Federal lawmakers and state officials at a February 29, 2000, House Ways and Means subcommittee hearing examined several pending legislative fixes to the unemployment insurance system. While offering support for some of the proposals, the Clinton administration stressed its desire for a comprehensive overhaul of the system, rather than a piecemeal approach.

A major issue in the debate over reform of the system involves the repeal of the Federal Unemployment Tax Act (FUTA) surcharge, a "temporary" .2 percent charge paid by employers. The federal government established the FUTA surcharge in 1976 when the unemployment insurance system was in financial difficulty. It is set to expire at the end of 2007.

Jane Dee Hull, Arizona's Republican governor, called for a repeal of the surtax. It adds to the federal budget surplus, but does not help states administer their unemployment insurance programs, she testified. Hull and other governors would rather see increased funding for workforce development programs.

A pending House bill (H.R. 1975) would repeal the FUTA surcharge. But the Clinton administration opposes a repeal of the surcharge as a stand-alone bill. "[W]e strongly believe that any repeal should only be considered as part of a comprehensive UI reform package," Deputy Assistant Secretary of Labor Raymond J. Uhalde testified.

Another bill (H.R. 3174) would change the administrative funding of the unemployment insurance system by transferring the collection of the FUTA tax from the federal government to the states. As a result, states would be given greater control in running their programs.

But the administration opposes H.R. 3174. Uhalde testified that there is no guarantee that states would appropriate sufficient revenues toward their unemployment insurance systems if H.R. 3174 were enacted. He also emphasized the need for the federal government to provide "national leadership, policy direction and coordination" for state programs.

Uhalde said the administration has five goals for unemployment insurance reform legislation:

1. expanding eligibility
   
2. streamlining filing and tax burdens
   
3. emphasizing re-employment
   
4. combating fraud and abuse
   
5. improving administration

A working group made up of employers, workers, state representatives and federal officials has been discussing comprehensive reform options that include those principles.

Uhalde described a bill introduced by Rep. Sander M. Levin (D-Mich.) as the first step toward comprehensive reform. Levin's bill (H.R. 1830) would provide funds to help states make their systems more accessible to lower-wage workers. States would be encouraged to implement a base period, which determines eligibility for benefits, that takes into account a claimant's more recent earnings.

Levin's bill also would prod states to build their unemployment reserves. It would increase funding to states for administering their programs and make extended benefits more available during a recession.

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