Testimony of Elissa Silverman, Communications and Policy Associate, for the Public Hearing on B18-420, “Unemployment Compensation Administration Modernization Amendment Act of 2009” and B18-455, “Unemployment Compensation Reform Act of 2009”

Chairman Barry and fellow members of the Council, thank you for the opportunity to speak today.  My name is Elissa Silverman, and I work for the DC Fiscal Policy Institute.  DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low-and-moderate-income residents.

On Friday, we learned the District’s unemployment rate hit a record high of 11.9 percent in October.  I’d like to use my time today to focus on the economic benefits of expanding the District’s unemployment insurance program. Economic research shows unemployment insurance is particularly effective in stabilizing and stimulating the local economy during a downturn.

The income support provided by unemployment insurance not only helps pay the rent and keeps food on the table for families; it also keeps dollars in circulation in the local economy.  In other words, unemployment insurance is spent on groceries, clothing, and other necessities in neighborhood businesses.  That helps keep the economy from declining further, and eventually leads to increased production and job growth.

In fact, a study conducted a few years ago by Mark Zandi of moodyseconomy.com estimated that every $1 spent on increased unemployment benefits spurred economic activity by $1.63.[1] That’s because money given to unemployment claimants is not socked away in savings or put into investments.  It is almost immediately used to pay for food, rent, and other day-to-day expenses. That money goes directly back into the coffers of local businesses.

Bill 18-420 gives a boost not only to unemployed workers but to the District itself at this critical time.  It is a win-win.  By incorporating a $15 per dependent allowance and extended benefits for those enrolled in training as part of the city’s unemployment benefits, the District will receive $18 million from the federal government as part of the stimulus package. The stimulus offers a financial incentive to states and DC to expand eligibility for unemployment benefits in targeted ways.  The District already has earned $9 million in stimulus funds based on existing UI provisions, and the expansions in Bill 18-420 would allow us to qualify for all available stimulus funds targeted for unemployment insurance.

Creating a dependent benefit would be consistent with expansion measures taken by other states.   Bill 18-420 gives those receiving unemployment $15 per week for each person defined as a dependent, up to a maximum of $50. Many other states, such as Maryland, already give additional benefits to claimants with children or spouses unable to work. We are working with the Office of the Chief Financial Officer to determine an accurate assessment of the cost of this expansion.  As you’ll see in the current fiscal impact statement, the CFO assumes that every unemployment claimant has dependents. Yet data from the Census shows that in many states, including Maryland, Virginia and the District, more than 50 percent of claimants have no dependents.  Regional numbers are important to note, because the unemployment claim is made in the jurisdiction of last employment. As you know, many workers in the District live in Maryland, Virginia, and elsewhere.

Extending benefits to workers enrolled in training also is important and a key part of Bill 18-420.  Given that unemployment continues to climb in the District’as I mentioned earlier, the rate for October was estimated at a historic 11.9 percent, a 0.5 percent increase from September’it’s clearly taking certain workers longer to find a job. Many might find their skills incompatible with the jobs available. By allowing workers to pursue training while receiving benefits, the District is steering workers toward jobs that give long-term stability and benefits, not just a short-term paycheck.

Unemployment insurance is supposed to replace about half of an unemployed individual’s lost wages up to a maximum amount, which differs from state to state.  In the District, the weekly maximum benefit is $359. Currently, this is the lowest in the metropolitan area. Virginia has a maximum of $378, and Maryland’s is $380.

B18-455, “Unemployment Compensation Reform Act of 2009,” gives another type of economic boost to many of those actively searching for work.  The $20 weekly benefit increase in the bill would raise the maximum to $379 a week, from $359.

We may want to consider additional options to give a boost to all those actively looking for work. Estimates show that about half who receive unemployment qualify for the maximum payment, so the $20 increase would help them. The other half of unemployment insurance recipients’those who currently receive less than the maximum benefit–tend to be lower-wage workers.  They would see no gain from an increase in the maximum benefit.  For this reason, the District might also want to consider a change to the formula used to calculate benefits, which would impact all claimants.

Finally, Bill 18-455 would help more families get unemployment benefits by increasing the amount of days workers have to appeal a denial of benefits from 10 to 15.  Research has shown fewer than half of unemployed workers receive any type of assistance. Bill 18-455 would also make benefits available for those who must leave a job for compelling family reasons.

In summary, both Bill 18-420 and Bill 18-455 are important to the long-term health and welfare of the District.  Thank you again for the opportunity to testify.  I am happy to answer any questions you may have.

[1] Sharon Parrott, Center on Budget and Policy Priorities, “Temporarily Increasing Unemployment Benefits is Better Targeted and More Stimulative Than Suspending Taxation of Unemployment Benefits”