GOP readies bill allowing states to use unemployment funding to reduce taxes

House Republicans are moving ahead with a bill that would let states use federal unemployment funds to reduce state taxes or take other steps they think will lead to job creation.

Democrats have argued for months that the GOP has not brought a "jobs" bill to the floor. But they are expected to continue to oppose H.R. 1745 — the Jobs, Opportunity, Benefits and Services (JOBS) Act — as it would give states options other than continuing to provide unemployment benefits according to current federal requirements.

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During a Ways and Means Committee markup of the bill on May 11, ranking member Sandy Levin (D-Mich.) criticized the bill as something that would "end the guarantee of federal unemployment insurance."

The House Rules Committee is preparing to approve a rule for the bill, and might do so this week. But the bill was not on House leadership's schedule for floor consideration as of Monday morning, and given the busy week ahead, it could be pushed off to early June.

Republicans say the bill is designed to give states more choices in how they spend their share of $31 billion in federal unemployment funds, in order to help them better handle their increasingly shaky fiscal situation. They argue that states have paid record high unemployment benefits due to the recession, and have done so through a combination of raising unemployment taxes and borrowing $45 billion from the federal government. The GOP says higher taxes in particular are likely to stunt job creation in states.

Republicans also argue that federal benefits, which now allow extended unemployment payments for up to 99 weeks, are often poorly targeted because different states face different situations.

"For example, in North Dakota unemployment is 3.6 percent, yet the unemployed can collect 60 weeks of benefits, including 34 weeks paid 100 percent by the federal government," House Ways and Means Committee Republicans said in a summary of the bill.

In response to these issues, the bill would "forward fund" federal unemployment funds to states for fiscal 2011 and 2012, and give states more choice in how they can spend these funds. As examples, states could continue offering the same level of unemployment benefits, but could also use the money to reduce their unemployment taxes, or use it in other ways to help promote job creation.

This could involve "demonstration projects" that states could seek to develop in consultation with the Labor Department. The bill sets out a process by which states could apply for and establish demonstration projects.

The funds could also be used to pay back interest or principal on the $45 billion in federal loans that states have received. Republicans cite 11 states that have taken out loans over $1 billion, including California ($11 billion), Pennsylvania ($3.8 billion) and Michigan ($3.2 billion).

But aside from these new flexibilities, the bill would impose new conditions on the use of federal unemployment benefits, most of which are designed to ensure that benefit recipients are actively looking for work.

For example, the bill would require those who are "most likely" to exhaust benefits, such as those without a high school degree, to pursue education and training programs that boost their chances of finding work. The bill also specifies that benefit recipients must be "able to work, available to work and actively seeking work."