STEWARDSHIP INVESTMENTS IN HUMAN CAPITAL
Stewardship investments are made by the DOL for the nation's benefit.
For accounting purposes, these investments are expensed as incurred, and
reflected in the net cost of the DOL's operations. Stewardship investments
provide long-term benefits which cannot be measured in traditional financial
reports.
The DOL's stewardship investments are in human capital, reported as expenses
in the net cost of the DOL's employment and training programs. These investments
are intended to maintain or increase national economic productive capacity,
as demonstrated by program outputs and outcomes. Within the DOL, the Employment
and Training Administration and the Veterans' Employment and Training
Service administer programs which invest in human capital, as discussed
below.
Employment and Training Administration
The U.S. Department of Labor, Employment and Training Administration's
(ETA) Federal investment in human capital comprises expenses incurred
for training and employment services enacted under the Workforce Investment
Act of 1998 (WIA), Job Training Partnership Act, as amended (JTPA), the
Trade Act of 1974, as amended (Trade Act), School-To-Work Opportunities
Act of 1994, as amended (STW), and Balanced Budget Act of 1997, as amended.
This investment is made for the general public and the expenses incurred
are intended to increase or maintain national economic productive capacity.
The ETA's investment in human capital for fiscal years 2000 to 2004, excluding
the cost of internal Federal education and training, is presented below.
Text only
A brief description of the programs under each Act is as follows:
Workforce Investment Act (Successor Legislation to the JTPA)
- Youth Activities - Grants to provide financial
assistance to States and U.S. territories to design and operate workforce
investment activities for eligible youth.
- Adult and Dislocated Worker Employment and Training
Activities - Grants to provide financial assistance to States
and U.S. territories to design and operate training programs for low
income adults and re-employment services and retraining assistance
to individuals dislocated from their employment.
- Job Corps - Nationwide program carried
out in partnership with States and communities to assist eligible youth
to become more responsible, employable, and productive citizens.
- National Programs - Grants to provide
financial assistance in support of employment and training activities
and opportunities for Native American, Migrant and Seasonal Farm Workers,
and Disadvantaged Youth.
Job Training Partnership Act (Antecedent Legislation to the WIA)
- Adult Employment and Training - Grants
to provide financial assistance to States and U.S. territories to design
and operate training programs for low-income adults.
- Dislocated Worker Employment and Training -
Grants to provide re-employment services and retraining assistance to
individuals dislocated from their employment.
- Youth Training - Grants to provide financial
assistance to States and U.S. territories to design and operate training
programs for economically disadvantaged youth.
- Summer Youth Employment and Training -
Grants to operate programs of employment and opportunities, as well
as academic enrichment for economically disadvantaged youth during the
summer months.
- Native Americans - Grants to Indian tribes
and other Native American groups to provide training, work experience,
and other employment-related services to Native Americans.
- Migrant and Seasonal Farm Workers - Grants
to public agencies and nonprofit groups to provide training and other
employability development services to economically disadvantaged families
whose principal livelihood is gained in migratory and other forms of
seasonal farm work.
- Veterans Employment - Grants or contracts
to provide disabled, Vietnam era, and recently separated veterans with
programs to meet their unique employment and training needs.
- National Activities - Provides program
support for JTPA activities and nationally administered programs for
segments of the population that have special disadvantages in the labor
market.
Trade Act of 1974
- Trade Adjustment Assistance - Adjustment
assistance, including cash weekly benefits, training, job search, and
relocation allowances provided to workers as authorized by the Trade Act
of 1974, as amended.
- North American Free Trade Agreement (NAFTA) -
Transition adjustment assistance, including weekly cash benefits, training,
job search, and relocation allowances provided to workers determined
to be adversely affected as a result of the NAFTA as authorized by the
Trade Act of 1974, as amended.
School-To-Work Opportunities Act
- School-To-Work Opportunities - Grants to States and localities,
jointly administered by the DOL and U.S. Department of Education to
build systems that provide youth with the knowledge and skills necessary
to make an effective transition from school to careers through work-based
learning, school-based education, and connecting activities.
Balanced Budget Act of 1997
- Welfare-To-Work Opportunities - Grants to States and localities,
jointly administered by the DOL and U.S. Department of Health and Human
Services to build programs to provide recipients receiving assistance
under State funded programs with the knowledge and skills necessary to
make an effective transition to unsubsidized employment opportunities.
Veterans' Employment and Training Service
The mission of Veterans' Employment and Training Service (VETS) is to
provide veterans and transitioning service members with the resources
and services to succeed in the 21st Century workforce, by maximizing
their employment opportunities, protecting their employment rights, and
meeting labor market demands with qualified veterans. The Agency's vision
is embodied in this statement: Veterans Succeeding in the 21st Century
Workforce.
VETS can be classified into two main areas, Career Counseling and Employment
Services, and Transition and Reemployment Services. Brief descriptions
follow:
Career Counseling and Employment Services
Disabled Veterans Outreach Program Specialist (DVOP) - This
program is codified at 38 U.S.C. 4103A. DVOP grants are made to State
Workforce Agencies (SWAs) according to a distribution formula prescribed
by law. DVOP staff provide counseling, assessment, lifelong learning skills
and/or referral to training for veterans, particularly those with disabilities
or recently separated from the military.
Local Veterans' Employment Representative (LVER) -
This program is codified at 38 U.S.C. 4104. The program provides grants
to SWAs for the appointment of LVER staff positions identified in Job
Service local offices and One-Stop Career Centers to enhance the services
provided to veterans through oversight, technical support, and direct
provision of services. LVER staffs help veterans into
productive employment through lifelong learning services.
Homeless Veterans' Reintegration Project (HVRP) - The
HVRP, codified at 38 U.S.C. 2021, provides employment assistance to homeless
veterans through grants to both urban and other areas. Veterans' Workforce Investment Program (VWIP) - The
VWIP, codified at 29 U.S.C. 2913, provides targeted veterans training
and/or employment opportunities. The program targets service connected
disabled veterans, recently separated, campaign badge veterans and veterans
with significant employment barriers. Transition and Reemployment Services
Transition Assistance Program (TAP) -
Authority for TAP is provided in 38 U.S.C. 4215 and 10 U.S.C. 1144. TAP
operates as a partnership between the Departments of Labor, Defense, and
Veterans Affairs. This partnership also exists at the local level, where
memoranda of understanding spell out the responsibilities of SWAs, military
installations, VETS staff and VA facilities. The program provides separating
service members and their spouses or individuals retiring from military
service with career counseling and training on becoming productive members
of society through employment. TAP workshops are provided throughout the
Nation and overseas.
Uniformed Services Employment and Reemployment Rights and Veteran's
Preference Rights (USERRA) - is codified at 38 U.S.C. Chapter
43. The Uniformed Services Employment and Reemployment Rights Act of
1994 (USERRA) succeeded Veterans' Reemployment Rights statutes. USERRA
continues to protect civilian job rights and benefits for veterans,
members of the National Guard and Reserves. Veteran's Preference for
Federal employment is codified in 5 U.S.C. 2108. VETS educates both
employee and employer so they better understand the rights of the individuals
and promotes a more productive relationship between employer and employee.
The full cost of VETS major programs is presented below. Full costs include
all direct program costs and those indirect costs which can reasonably
be assigned or allocated to the program.
(Dollars in thousands) |
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Program Expenses |
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Career Counseling and Employment Services |
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Disabled Veterans Outreach Program |
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Local Veterans' Employment Representative |
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Transition and Reemployment Services |
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A summary of program outputs is presented below. |
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Program Outputs |
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2004 | |
2003 | |
2002 | |
2001 |
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Disabled Veterans Outreach Program |
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Participants employed |
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Disabled veterans |
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Special disabled veterans |
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Participants assisted |
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Local Veterans' Employment Representative |
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Participants employed |
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Disabled veterans |
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Special disabled veterans |
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Participants assisted |
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Transition and Reemployment Services |
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Participants served |
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Workshops |
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Uniformed Services Employment and Reemployment |
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Briefings, presentations, and technical assistance |
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Individuals briefed or assisted |
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* - Projected data. |
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na - Data not available. |
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SOCIAL INSURANCE PROGRAMS
The Federal Accounting Standards Advisory Board (FASAB) has classified
certain government income transfer programs as social insurance programs.
Recognizing that these programs have complex characteristics that do not
fit traditional accounting models, the FASAB has developed accounting
standards for social insurance programs which require the presentation
of supplementary information to facilitate the assessment of the program's
long term sustainability.
The U.S. Department of Labor operates two programs classified under Federal
accounting standards as social insurance programs, the Unemployment Insurance
Program and the Black Lung Disability Benefits Program. Presented below
is the supplementary information for the two programs.
Unemployment Insurance Program
The Unemployment Insurance (UI) Program was created in 1935 to provide
income assistance to unemployed workers who lose their jobs through no
fault of their own. The program protects workers during temporary periods
of unemployment through the provision of unemployment compensation benefits.
These benefits replace part of the unemployed worker's lost wages and,
in so doing, stabilize the economy during recessionary periods by increasing
the unemployed's purchasing power. The UI program operates counter cyclically,
with benefits exceeding tax collections during recessionary periods and
UI tax revenues exceeding benefit payments during periods of recovery. Program Administration and Funding
The UI program is administered through a unique system of Federal-State
partnerships, established in Federal law but executed through conforming
State laws by State officials. The Federal government provides broad policy
guidance and program direction through the oversight of the U.S. Department
of Labor, while program details are established through individual State
UI statutes, administered through State UI agencies.
Federal and State Unemployment Taxes
The UI program is financed through the collection of Federal and State
unemployment taxes levied on subject employers and deposited in the Unemployment
Trust Fund (UTF). The UTF was established to account for the receipt,
investment and disbursement of unemployment taxes. Federal unemployment
taxes are used to pay for the administrative costs of the UI program,
including grants to each State to cover the costs of State UI operations
and the Federal share of extended UI benefits. Federal unemployment taxes
are also used to maintain a loan account within the UTF, from which insolvent
States may borrow funds to pay UI benefits. State UI taxes are used exclusively
for the payment of regular UI benefits, as well as the State's share of
extended benefits.
Federal Unemployment Taxes
Under the provisions of the Federal Unemployment Tax Act (FUTA), a Federal
tax is levied on covered employers, at a current rate of 6.2% of the first
$7,000 in annual wages paid to each employee. This Federal tax rate is
reduced by a credit of up to 5.4%, granted to employers paying State UI
taxes under conforming State UI statutes. Accordingly, in conforming States,
employers pay an effective Federal tax of 0.8%. Federal unemployment taxes
are collected by the Internal Revenue Service.
State Unemployment Taxes
In addition to the Federal tax, individual States finance their UI programs
through State tax contributions from subject employers based on the wages
of covered employees. (Three States also collect contributions from employees).
Within Federal confines, State tax rates are assigned in accordance with
an employer's experience with unemployment. Actual tax rates vary greatly
among the States and among individual employers within a State. At a minimum,
these rates must be applied to the Federal tax base of $7,000; however,
States may adopt a higher wage base than the minimum established by FUTA.
State UI agencies are responsible for the collection of State unemployment
taxes.
Unemployment Trust Fund
Federal and State UI taxes are deposited into designated accounts within
the Unemployment Trust Fund. The UTF was established under the authority
of Title IX, Section 904 of the Social Security Act of 1935, as amended,
to receive, hold, invest, loan and disburse Federal and State UI taxes.
The U.S. Department of the Treasury acts as custodian over monies deposited
into the UTF, investing amounts in excess of disbursing requirements in
Treasury securities. The UTF is comprised of the following accounts:
Federal Accounts
The Employment Security Administration Account (ESAA) was established
pursuant to Section 901 of the Act. All tax receipts collected under the
Federal Unemployment Tax Act (FUTA) are appropriated to the ESAA and used
to pay the costs of Federal and State administration of the unemployment
insurance program and veterans' employment services, as well as 97 percent
of the costs of the State employment services. Excess balances in ESAA,
as defined under the Act, are transferred to other Federal accounts within
the Fund, as described below.
The Federal Unemployment Account (FUA) was established pursuant to Section
904 of the Act. FUA is funded by any excesses from the ESAA as determined
in accordance with Section 902 of the Act. Title XII, Section 1201 of
the Act authorizes the FUA to loan Federal monies to State accounts that
are unable to make benefit payments because the State UI account balance
has been exhausted. Title XII loans must be repaid with interest. The
FUA may borrow from the ESAA or EUCA, without interest, or may also receive
repayable advances, with interest, from the general fund of the U.S. Treasury,
when the FUA has a balance insufficient to make advances to the States.
The Extended Unemployment Compensation Account (EUCA) was established
pursuant to Section 905 of the Act. EUCA provides for the payment of extended
unemployment benefits authorized under the Federal-State Extended Unemployment
Compensation Act of 1970, as amended. Under the extended benefits program,
extended unemployment benefits are paid to individuals who have exhausted
their regular unemployment benefits. These extended benefits are financed
one-half by State unemployment taxes and one-half by FUTA taxes from the
EUCA. The EUCA is funded by a percentage of the FUTA tax transferred from
the ESAA in accordance with Section 905(b)(1) and (2) of the Act. The
EUCA may borrow from the ESAA or the FUA, without interest, or may also
receive repayable advances from the general fund of the Treasury when
the EUCA has a balance insufficient to pay the Federal share of extended
benefits. During periods of sustained high unemployment, the EUCA may
also receive payments and non-repayable advances from the general fund
of the Treasury to finance emergency unemployment compensation benefits.
Emergency unemployment benefits require Congressional authorization.
The Federal Employees Compensation Account (FECA) was established pursuant
to Section 909 of the Act. The FEC account provides funds to States for
unemployment compensation benefits paid to eligible former Federal civilian
personnel and ex-service members. Generally, benefits paid are reimbursed
to the Federal Employees Compensation Account by the various Federal agencies.
Any additional resources necessary to assure that the account can make
the required payments to States, due to the timing of the benefit payments
and subsequent reimbursements, will be provided by non-repayable advances
from the general fund of the Treasury.
State Accounts
Separate State Accounts were established for each State and territory
depositing monies into the Fund, in accordance with Section 904 of the
Act. State unemployment taxes are deposited into these individual accounts
and may be used only to pay State unemployment benefits. States may receive
repayable advances from the FUA when their balances in the Fund are insufficient
to pay benefits.
Railroad Retirement Accounts
The Railroad UI Account and Railroad UI Administrative Account were established
under Section 904 of the Act to provide for a separate unemployment insurance
program for railroad employees. This separate unemployment insurance program
is administered by the Railroad Retirement Board, an agency independent
of DOL. DOL is not responsible for the administrative oversight or solvency
of the railroad unemployment insurance system. Receipts from taxes on
railroad payrolls are deposited in the Railroad UI Account and the Railroad
UI Administrative Account to meet benefit payment and related administrative
expenses.
UI Program Benefits
The UI program provides regular and extended benefit payments to eligible
unemployed workers. Regular UI program benefits are established under
State law, payable for a period not to exceed a maximum duration. In 1970,
Federal law began to require States to extend this maximum period of benefit
duration by fifty percent during periods of high unemployment. These extended
benefit payments are paid equally from Federal and State accounts.
Regular UI Benefits
There are no Federal standards regarding eligibility, amount or duration
of regular UI benefits. Eligibility requirements, as well as benefit amounts
and benefit duration are determined under State law. Under State laws,
worker eligibility for benefits depends on experience in covered employment
during a past base period, which attempts to measure the workers' recent
attachment to the labor force. Three factors are common to State eligibility
requirements: (1) a minimum duration of recent employment and earnings
during a base period prior to unemployment, (2) unemployment not the fault
of the unemployed, and (3) availability of the unemployed for work.
Benefit payment amounts under all State laws vary with the worker's base
period wage history. Generally, States compute the amount of weekly UI
benefits as a percentage of an individual's average weekly base period
earnings, within certain minimum and maximum limits. Most States set the
duration of UI benefits by the amount of earnings an individual has received
during the base period. Currently, almost all States have established
the maximum duration for regular UI benefits at 26 weeks. Regular UI benefits
are paid by the State UI agencies from monies drawn down from the State's
account within the Unemployment Trust Fund.
Extended UI Benefits
The Federal/State Extended Unemployment Compensation Act of 1970 provides
for the extension of the duration of UI benefits during periods of high
unemployment. When the insured unemployment level within a State, or in
some cases total unemployment, reaches certain specified levels, the State
must extend benefit duration by fifty percent, up to a combined maximum
of 39 weeks. Fifty percent of the cost of extended unemployment benefits
is paid from the Extended Unemployment Compensation Account within the
UTF, and fifty percent by the State, from the State's UTF account.
Emergency UI Benefits
During prolonged periods of high unemployment, Congress may authorize
the payment of emergency unemployment benefits to supplement extended
UI benefit payments. Emergency benefits are currently being paid under
the Temporary Extended Unemployment Compensation Act. The program is currently
phasing out. No new claimants have been allowed to enter the program since
January 2004 and no benefits will be paid after January 2005. Emergency
benefit payments totaling $4.2 and $10.7 billion were paid in FY 2004
and 2003, respectively, and payments in excess of $23 billion have been
paid since inception of the program in March 2002. The benefits under
this program are paid from Federal unemployment taxes and general fund
appropriations in EUCA.
Federal UI Benefits
Unemployment benefits to unemployed Federal workers are paid from the
Federal Employment Compensation Account within the Unemployment Trust
Fund. These benefit costs are reimbursed by the responsible Federal agency
and are not considered to be social insurance benefits. Federal unemployment
compensation benefits are not included in this discussion of social insurance
programs.
Program Finances and Sustainability
At September 30, 2004, total assets within the UTF exceeded liabilities
by $45.4 billion. This fund balance approximates the accumulated surplus
of tax revenues and earnings on these revenues over benefit payment expenses
and is available to finance benefit payments in future periods when tax
revenues may be insufficient. Treasury invests this accumulated surplus
in Federal securities. The net value of these securities at September
30, 2004 was $45.2 billion. These investments accrue interest, which is
distributed to eligible State and Federal accounts within the UTF. Interest
income from these investments during FY 2004 was $2.4 billion. Federal
and State UI tax and reimbursable revenues of $39.2 billion and regular,
extended and emergency benefit payment expense of $41.4 billion were recognized
for the year ended September 30, 2004.
As discussed in Note 1.L.1 to the consolidated financial statements,
DOL recognized a liability for regular, extended and temporary extended
unemployment benefits to the extent of unpaid benefits applicable to the
current period. Accrued unemployment benefits payable at September 30,
2004 were $1.1 billion.
Effect of Projected Cash Inflows and Outflows on the Accumulated Net
Assets of the UTF
The ability of the UI program to meet a participant's future benefit
payment needs depends on the availability of accumulated taxes and earnings
within the UTF. The Department measures the effect of projected benefit
payments on the accumulated net assets of the UTF, under an open group
scenario, which includes current and future participants in the UI program.
Future estimated cash inflows and outflows of the UTF are tracked by the
Department for budgetary purposes. These projections allow the Department
to monitor the sensitivity of the UI program to differing economic conditions,
and to predict the program's sustainability under varying economic assumptions.
The significant assumptions used in the projections include total unemployment
rates, civilian labor force levels, percent of unemployed receiving benefits,
total wages, distribution of benefit payments by state, state tax rate
structures, state taxable wage bases and interest rates on UTF investments.
Presented on the following pages is the effect of projected economic
conditions on the net assets of the UTF, excluding the Federal Employees
Compensation Account.
Expected Economic Conditions
Charts I and II graphically depict the effect of expected economic conditions
on the UTF over the next ten years.
Projected Cash Inflows and Outflows Under Expected Economic Conditions
Chart I depicts projected cash inflows and outflows of the UTF over the
next ten years under expected economic conditions. Both cash inflows and
cash inflows excluding interest earnings are displayed. Current estimates
by the Department are based on an expected unemployment rate of 5.35%
during FY 2005, decreasing to 5.10% in FY 2008 and thereafter. Total cash
inflows exceed total cash outflows for all years projected. The net inflow
peaks at $7.6 billion in FY 2007 and decreases to $3.0 billion in FY 2010,
indicating that States have replenished their funds to desired levels.
These projections, excluding interest earnings, indicate net cash inflows
from FY 2005 to FY 2009, then net cash outflows for four of the next five
years. This crossover back to net outflows implies that the fund must
rely on interest earnings to keep growing.
Chart I
Text only
Effect of Expected Cash Flows on UTF Assets
Chart II demonstrates the effect of these expected cash inflows and outflows
on the net assets of the UTF over the ten year period ended September
30, 2014. Yearly projected total cash inflows, including interest earnings,
and cash outflows are depicted, as well as the net effect of this cash
flow on UTF assets.
Total cash inflows exceed cash outflows for all years projected, with
this excess peaking in 2007. Starting at $51.7 billion in FY 2005, net
UTF assets increase by 87% over the next nine years to $96.5 billion by
the end of FY 2014.
Chart II
Text only
Recessionary Scenarios
Charts III and IV demonstrate the effect on accumulated UTF assets of
projected total cash inflows and cash outflows of the UTF over the ten
year period ending September 30, 2014, under mild and severe recession
scenarios. Each scenario uses an open group, which includes current and
future participants in the UI program. Charts III and IV assume increased
rates of unemployment during mild and deep periods of recession.
Effect on UTF Assets of Mild Recession
The Department projects the effect of moderate recession on the cash inflows
and outflows of the UTF. Under this scenario, which utilizes an unemployment
rate peaking at 7.43% in FY 2007, net cash outflows are projected in FY
2006 through FY 2008. Net cash inflows are reestablished in FY 2009 and
peak in FY 2012 with a drop in the unemployment rate to 5.18%. Net assets
never fall below $33.9 billion and are within $6.4 billion of the balance
under expected economic conditions by 2014. The crossover pattern remains
the same when interest earnings are excluded.
Chart III
Text only
Effect on UTF Assets of Deep Recession
The Department also estimates the effect of severe recession on the cash
inflows and outflows of the UTF. This scenario assumes a rising unemployment
rate peaking at 10.15% in FY 2008. Under this scenario, net cash outflows
are projected in FY 2006 through FY 2009, with the fund in a deficit situation
from 2008 to 2012. The net assets of the UTF decrease from $50.9 billion
in FY 2005 to negative $28.9 billion in 2009, a decline of $79.8 billion.
State accounts without sufficient reserve balances to absorb negative
cash flows would be forced to borrow funds from the FUA to meet benefit
payment requirements. State borrowing demands could also deplete the FUA,
which borrows from the ESAA and the EUCA until they are depleted. The
FUA would then require advances from the general fund of the U.S. Treasury
to provide for State borrowings. (See discussion of State solvency measures
following.)
Net cash inflows are reestablished in FY 2010, with a drop in the unemployment
rate to 7.28%. By the end of FY 2014, this positive cash flow has replenished
UTF account balances to $38.7 billion at a growth rate higher than prior
to the recession. This example demonstrates the counter cyclical nature
of the UI program, which experiences net cash outflows during periods
of recession, to be replenished through net cash inflows during periods
of recovery. However, at the end of the projection period, net assets
are still $57.8 billion less than under expected economic conditions.
Chart IV
Text only
Tables containing the total yearly cash inflow, interest
earnings and cash outflow for each scenario are presented
in the following page.
States Minimally Solvent
Each State's accumulated UTF net assets or reserve balance should provide
a defined level of benefit payments over a defined period. To be minimally
solvent, a State's reserve balance should provide for one year's projected
benefit payment needs based on the highest levels of benefit payments
experienced by the State over the last twenty years. A ratio of 1.0 or
greater prior to a recession indicates a state is minimally solvent. States
below this level are vulnerable to exhausting their funds in a recession.
States exhausting their reserve balance must borrow funds from the Federal
Unemployment Account (FUA) to make benefit payments. The Missouri, New
York and Minnesota state accounts had loans payable to FUA at the end
of FY 2004. In addition, Texas, Illinois and North Carolina had outstanding
debts to other sources. During periods of high-sustained unemployment,
balances in the FUA may be depleted. In these circumstances, FUA is authorized
to borrow from the Treasury general fund.
Chart V presents the State by State results of this analysis at September
30, 2004, in descending order, by ratio. As the table below illustrates,
32 state funds were below minimal solvency ratio at September 30, 2004.
Chart V
Minimally
Solvent |
Not Minimally
Solvent |
State |
Ratio |
State |
Ratio |
New Mexico |
2.99 |
Tennessee |
0.99 |
Mississippi |
2.78 |
Florida |
0.96 |
Vermont |
2.08 |
Kansas |
0.96 |
Maine |
1.76 |
Nebraska |
0.91 |
Virgin Islands |
1.76 |
Maryland |
0.86 |
New Hampshire |
1.66 |
Wisconsin |
0.84 |
Hawaii |
1.60 |
South Carolina |
0.81 |
Montana |
1.60 |
Alaska |
0.80 |
Iowa |
1.59 |
Washington |
0.80 |
Wyoming |
1.59 |
West Virginia |
0.78 |
Delaware |
1.56 |
South Dakota |
0.73 |
Arizona |
1.54 |
Alabama |
0.66 |
Louisiana |
1.50 |
Kentucky |
0.61 |
District of Columbia |
1.47 |
North Dakota |
0.56 |
Utah |
1.35 |
Connecticut |
0.55 |
Puerto Rico |
1.26 |
Rhode Island |
0.52 |
Oregon |
1.23 |
Idaho |
0.49 |
Oklahoma |
1.22 |
New Jersey |
0.45 |
Indiana |
1.11 |
Virginia |
0.45 |
Nevada |
1.10 |
Ohio |
0.44 |
Georgia |
1.07 |
Michigan |
0.42 |
|
|
Arkansas |
0.31 |
|
|
Pennsylvania |
0.29 |
|
|
Colorado |
0.19 |
|
|
California |
0.17 |
|
|
Massachusetts |
0.08 |
|
|
North Carolina |
0.00 |
|
|
Illinois |
0.00 |
|
|
Minnesota |
0.00 |
|
|
Missouri |
0.00 |
|
|
New York |
0.00 |
|
|
Texas |
0.00 |
Black Lung Disability Benefit Program
The Black Lung Disability Benefit Program provides for compensation,
medical and survivor benefits for eligible coal miners who are disabled
due to pneumoconiosis (black lung disease) arising out of their coal mine
employment. The U.S. Department of Labor operates the Black Lung Disability
Benefit Program. The Black Lung Disability Trust Fund (BLDTF) provides
benefit payments to eligible coal miners disabled by pneumoconiosis when
no responsible mine operator can be assigned the liability.
Program Administration and Funding
Black lung disability benefit payments are funded by excise taxes from
coal mine operators based on the sale of coal, as are the fund's administrative
costs. These taxes are collected by the Internal Revenue Service and transferred
to the BLDTF, which was established under the authority of the Black Lung
Benefits Revenue Act, and administered by the U.S. Department of the Treasury.
The Black Lung Benefits Revenue Act provides for repayable advances to
the BLDTF from the general fund of the Treasury, in the event that BLDTF
resources are not adequate to meet program obligations.
Program Finances and Sustainability
At September 30, 2004, total liabilities of the Black Lung Disability
Trust Fund exceeded assets by $8.7 billion. This deficit fund balance
represented the accumulated shortfall of excise taxes necessary to meet
benefit payment and interest expenses. This shortfall was funded by repayable
advances to the BLDTF, which are repayable with interest. Outstanding
advances at September 30, 2004 were $8.7 billion, bearing interest rates
ranging from 5.375 to 13.875 percent. Excise tax revenues of $566.0 million,
benefit payment expense of $344.3 million and interest expense of $650.6
million were recognized for the year ended September 30, 2004.
As discussed in Note 1.L.3, DOL recognized a liability for disability
benefits to the extent of unpaid benefits applicable to the current period.
Accrued disability benefits payable at September 30, 2004 were $25.3 million.
Although no liability was recognized for future payments to be made to
present and future program participants beyond the due and payable amounts
accrued at year end, future estimated cash inflows and outflows of the
BLDTF are tracked by the Department for budgetary purposes. The significant
assumptions used in the projections are coal production estimates, the
tax rate structure, number of beneficiaries, life expectancy, medical
costs and the interest rate on new repayable advances from Treasury. These
projections are sensitive to changes in the tax rate and changes in interest
rates on repayable advances from Treasury.
These projections, made over the thirty-six year period ending September
30, 2040, indicate that cash inflows from excise taxes will exceed cash
outflows for benefit payments and administrative expenses for each period
projected. Cumulative net cash inflows are projected to reach $16.2 billion
by the year 2040. However, when interest payments required to finance
the BLDTF's repayable advances are applied against this surplus cash inflow,
the BLDTF's cash flow turns negative during each of the thirty-six periods
included in the projections. Net cash outflows after interest payments
are projected to reach $47.2 billion by the end of the year 2040, increasing
the BLDTF's deficit to $55.9 billion at September 30, 2040. (See Chart
I on following page.)
The net present value of future benefit payments for the thirty-six year
period ending 2040 is $2.9 billion. The net present value of future excise
taxes for the thirty-six year period is $7.7 billion which results in
a $4.8 billion excess of excise taxes over benefit payments. However,
the net present value of total cash outflows, including interest payments
and administrative costs, is $23.6 billion resulting in an excess of cash
outflows over excise taxes of $15.9 billion. The interest rate used for
net present value is 5.25 percent.
Chart I
Text only
The projected decrease in cash inflows in the year 2014 and thereafter
is the result of a scheduled reduction in the tax rate on the sale of
coal. This rate reduction is projected to result in a fifty-eight percent
decrease in the amount of excise taxes collected between the years 2013
and 2015. The cumulative effect of this change is estimated to be in excess
of $10.9 billion by the year 2040.
Yearly cash inflows and outflows are presented in the table on the following
page.
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