Jobless benefits are extended - but hold the applause

By Tami Luhby, senior writer


NEW YORK (CNNMoney.com) -- Millions of jobless Americans are no doubt cheering the tax cut deal that President Obama signed into law Friday.

The legislation provides for 13 more months to apply for extended jobless benefits, but not everyone who's unemployed will be eligible for these extended benefits.

In fact, residents in at least five states won't have access to the same level of unemployment benefits 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 for 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.

Meanwhile, residents of Alaska, Delaware 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 they 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 was the subject of much debate when Congress was considering the 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 that had opposed 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." To top of page

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