House GOP plan would allow states to divert unemployment funds

House Republicans are advancing legislation that would allow states to divert $31 billion in federal funds that had been intended for extending unemployment insurance to other state budget needs.

The proposal has drawn criticism from Democrats who say the money approved last year as part of an agreement to extend the President George W. Bush-era tax cuts was set aside to pay the costs of jobless benefits as the nation’s unemployment rate remains at 9%.

Instead, the proposed Jobs, Opportunity, Benefits and Services Act, which was approved by a House committee, would allow states to use the funds to pay down the debt they have incurred to finance jobless benefits during the recession.

“Just when you think you have seen it all,” said Rep. Nancy Pelosi (D-Calif.), the House minority leader, said Thursday. “Just when you thought they can go no further to hurt working families in America.”

More than half the states have taken out loans to provide unemployment benefits as the jobless rate has soared. Most states have increased unemployment taxes on employers.

Supporters of the bill, including the National Federation of Independent Businesses, said the legislation would help protect small businesses from further unemployment insurance tax increases.

“The JOBS Act provides states new flexibility to decide how to spend their share of temporary unemployment funds,” Rep. Dave Camp (R-Mich.), the chairman of the Ways and Means Committee, said in a statement with other bill sponsors.

Under the bill, states could continue to use the funds as intended to provide up to 99 weeks of jobless benefits, or legislatures could vote to redirect the funds to service loans.

In California, where the unemployment rate remains in the double-digits, the state has amassed $10 billion in federal unemployment loans, according to Ways and Means Committee data. Illinois owes nearly $2 billion.

Democrats struggled politically last year to continue providing jobless benefits during the prolonged recession, amid mounting opposition from Republicans and conservatives within their own ranks.

An agreement was reached to extend benefits through the end of the 2011 fiscal year as part of the deal to extend the Bush-era tax cuts. From that agreement, $31 billion in jobless funds remain.

The bill is expected to come to the House floor for a vote in coming weeks.

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