UI solvency challenges. Click Here to Download the Full Paper. (May 2008)

NELP testifies in Congress on worker misclassification as independent contractors. When employers misclassify workers as independent contractors, workers lose out on unemployment benefits and states lose out on UI taxes - as much as $170 million in New York according to this testimony by Rebecca Smith. (June 2007)

NELP testifies in Congress on SUTA Dumping. NELP's testimony outlines progress in the implementation of SUTA dumping legislation and recomends additional action by Congress. (May 2005)

State SUTA Dumping Proposals: Many bills falling short at protecting state trust funds, workers and employers. SUTA dumping is a scheme by which employers dodge unemployment insurance taxes by "selling" their companies to new related entities in order to receive a much lower UI tax rate. Following a new federal law, most states have proposed anti-SUTA dumping legislation for consideration in the 2005 state legislative session. However, many of these proposals need to be strengthened in order to provide an effective deterrent to firms evading their fair share of UI taxes. (March 2005)

State SUTA Dumping Legislation: A First Step Toward Program Integrity As a result of a new federal law, states will be required inthe coming legislative sessions to make changes to state law that will combat "SUTA dumping," an employer and accounting firm scheme by which companies evade unemployment insurance taes by moving their employees to new shell companies. States should take this opportunity to enact broad anti-SUTA dumping laws and to broaden their efforts to detect othe forms of tax cheating by employers. (October 2004)

Indexed State Taxable Wage Bases: Taking A Significant Step Toward Better UI Financing. Indexing links the growth in wages in a state to the amount of wages subject to UI payroll taxes. Indexing state taxable wage bases is the single step that experts agree will move states toward better UI financing. This NELP document shows how indexing of taxable wage bases contributes to more secure UI financing in the 17 states that have indexing, and estimates the positive impact of universal wage base indexing on state UI trust funds. (February 2004)

Bond Financing for Insolvent State UI Trust Funds This briefing paper provides an overview of state practices used for UI financing, background information on state UI trust fund solvency, and past state UI bonding arrangements. The paper then explains how to evaluate bonding as a UI financing mechanism.  (Janaury 2004)

Financing Unemployment Benefits in Today's Tough Economic Times.  This presentation, prepared for the AFL-CIO Workers' Voice Conference, provides a roadmap for state policy makers to evaluate whether their unemployment system is collecting sufficient reserves to finance benefits, including key strategies to increase revenue and move toward "foward funding" of the unemployment system. (July 2003)

Financing Unemployment Insurance in Illinois. In this briefing paper, NELP shows that the current unemployment insurance funding crisis in Illinois is due to imprudent decisions made in the 1980s to shift to "pay as you go" financing. (May 2003)

Financing an Effective Unemployment Insurance System: Protecting Working Families, Our Communities & Minnesota's Economy. This briefing paper, by the Minnesota JOBS NOW Coalition and the National Employment Law Project (NELP), analyzes the favorable economic impact of UI benefits in Minnesota, and critiques the state's system of financing unemployment benefits.  (April 2003)

Beyond Boom and Bust: Financing Unemployment Insurance in a Changing Economy. This study details the troubling gaps in funding of state unemployment programs since the economic expansion of the late 1990s.  It concludes that large UI tax cuts and other short-term funding measures threaten the solvency of many state UI systems, while those states with more solvent funds have still failed to expand benefits. (April 2001)

Unemployment Insurance Trust Funds: What is Solvency and Why is it Important? NELP describes UI trust fund financing in a nutshell, with explanations of the basic measures of solvency and key areas of concern. (April 2001)

Questions and Answers About FUTA Taxes. This one page fact sheet discusses the history of federal UI payroll taxation under the Federal Unemployment Tax Act (FUTA).  Currently, because the federal taxable wage base at $7,000 since 1983, federal unemployment taxes have reached historic low levels. (April 2001)