Issue Brief 9-04
January 29, 2009

More than 30 states currently have Unemployment Insurance (UI) trust fund reserve levels that are considered inadequate according to nationally recognized standards. Seven states currently have outstanding loans from the federal unemployment account. Given the projected duration of the current recession, more states may need to follow suit. Outside of federal (interest-bearing) loans, there are two primary options for transferring federal funds into state UI programs based on recent precedent and legislative proposals:

  1. a no-strings attached distribution of excess funds in the federal unemployment trust fund, known as a Reed Act distribution, or
  2. incentive payments tied to efforts at increasing UI coverage, as detailed in the UI Modernization Act.

Both the House and Senate economic stimulus packages include UI modernization incentives.