Comments on H.R. 3896, the Unemployment Compensation Reform Act of 1990
T-HRD-90-15, Feb 22, 1990
GAO discussed proposed legislation affecting the unemployment insurance (UI) system, which provides income maintenance assistance to the unemployed, funded by federal and state employer taxes. GAO noted that: (1) state UI trust fund reserves appear to be inadequate to handle a recession; (2) increased reliance on loans and general fund advances has eroded the forward-funding principle under which UI has operated for over 50 years; (3) an increase in the taxable wage base, as proposed, would restore the forward-funding nature of the program, increase revenue for the federal UI trust fund accounts, and slightly increase state reserves; and (4) the legislation would provide the states with $3 billion annually for administrative costs, to help reduce the effects of any recession.