PA UC Reform UC Fund Reforms > Pennsylvania’s Unemployment Compensation Debt Repayment and Trust Fund Solvency Restoration 1

UC Fund Reforms > The Situation: The recession Unemployment compensation (UC) benefits outpaced UC payments PA began borrowing from the federal government PA UC Reform 2

UC Fund Reforms > The Situation: PA – 3 rd largest debt, $3.9 billion as of May 31, 2012 Federal loan must be repaid by employers Tax on the loan is per-employee PA UC Reform 3

UC Fund Reforms > The Result: Debt - $3.9 billion as of May 31, 2012 Taxes – 2 additional employer taxes Structural insolvency – benefits outpace revenue PA UC Reform 4

UC Fund Reforms > The Reality: Pennsylvania’s unemployment federal debt created an escalating per-employee tax on employers that jeopardized jobs, left the fund insolvent, and put the resources needed for the unemployed at risk. PA UC Reform 5

UC Fund Reforms > Governor Corbett’s solution UC reforms: Helps employers create jobs and grow their businesses. Delivers a package that contains a comprehensive solution to pay the current debt and fix the structural imbalances of a flawed UC fund so that it remains a viable safety net for our citizens. PA UC Reform 6

UC Fund Reforms > The Solution Refinancing the debt: BONDS repay the entire debt Bonds issued at a low, fixed rate through the Pennsylvania Economic Development Financing Authority. The bonds will not be general obligation bonds, but rather revenue bonds with a designated funding source paid for solely by employers. Employers' payments will be stabilized. PA UC Reform 7

UC Fund Reforms > The Solution: Fixing the structural imbalance of revenue and benefits Employer tax changes: Increase the taxable wage base from $8,000 to $10,000 and the cap on the State Adjustment Factor will decrease from 1.5 percent to.75 percent over six years. This is a revenue neutral re-alignment. Adjust solvency trigger to 250 percent. Utilize the Interest Factor (capped at 1.1 percent) to service the bonds. Restore normal FUTA tax credits to employers. PA UC Reform 8

UC Fund Reforms > The Solution: Fixing the structural imbalance of revenue and benefits Employee tax changes: No change to the employee tax rate, but implement a process whereby solvency can be obtained and employee taxes will end. Adjust solvency trigger to 250 percent. PA UC Reform 9

Act XX of 2012 UC Fund Reforms > The Solution: Fixing the structural imbalance of revenue and benefits Benefits changes: Maximum weekly benefit remains frozen at $573 per week through Starting in 2013, institute a variable claim duration with a minimum duration of 18 times the claimant’s weekly benefit rate up to a maximum 26 times that same weekly benefit rate based on qualified credit weeks. Lower partial benefit credit from 40 percent to 30 percent with dollar-for- dollar reduction above 30 percent. 10

Act XX of 2012 UC Fund Reforms > The Solution: Fixing the structural imbalance of revenue and benefits Eligibility changes: Increase base-year wage requirement from an average of 37 percent outside the high quarter to 49.5 percent. Claimants benefit rate may be determined at the highest of the next two lower rates instead of the current three lower rates. Claimants must have six times covered employment to purge a non- monetary determination or qualify for a new UC benefit year. 11

Act XX of 2012 UC Fund Reforms > The Solution: Lessening the impact of any changes Current claimants are not affected. Less than 10 percent of all new claimants will be affected. A portion of the UC revenue has been set aside to fund training and employment initiatives to help as many Pennsylvanians as possible return to work. The updated eligibility requirements do not favor one income level or industry. 12

UC Fund Reforms > Pennsylvania’s Unemployment Compensation Trust Fund reform means jobs. The reforms responsibly repay our debt, make the UC system healthy without raising taxes on businesses and modernize eligibility requirements – making them fair and reasonable. PA UC Reform 13

UC Fund Reforms > Governor Corbett’s UC solution is unique. Pennsylvania is the only state to both eliminate such a large debt and establish fund solvency. PA UC Reform 14