PI Original Ellyn Fortino Thursday May 30th, 2013, 6:14pm

Sequester Cuts Deal A Blow To The Long-Term Unemployed

The long-term unemployed in Illinois will soon see their weekly federal unemployment insurance payments reduced by an average of $51 as a result of the federal sequester cuts. We take a deeper look at the issue.

The long-term unemployed in Illinois will soon see their weekly federal unemployment insurance payments reduced by an average of $51 as a result of the federal sequester cuts.

Payments beginning June 10 for the 80,000 Illinoisans who collect federal emergency unemployment compensation will reflect the reduction, according to the Illinois Department of Employment Security (IDES).

“That’s real money coming out of people’s checks,” said Chad Stone, chief economist at the Center on Budget and Policy Priorities.

As a result of the federal cuts, the long-term unemployed in the country, or those who have been without a job for 27 weeks or more, may have to dip into their savings or rely on spouses’ earnings, if they are lucky enough to have either or both, Stone noted.

“It’s a real hit, and that’s obviously hard on them,” Stone said. “It takes purchasing power out of the economy as well, so it’s hard on the communities where there’s concentrations of unemployed.”

There were 4.4 million long-term unemployed Americans counted in April, according to figures from the Labor Department.

Federal unemployment insurance benefits are impacted by the sequester, which began March 1; state benefits will remain the same.

Sequestration was supposed to cut 5.1 percent from the federal emergency unemployment compensation program for the entire fiscal year, which began Oct. 1 2012, said Stone. But states have not implemented the cuts until more recently, or have not yet finished putting them in place, he explained.

“You hear numbers about people’s benefits getting cut in the 10 to 11 percent range, and that’s because the amount of the cuts on an annual basis have to be jammed into a shorter period of time, because the states have to reprogram their computers and do all that stuff,” Stone said.

In Illinois, benefit payments will be reduced by 16.8 percent, because the cuts must be spread across four months, rather than 12 months, said Greg Rivara, an IDES spokesman. The 2013 federal fiscal year ends September 30.

Right now, before the cuts are installed, the average weekly federal unemployment benefit payment in Illinois is about $320. The minimum payment is about $40 a week, while the maximum is more than $500, Rivara pointed out.

On average, the weekly federal unemployment insurance benefit in the country is about $300 a week. And in general, people’s benefits are being cut by 10 or 11 percent, Stone said.

Janelle Jones, a research associate at the Center for Economic and Policy Research, said federal emergency unemployment compensation should not be cut for moral and ethical reasons, but also because it will impact the economy.

“For every one dollar we give someone in unemployment benefits, we’re actually getting more of that from the economy," she said. "Because people are so strapped, they are immediately spending their money."

Jones acknowledged, however, that she saw the cuts coming.

“But it’s definitely going to be even more of a struggle for these families to make ends meet and for the businesses around them to stay open with their customer base kind of being cut short.”

The unemployed in Illinois who initiated claims in 2012 and beyond can receive 25 weeks of state benefits, which are paid for by businesses through a payroll tax.

The state offers up to 45 weeks of federal emergency unemployment compensation. The unemployed in Illinois currently can receive both state and federal benefits for a maximum of 70 weeks.

Illinois’ unemployment rate in April was 9.3 percent, which is much higher than the 7.5 national rate.

More cuts ahead

An 8 percent cut to federal unemployment benefits is also expected for fiscal year 2014, said Stone. If Congress does not take any action to supersede the sequestration for 2014, then the cuts will continue roughly at an 8 percent rate for as long the sequester is in effect, he said.

On top of that, the emergency unemployment compensation program is set to expire December 31, 2013 and will have to be reauthorized.

Unemployed individuals were first able to collect up to 99 weeks of benefits in November 2009, but the law was changed last year to a maximum of 73 weeks.

As part of the fiscal cliff deal at the end of 2012, which President Barack Obama signed in January of this year, unemployment insurance benefits were extended. But the payroll tax break was left to expire, Stone noted.

The payroll tax cuts were allowed to lapse, yet some tax cuts for high-income people were extended, he said.

“That was not so good for the economy, and I think that we should think about that as the recovery is still relatively weak, and unemployment is still pretty high,” he said.

Job training and employment search programs funded with federal money are also being hit by sequestration, Stone noted.

So where can unemployed individuals turn for extra financial assistance?

“There isn’t a whole lot out there for people, and they kind of have to make ends meet, relying on family and friends, credit card debt and whatnot to get by,” said Michael Evangelist, policy analyst at the National Employment Law Project.

There is “basically nothing” out there to provide financial assistance to the unemployed, and so few people are able to get help from the Temporary Assistance for Needy Families program, or TANF, he said.

A February 2012 report (PDF) from the U.S. Government Accountability Office analyzed government benefits that households with an unemployment insurance exhaustee received in 2009.

The report looked at the 2 million people aged 20 and older who lost a job from 2007 to 2009. These people received unemployment insurance and exhausted it as of January 2010, which was the most recent survey data available, according to the report.

The report estimated that 18 percent of the households with an unemployment insurance exhaustee in 2009 were recipients of Social Security retirement, disability insurance or survivor benefits.

About 15 percent of the households received Supplemental Nutrition Assistance Program (SNAP) benefits, while less than 3 percent received TANF or other welfare benefits.

Less than 6 percent received Supplemental Security Income.

The percentages may be higher today, Evangelist said, because reports such as this one are constrained by when the survey data becomes available.

But currently, Evangelist said, SNAP, formerly called food stamps, or early retirement are "the big buckets that people are falling into."

Those applying for TANF have to have children under the age of 18, which could be one reason why so few people are getting on the program, Evangelist said.

Read Progress Illinois’ story here about the difficulty of getting and staying on TANF in Illinois, as well as what impact the program has had in reducing poverty in the state and across the country.

Image: AP Photo/The Citizens' Voice, Kristen Mullen

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