You don't want to be unemployed in Vermont

NEW YORK (CNNMoney.com) -- Jobless Americans everywhere are running out of federal unemployment benefits as Congress debates whether to extend the safety net as part of a Bush tax cut compromise.

But even if lawmakers approve an extension, residents in seven states won't be eligible for the same number of weeks as their peers nationwide.

That's because the unemployment rate in those states is improving so, according to federal law, the jobless there can't receive checks as long as those in harder-hit states.

Take Vermont. Only a few months ago, unemployed Vermont residents could collect up to 86 weeks of jobless benefits.

Now, they are eligible for only up to 60 weeks.

The reason is that Vermont's unemployment rate has dropped below 6%. Good news for those lucky enough to find work, but small consolation to the jobless still looking for a position.

Here's how the system works: The jobless collect up to 26 weeks of state benefits before shifting to the extended federal program. Federal benefits consist of up to 53 weeks of emergency compensation, which is divided into four tiers, and up to another 20 weeks of extended benefits. The maximum is 99 weeks.

But not everyone can collect benefits for that long. Extended benefits, as well as the last two tiers of emergency compensation, are tied to state unemployment rates. So as their state job picture brightens, the jobless stop qualifying for long-term benefits.

To be eligible for the fourth tier of emergency benefits, which last up to six weeks, the average state's unemployment rate must be above 8.5% for three months. Similarly, states lose their eligibility for the third tier of benefits, which last up to 13 weeks, if their rate falls below 6%. Extended benefits have a more complicated formula tied to different gauges of unemployment.

There's a logic to the system: "If the unemployment rate in a state is 6% versus 10%, one can argue you'll have a better time finding a job," said Richard Hobbie, executive director for the National Association of State Workforce Agencies.

In recent months, those out of work in New Hampshire and Vermont have lost both Tier 3 and extended benefits because the state unemployment rates have fallen to 5.4% and 5.7%, respectively. Montana residents no longer qualify for extended benefits, according to the National Employment Law Project, an advocacy group.

Meanwhile, residents of Alaska, Delaware, New Mexico and Massachusetts can no longer receive Tier 4 benefits since their rates are all below 8.5%.

Those in the midst of a tier can continue to collect benefits until their exhaust that tier, but they cannot advance to the next level. This does not sit well with those who cannot find a job.

"It can feel rather arbitrary to certain people," said Andrew Stettner, deputy director of the law project.

Just how long federal jobless benefits should continue has been the subject of much debate as Congress considers a 13-month extension contained in the tax-cut deal. The federal government has already paid out $109 billion in unemployment insurance during this recession.

Those opposed to continuing benefits say another extension would be too expensive and would dissuade people from finding jobs.

Advocates argue that the safety net has always existed during periods of high national unemployment. The Obama administration echoes their position, saying that people will naturally fall off the rolls as state unemployment rates improve.

"As your unemployment rate goes below various thresholds, the extension itself phases down and the weeks shorten," said Austan Goolsbee, chairman of the president's Council of Economic Advisers. It "should be determined at the state level, not at the national level."