The largest bill to move out of each chamber this week was HF 2355, the Unemployment Insurance reform bill. There has long been a need to reform Iowa’s Unemployment Insurance Trust Fund (UITF) laws in order to balance the need for those terminated through no fault of their own, against the need for the fund to grow during the good times of low unemployment.
The UITF is an account employers are taxed to fund according to state law in order to help unemployed Iowans between jobs. It is regulated by the state to keep the fund balance healthy during times of both high and low unemployment. During historically low unemployment, as we saw during the great economic times of the Trump Administration, the fund should have moved to the lowest tax bracket. Due to fraud and improper claims, this didn’t happen.
During the late pandemic, Iowa’s trust fund was pummeled by a massive number of unemployment claims from the early business shutdowns. Along with this legitimate use of the fund, there was a growing and sophisticated fraud effort ranging from individuals filing single fraudulent claims to multi-state operations using computers to steal identities and addresses to file thousands of claims automatically. We obviously must address this issue for both good times and bad.
HF 2355 has several sections, indicating just how far behind the modern market environment we are currently.
The bill changes the length of assistance from six months of coverage to four months. Iowa Workforce Development shows over 80,000 jobs open across the state. It should not take anyone half a year of benefits to find a job in this environment. States that are ahead of ours show a history of job seekers becoming employed in less than half the time as we shift the benefit by two months. Iowa’s data shows an average of twelve weeks of benefits before employment, a whole month shorter than the sixteen weeks we have set.
Next is the addition of a one-week period from filing a claim to the start of assistance. This is the most necessary but controversial part of the bill. Waiting one week before starting a payment gives Workforce Development time to do verification of eligibility, notify the employer, and check the claim for fraud. This policy is big. The amount of fraud nationwide has been conservatively estimated by the US Labor Bureau to be over $87 billion during the Covid extended unemployment benefit period. Iowa has reported over $5 million in fraud losses in each of 2019 and 2020. That was only what was identified. In today’s system, Iowa starts processing the first payment before all of the checks can be finished. It is practically impossible to claw back the money once it is disbursed. The department needs a week head start. Forty other states have this provision including all the states that surround Iowa. Even the United Auto Workers union recognizes this policy as necessary as they also wait one week before starting strike pay.
Improper use during the first week includes businesses shutting down for a week for regularly scheduled maintenance. They tell their employees to stay home and have them file unemployment when they know those same employees will be hired back the next Monday. Unions will also play the game, as they pull their apprentices off jobs to attend regular training. The apprentice is told to apply for jobless benefits, but they know they will be back on the job in a week as they weren’t actually laid off. Each of these examples are costs that should be born by the business or union, not the business taxes that sustain the fund for real unemployment.
HF 2355 also puts into code definitions of misconduct to guide the department and judges as they decide contested cases. Currently, the department can make a ruling, and it can be appealed to an administrative law judge. This judge can make essentially any ruling and not have a written guideline to which to refer. Defining misconduct offers consistency and predictability as all parties and judges can refer to the same definitions. The bill also allows parties to go straight to District Court instead of having to stop at the Employment Appeals Board.
The message I constantly receive from home is that all those who can work, need to work and that programs still pay people to stay home. The House has almost identical language passed out of their chamber. It should not take long to negotiate and strike a deal. I am sure the governor will sign it as this was originally her idea, and she presented this policy during her annual Condition of the State address in January.
In other news, it appears that the session may be wrapping up a week or two before the April 19 scheduled close. We are still working on the budget, but the House has passed us a few budget bills already. Large issues still to resolve include E-15, pharmacy benefit manager regulation, school choice, and the bottle bill. Other good bills will pass, but these seem to take the largest portion of my time at the Capitol and at forums.