Recommendations made by the Kentucky Chamber to improve our unemployment insurance system were included in a report approved by a legislative task force yesterday. These recommendations included strengthening Kentucky’s work search requirement and providing more effective re-employment support services for UI claimants.
The General Assembly’s Unemployment Insurance Reform Task Force was established following the 2021 legislative session to study Kentucky’s UI system and consider policy changes to improve it and address challenges that arose during 2020. Throughout the summer and fall, Chamber staff testified before the task force to provide the business community’s perspective on how Kentucky could reform its UI system.
As detailed in the Chamber’s recent report on Kentucky’s workforce crisis, Kentucky lags the nation when it comes to workforce participation and the percentage of adults who are actively employed. Moreover, Kentucky UI claimants have historically spent more time receiving benefits than elsewhere in the nation. In 2019, the average benefit duration for a Kentucky claimant was 18.2 weeks, one of the highest durations in the country. Reforming Kentucky’s UI system to more effectively support laid-off workers and encourage rapid re-employment is one of several policy tools the General Assembly should consider to address the Commonwealth’s workforce challenges.
Some of the Chamber’s top recommendations for structural reforms to Kentucky’s UI system include:
- Increasing the number of weekly work search activities required of UI claimants to align with other states and encourage rapid re-employment
- Incorporating a comprehensive job referral program into our UI system that directly connects claimants with employers based on their skills and previous work experience
- Combating fraud and protecting employers from fraud-related charges
- Allowing employers to report claimants who do not show up for interviews, similar to how employers can already report claimants who refuse job offers
- Providing state agencies with the necessary funding to administer an effective work search system and job referral program
- Implementing reforms to Kentucky UI tax structure for employers
- Consideration of proposals in past legislation, including tying the maximum number of weeks a claimant can receive unemployment benefits to current economic conditions
Several of the Chamber’s key reform recommendations were included in the UI Reform Task Force’s final report, which can be accessed here.
In addition to key structural improvements to Kentucky’s UI system, the Chamber is also advocating for policymakers to use federal relief dollars to replenish the state’s UI trust fund. The trust fund is paid into by employers and is used to pay out benefits to claimants. Prior to the pandemic, the trust fund was approximately $619 million. Because of the unprecedented surge in unemployment claims in March and April of 2020, the trust fund was depleted, forcing the state to take on federal loans to continue paying out benefits. In 2021, the Chamber successfully advocated for lawmakers to use federal relief dollars to pay off the state’s loan and freeze rates for employers, ultimately preventing a tax increase on businesses amounting to $100 per employee per year on average. Additional funding, however, is needed to fully restore the trust fund to pre-pandemic levels, which could help prevent future tax increases and prepare the state for future economic downturns.
According to a recent analysis by the Tax Foundation, fully restoring the UI trust fund to pre-pandemic levels “deserves to be a top priority use” of federal relief dollars in Kentucky.