Last week, the Center on Budget and Policy Priorities (CBPP) issued a new report on a bill that the House passed in December (H.R. 3630) to extend the Social Security payroll tax cut and extend unemployment insurance (UI). One of the provisions in that bill would have denied UI benefits to workers without a high school diploma or GED. Congress eventually passed a two-month payroll tax cut and UI extension bill without any restrictions, but it is expected that Republicans in the House are going to push to include many of the provisions in their bill to be included in any legislation to extend the payroll tax cut and UI through the end of this year.

Adult education advocates have been focused on the GED/High School Diploma requirement in SEC. 2122 of that bill, as noted above. (You can read why this is such a bad idea in an earlier CBPP paper here.) Reading CBPP’s latest paper, it appears to me that the state waiver provisions in that bill should also be of concern to adult education advocates, assuming they are proposed again.

Under SEC. 2123 of H.R. 3630, up to 10 states could apply for waivers that would exempt them from key federal requirements for state UI systems, so that they may conduct “demonstration projects” designed either to “expedite the reemployment of individuals” or “improve the effectiveness of a State in carrying out its State law with respect to reemployment.” Specifically, they could obtain waivers from these critical requirements:

1. Section 3304(a)(4) of the Internal Revenue Code, which requires that “all money withdrawn from the unemployment fund of the State shall be used solely in the payment of unemployment compensation, exclusive of expenses of administration.”
2. Paragraph (1) of section 303(a) of the Social Security Act, which requires that state methods of administration to be” reasonably calculated to insure full payment of unemployment compensation when due.”
3. Paragraph (5) of section 303(a) of the Social Security Act, which, again, requires the expenditure of all money withdrawn from a state unemployment fund to be used in the payment of unemployment compensation, exclusive of expenses of administration.

The CBPP paper offers a strong overall critique of these waiver requirements which I encourage you to read. Here are the two specific areas of concern I see from an adult education policy and advocacy perspective:

First, a waiver of the first requirement above would allow states to collect unemployment taxes from employers and then turn around and use those funds for purposes other than paying out UI benefits. I agree with CBPP that this “would start the UI system down a slippery slope that would alter its fundamental nature.” But I can also imagine demonstration projects funded through these waivers that provide new adult education and job training opportunities. (CBPP suggests that as a possibility in their paper.) Since these programs provide unemployed people with skills that should improve their employment prospects, this might seem like a reasonable idea, especially during good times, when states may have a surplus of UI funds (i.e. low unemployment, so more money is going into the system then is going out in the form of benefits). A new source of funding for adult education and job training is always tantalizing.

But it will be just as tempting for legislators to divert those funds elsewhere. How would they able to do this? As the authors of CBPP’s paper explain, the House proposal would “enable states to replace state or local funds now used for job training or other such purposes with diverted UI funds and then to shift the withdrawn funds to other uses.” CBPP suggests tax cuts, and I think that sounds pretty realistic. In other words, the fear is that states will cut their current expenditures on adult education or job training, replace that money with funds from their Unemployment Trust Fund, and take the money they cut and spend it on whatever they like—including tax cuts. This would result in a zero net gain in adult education or job training resources.

It also seems to me that using UI funds for other purposes might significantly destabilize a state’s UI system. If state Unemployment Trust Fund dollars are allowed to be used in part for other purposes—even good ones—what assurances are there that sufficient funds will be available for benefits when the economy goes into a downturn and UI benefit claims soar? During bad times, with less UI tax revenue coming in, and more workers applying for benefits, will we be facing a “bankrupt” UI system that can’t pay out the benefits that workers have earned? Will states then be more inclined to cut benefit levels and/or reduce the number of weeks one can collect benefits?

My second concern has to do with language in SEC. 2123 that may allow states to impose their own new eligibility requirements. The authors of the CBPP paper argue that by allowing states to waive the requirements described above, states will also, by implication, no longer be bound by the definition of “compensation” in Section 3304 of the Internal Revenue Code. This definition basically restricts states from defining eligibility for UI compensation outside of conditions related to their unemployment. According to CBPP, the waivers would allow states “to condition receipt of benefits on factors unrelated to workers’ having amassed a sufficient work record, having become unemployed due to no fault of their own, and looking for a new job.” (my emphasis) This would open the door for states to impose new eligibility requirements and restrictions of their own—such as requiring UI recipients to have a high school diploma or GED.

In other words, these “demonstration project” waivers contained in the House bill could be a backdoor way for states to impose the same educational eligibility requirements that the House would like to impose at the federal level.

So it seems equally important to argue against these state waiver provisions as well as the GED/High School Diploma requirement contained in SEC. 2122. If SEC. 2122 is stripped from whatever bill emerges, but the waiver language remains, it appears that some states would be able to go move forward with similar eligibility restrictions—or worse.