WASHINGTON — The Bush administration will ask Congress on Monday to overhaul the nation's system of unemployment insurance, gradually shifting financial responsibility from the federal government to the states for the Depression-era program that remains a bedrock protection for middle-class workers.
The proposal is part of President Bush's 2003 budget, which calls for sharp cuts in the federal unemployment tax.
Under the plan, which has been kept closely under wraps, states would assume the unemployment insurance program's administrative costs. The U.S. Labor Department, however, would continue to oversee the program. And administration officials said there would be no reduction in unemployment benefits.
The plan to reduce the federal government's financial stake, even when couched as overdue reform, is certain to cause unease among many Democrats and organized labor.
Unemployment insurance is a jointly run program, with the federal government paying for most administrative costs and states financing the benefits, with each part funded by a separate payroll tax levied on employers.
The program has been under attack for years from all sides. State officials contend that red tape from Washington is often excessive. Worker advocates say the modern economy, which has created more part-time and low-paying jobs, requires a broader set of benefits. And many employers say that Washington holds on to too much of their payroll taxes.
"We believe it will make unemployment insurance benefits and employment services more responsive to the needs of employees and business," said Assistant Labor Secretary Emily Stover DeRocco. "It clearly will give states more flexibility."
Some argue that the federal government, in fact, should assume an even larger role in the program to ensure that states maintain financially stable, adequate benefit programs.
Just last week, New York and Texas disclosed that they need more than $1 billion combined from Washington to help bail out their unemployment funds. Other state funds also may be in a precarious position.
"The federal government should take more of a role in leading the federal-state unemployment system--not less," said David Socolow, who follows the issue as a legislative representative for the AFL-CIO.
Unemployment compensation is one of several friction points that are emerging between labor groups and the administration.
