NCPA - National Center for Policy Analysis

Paid Family Leave -- Using Unemployment Insurance Funds

January 26, 2000

Over the holidays, the U.S. Department of Labor (DOL) proposed new regulations that redefine what it means to be unemployed and allow states to pay workers who choose to stay home up to one year with their newborn or newly adopted children. The President's plan would allow states to use their Unemployment Insurance (UI) trust funds for paid family leave.

According to Heritage Foundation analysts, raiding unemployment insurance funds would threaten the ability of states to pay regular UI benefits to laid-off workers during the next economic downturn.

  • If all 50 states provide just 12 weeks of benefits to new parents in the labor force, as recommended by DOL, the cost could be $11.3 billion per year -- over one-half the amount of regular benefits paid to out-of-work Americans in 1999.
  • State UI benefit payments could balloon from $24.9 billion to $36.2 billion this year and quickly drain the trust funds.
  • By 2002, state trust fund balances could fall by over 60 percent from $53.7 billion to just $21.4 billion
  • Moreover, the cost of the program could explode if Washington expands it again to cover other types of leave such as illness and elder care.

The DOL claims that the new program gives states the "flexibility" to experiment with the UI program; but the proposed regulation only gives them the flexibility to expand UI benefits to new parents. True flexibility, say critics, would allow the states to conduct many different types of experiments, such as privatizing UI or offering reemployment incentives not allowed under current law.

The comment period on the proposed regulations ends Feb. 2.

Source: D. Mark Wilson, "President Clinton Puts Unemployment Insurance At Risk," Executive Memorandum No. 644, January 24, 2000, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.


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