Fiscal 2020 sequestration of mandatory UI programs

CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                     Unemployment Insurance
               ADVISORY SYSTEM                                CORRESPONDENCE SYMBOL
          U.S. DEPARTMENT OF LABOR                            OUI/DFAS
             Washington, D.C. 20210                           DATE
                                                              September 16, 2019

ADVISORY:         UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 18-19

TO:               STATE WORKFORCE AGENCIES

FROM:             JOHN PALLASCH /s/
                  Assistant Secretary

SUBJECT:          Implementation of Sequestration under the Budget Control Act of 2011 (BCA)
                  for Mandatory Unemployment Insurance Programs for Fiscal Year (FY) 2020

1. Purpose. To provide sequestration rules for FY 2020 to State Workforce Agencies (SWAs)
   that apply to mandatory Unemployment Insurance (UI) programs. These rules include the
   application of sequestration on delayed benefit payments for prior FYs and the resulting
   administrative costs.

2. Action Requested. The Employment and Training Administration (ETA) advises State
   Administrators to provide this guidance to appropriate staff.

3. Summary and Background.

        a. Summary - As required by the sequestration order and set out in the March 18, 2019,
           Office of Management and Budget (OMB) Report to the Congress on the Joint
           Committee Reductions for FY 2020, a 5.9 percent reduction in non-exempt mandatory
           programs will go into effect on October 1, 2019, for FY 2020.

        b. Background - The BCA amended the Balanced Budget and Emergency Deficit Control
           Act of 1985 (BBEDCA) to require reductions in budgetary authority, known as
           sequestration, beginning on January 2, 2013, unless Congress passed, and the President
           signed, a bill that reduced the deficit by at least $1.2 trillion over 10 years. Such action
           did not occur, and sequestration rules have been in effect since FY 2013.

4. Sequestration in FY 2020.

   Impact on the Mandatory UI Programs. Below is a list of programs, projects, and
   activities (PPAs) related to the mandatory UI programs and the applicability of sequestration
   to each PPA.

 RESCISSIONS                                                  EXPIRATION DATE
 None                                                         September 30, 2020

The following PPAs are exempted from sequestration:

   1) Unemployment compensation paid by a state from its account in the Unemployment
      Trust Fund;
   2) Title XII, Social Security Act (SSA), advances to states; and
   3) Unemployment Compensation for Federal Employees (UCFE) and Unemployment
      Compensation for Ex-Servicemembers (UCX).

Note: The Federal Emergency Management Agency advises that there is no impact on
Disaster Unemployment Assistance (DUA) administrative funding or benefits.

Sequestration applies to the following PPAs:

   1) The Federal share of Extended Benefits (EB);
   2) Trade Adjustment Assistance (TAA) funds appropriated under the Federal
      Unemployment Benefits and Allowances Account (FUBA); and
   3) Emergency Unemployment Compensation (EUC).

Impact of Sequestration on EB. The applicable percentage reduction to the Federal share
of EB costs is 5.9 percent starting with weeks of unemployment ending on October 5, 2019,
and ending with weeks of unemployment ending on October 3, 2020. Unless a state amends
its law to reduce EB, as explained below, a reduction in the Federal share of EB due to
sequestration means the state becomes responsible for paying the remaining EB share from
its own funds, i.e., the amount represented by the 5.9 percent reduction. For any EB payments
made in FY 2020 relating to benefit weeks that occurred in prior fiscal years, the FY 2020
sequestration reduction of 5.9 percent must be applied.

Authority for States to Reduce EB Weekly Benefit Amounts due to Sequestration

Under the Federal-State Extended Unemployment Compensation Act (EUCA), the EB
weekly benefit amount (WBA) is “the amount of regular compensation (including
dependents’ allowances) under the State law payable to such individual for such week for
total unemployment.” (Section 202(b)(2), Federal-State EUCA.) However, 2 U.S.C.
906(i)(2) (BBEDCA section 256(i)(2)) permits states to reduce EB WBAs if the Federal
share of EB costs is reduced under a sequestration order. That section provides:

   “(A) A State may reduce each weekly benefit payment made under the Federal-State
   Extended Unemployment Compensation Act of 1970 for any week of unemployment
   occurring during any period with respect to which payments are reduced under an order
   issued under section 904 of this title by a percentage not to exceed the percentage by
   which the Federal payment to the State under section 204 of such Act is to be reduced for
   such week as a result of such order.

   (B) A reduction by a State in accordance with subparagraph (A) shall not be considered as
   a failure to fulfill the requirements of section 3304(a)(11) of Title 26.”

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   As a condition of reducing EB WBAs, state law must authorize the reduction in EB WBAs as
   specified in the BBEDCA. Note that actual reductions in Federal spending could not be
   achieved if WBAs are reduced without also reducing individuals’ remaining entitlement or
   maximum benefit amount (MBA) for EB. For this reason, state law must also provide for
   reductions in EB remaining entitlement and MBA if it provides for reducing EB WBAs.

   Any state amending its law to provide for EB reductions due to sequestration must provide
   notice to claimants and an opportunity to appeal the calculation of the amounts. The notice
   should also inform claimants that appeal of the sequestration reduction itself will not succeed
   as sequestration is mandated by Federal law.

   Impact of Sequestration on EUC. EUC funding for both benefits and administration is
   subject to a sequestration reduction of 5.9 percent in FY 2020. For any residual EUC benefit
   payments made in FY 2020 relating to benefit weeks that occurred in prior fiscal years, the
   FY 2020 sequestration reduction of 5.9 percent must be applied.

   EUC administration is funded quarterly in combination with above-base workload for regular
   UI. The sequestration reduction of 5.9 percent will be applied to above-base funds provided
   to the state for the administration of EUC. Although the EUC program expired on
   January 1, 2014, the Department will continue to provide administrative funds to cover
   residual EUC administrative workloads.

   Impact of Sequestration on TAA. The applicable percentage of reduction to TAA is 5.9
   percent in FY 2020. As in previous fiscal years, using the flexibility under BBEDCA, the
   Department will apply the full TAA Program sequestration to the funding for Training and
   Other Activities, which are the funds available for training, employment and case
   management services, out-of-area job search, relocation allowances, and related
   administrative expenses. The reductions will not be applied to Trade Readjustment
   Allowances (TRA), Reemployment Trade Adjustment Assistance (RTAA) benefits, or
   Alternative Trade Adjustment Assistance (ATAA) available under the TAA Program.

5. Inquiries. Please direct inquiries to the appropriate ETA Regional Office.

6. References.

      Federal-State Extended Unemployment Compensation Act of 1970 (Federal-State
       EUCA) (Pub. L. 91-373);
      Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) (Pub. L. 99-
       177), as amended by the Budget Control Act of 2011;
      Budget Control Act of 2011(BCA) (Pub. L. 112-25);
      Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96);
      American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240);
      Unemployment Insurance Program Letter (UIPL) No. 23-08, dated July 7, 2008,
       Supplemental Appropriation Act, 2008, Title IV – Emergency Unemployment
       Compensation;
      UIPL No. 04-10, Change 3, dated July 23, 2010, Emergency Unemployment
       Compensation Program Extension and Modification, Extended Benefits Temporary

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       Provisions Extension, and Expiration of Federal Additional Compensation, and Change
       9, dated March 5, 2012, Extension and Modification of Emergency Unemployment
       Compensation, 2008 (EUC08) and Extension of Temporary Extended Benefits (EB)
       Provisions;
   •   UIPL No. 22-12, dated June 18, 2012, Short-Time Compensation Provisions in the Middle
       Class Tax Relief and Job Creation Act of 2012;
   •   UIPL No. 13-13, dated March 8, 2013, Implementation of Sequestration under the Budget
       Control Act of 2011 for the Unemployment Insurance Programs for Fiscal Year 2013, and
       Change 1, dated April 9, 2013, Implementation of Sequestration under the Budget Control
       Act of 2011 for the Unemployment Insurance Programs for Fiscal Year 2013 –Questions
       and Answers: Emergency Unemployment Compensation;
   •   UIPL No. 15-13, dated March 29, 2013, Unemployment Insurance (UI) Supplemental
       Funding Opportunity to Fund Costs Attributable to the Implementation of the
       Sequestration Impacts on the Emergency Unemployment Compensation (EUC) Program;
   •   UIPL No. 27-13, dated September 9, 2013, Unemployment Insurance (UI) Supplemental
       Funding Opportunity to Fund Costs Attributable to the Implementation of the
       Sequestration Impacts on the Emergency Unemployment Compensation (EUC) Program
       in Fiscal Year (FY) 2014;
   •   UIPL No. 30-13, dated September 27, 2013, Implementation of Sequestration under the
       Budget Control Act of 2011 for Mandatory Unemployment Insurance Programs for Fiscal
       Year 2014;
   •   UIPL No. 2-15, dated October 15, 2014, Implementation of Sequestration under the
       Budget Control Act of 2011 for Mandatory Unemployment Insurance Programs for Fiscal
       Year 2015, and Change 1, dated January 22, 2015, Implementation of Sequestration under
       the Budget Control Act of 2011 for Mandatory Unemployment Insurance Programs for
       Fiscal Year 2015;
   •   UIPL No. 12-16, dated March 29, 2016, Implementation of Sequestration under the
       Budget Control Act of 2011 for Mandatory Unemployment Insurance Programs for Fiscal
       Year 2016;
   •   UIPL No. 9-17, dated January 19, 2017, Implementation of Sequestration under the
       Budget Control Act of 2011 for Mandatory Unemployment Insurance Programs for Fiscal
       Year 2017;
   •   UIPL No. 6-18, dated March 30, 2018, Implementation of Sequestration under the Budget
       Control Act of 2011 for Mandatory Unemployment Insurance Programs for Fiscal Year
       2018;
   •   UIPL No. 1-19, dated December 12, 2018, Implementation of Sequestration under the
       Budget Control Act of 2011 for Mandatory Unemployment Insurance Programs for Fiscal
       Year 2019; and
   •   Office of Management and Budget (OMB) Report to the Congress on the Joint
       Committee Reductions for Fiscal Year 2020, dated March 18, 2019.

7. Attachments. Not applicable.

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