Kentucky Center for Economic Policy analysis of House Bill 317 lowering unemployment insurance benefits

A House committee advanced a bill Thursday that would lower the unemployment insurance benefits of Kentuckians out of work for more than five weeks while cutting the timeframe in which they are eligible for such benefits to 20 weeks from 26 weeks.

House Bill 317, sponsored by Rep. Russell Webber, R-Shepherdsville, has the backing of the Kentucky Chamber of Commerce, which argues that such cuts will “incentivize” unemployed people to go back to work sooner and fill open positions.

However, the AFL-CIO of Kentucky and the progressive think tank Kentucky Center for Economic Policy counter that the bill would only reduce benefits that are already too low for many to survive on, especially for the economically depressed rural areas of the state where jobs lost during the Great Recession have not come back.

The state’s Unemployment Insurance Trust Fund is paid for by a tax on .6 percent of employers’ total wages, which collected $477 million in 2017. The average Kentuckian who draws unemployment benefits takes in $341 a week — 44 percent of their lost wages — and does so for less than 19 weeks. Roughly one-third of those drawing benefits do so for the full 26 weeks.

Under HB 317, a person’s unemployment benefits would be front-loaded to the first five weeks, when they draw 125 percent of the calculated benefit. However, that would move back to 100 percent in the next five weeks, followed by 75 percent in the third five weeks and 50 percent in the last five weeks.

In addition to lowering the number of weeks that a claimant can draw benefits from 26 to 20, the overall calculation for how a person’s benefits are determined would be cut by 11.5 percent.

The Kentucky Center for Economic Policy (KCEP) estimates that HB 317 would lead to a 20 percent cut in benefits for the average claimant and a 40 percent cut for those who would use the full 26 weeks.

Testifying before the House Committee on Small Business and Information Technology on Thursday, KCEP policy analysts Dustin Pugel said that HB 317 would be “putting salt in the wounds” of Kentuckians who had been laid off from their jobs.

Though Kentucky’s unemployment rate has fallen to 4.4 percent, Pugel noted that most counties — especially rural ones and eastern Kentucky — have actually lost jobs since the onset of the Great Recession, which makes the “carrot” offered by HB 317 impractical for many.

Ashli Watts, the vice president of the Kentucky Chamber of Commerce, testified that there are over 200,000 open jobs in Kentucky, which the legislation would push unemployed Kentuckians to pursue.

Webber told the Herald-Leader after the hearing that HB 317 would make Kentucky “more competitive” with surrounding states when it comes to attracting businesses, so long as the state can reduce the payroll tax that funds unemployment insurance.

The bill passed the House committee in a party-line vote, with 10 Republicans voting for it and seven Democrats voting against it. Rep. Lynn Bechler, R-Marion, passed on the vote. Opponents of HB 317 are hopeful that it will get tripped up in the full House by Republican members from eastern Kentucky districts, which have been decimated by the decline of the coal mining industry.