Filing for unemployment in 2023? Here's how a change in the law could affect you

Jan. 3—Kentucky will go from among one of the most generous states for unemployment benefits to one of the least starting in 2023 — thanks to House Bill 4 which took effect on Jan. 1.

The changes to unemployment benefits brought by House Bill 4 will mostly affect Kentuckians whenever they file for Unemployment Insurance (UI) — a process that many became familiar with during the COVID-19 pandemic.

Instead of 26 weeks of benefits, unemployed Kentuckians will get just 12 weeks under the new law.

It's the biggest change in Kentucky unemployment rules in 84 years.

Changes also include the amount disbursed through unemployment benefits and stricter stipulations for the jobs Kentuckians will have to take. Lawmakers have also changed the amount of time these benefits can be disbursed, relative to the state's unemployment rate.

Under the new law, the lower the unemployment rate in Kentucky — the shorter amount of time Kentukcians can claim benefits. However, if unemployment inches up — so will benefits.

Sources from The Kentucky Chamber Center for Policy and Research state that House Bill 4 will improve the strength of the UI Trust Fund, which is necessary due to Kentucky's long history of insolvency.

"Federally-designated solvency is based on the ability of a state's trust fund to pay out benefits to unemployment claimants during recessions. Kentucky's UI Trust Fund has not met federally-designated solvency levels since 1974," Charles Aull, Executive Director of The Kentucky Chamber Center for Policy and Research, explained in a Dec. 2022 article. "By these standards, Kentucky is not in a favorable position, trailing only behind Pennsylvania, which last reached solvency in 1971."

The notion is not so far-fetched, as it was during the height of the COVID-19 pandemic that Kentucky's UI Trust Fund was depleted, running down a balance of more than $600 million. Kentucky was one of several states that received a Title XII advance to continue paying out benefits. These federal advances can be costly, as they have to be repaid by the borrowing states, sometimes with interest.

While Aull reported more than $700 million in the Fund, he reported that Kentucky's Trust Fund had less than a quarter of the funds needed to reach federal solvency minimums, and that its solvency rating was among the bottom half of states.

What changes can I expect?

As of Jan. 1, unemployment insurance can now be paid for up to 12 weeks — down over half from the previous 26 week period established in 1938 when the program began.

It has always been an expectation for individuals to look for employment opportunities while they receive unemployment insurance. However, there were more broad terms to doing so before the enacting of House Bill 4. For example, only one verifiable job search activity had to be done per week under the previous law. Now, those claiming benefits must do five, with three of those activities consisting of formally submitting an application for employment.

The following activities are deemed suitable and could be found on documentation being disbursed by The Kentucky Career Center: Formally submitting an application for employment (either in person or online), interviewing for employment (either in person or online), job shadowing, attending a job fair or networking event hosted by state, local government or a business organization, participating in a job search skills workshop or seminar, participating in a Kentucky Career Center or partner programs training related to employment or the search for employment.

Those receiving benefits are responsible for keeping various types of records, such as copies of application submission emails or texts, certificates of completion from Kentucky Career Center staff, and documentation of a scheduled interview. If those records are requested, but unavailable, it will be assumed that the claimant did not complete them, and they will face consequences, such as losing benefits and also being forced to repay benefits.

Newly established law also states that after six weeks of receiving unemployment insurance benefits, a claimant must take the first job that is offered if it pays at least 20% more than their weekly benefit amount and can either be done remotely or is located within 30 miles of their residence. The worker just has to be able and qualified to perform the duties of the job, even if they do not have related experience of training.

Documentation from The Kentucky Career Center gives the following example: If your weekly unemployment benefit is $300 per week, then after six weeks you will be required to take any job within 30 miles that pays at least $360 per week.

The new rules apply to Kentuckians who lose their job through no fault of their own.

Here is how an unemployment situation could hypothetically pan out according to the Kentucky Career Center Unemployment Insurance Benefits Calculator — a tool intended to be a quick reference for determining approximate potential benefit amounts.

Theoretically, if a school teacher was laid off, they could file for unemployment insurance. If they reported they consistently made $30,000 last year — or $7,500 per quarter— their weekly benefits amount would be approximately $358 with a maximum benefits amount of $9,308. This means that after they reached their six week mark, they could be forced to accept any job that paid them at least $429.60 a week, or $20,620.80 — a loss of almost $10,000 every year. The hourly amount would average out to $10.74 for a 40-hour workweek.

Whatever job they took would not have to be in their chosen field. If they lived in Richmond, they could be forced to take a job in Berea at $12 an hour — if they were offered a position.

Benefits from both sides

In a Feb. 2022 article, Dustin Pugel, Policy Director at the Kentucky Center for Economic Policy claims that the flexibility of the previous plan lent itself to economic growth and job satisfaction, as poor skills-matching can cause a lower trajectory of lifetime earnings for skilled workers and unfilled spots for positions who need those skilled workers who are stuck in unrelated jobs due to the inaccessibility of UI benefits.

However, Aull asserts the new law will keep Kentucky jobs competitive, as trust fund health is one of the key factors in determining an employer's UI tax contribution rate in Kentucky.

"Maintaining competitive UI tax rates is important to the state's broader economic competitiveness," said Aull. "A company's UI tax burden is one of numerous factors that shape employer location or investment decisions and contributes to the broader cost of doing business in a state."

Alternatively, Pugel finds House Bill 4 to be fatally flawed for working Kentuckians.

In an Oct. 2022 article, he argues the calculating system is flawed, with benefits being based on the state unemployment rate from months earlier.

For example, he says, the average unemployment rate from July-September will be applied for the duration of benefits for claims filed the following January-June, and the average unemployment rate from January-March will be applied for the duration of benefits for claims filed the following July-December.

According to the article, "during the depth of the 2020 downturn, when unemployment rose above 16% in April, laid-off Kentuckians would have only had 12 weeks of benefits available to them because the number would have been set based on unemployment rates from the third quarter of 2019."

These numbers also disproportionately affect poor communities, as the statistics for UI benefits are actually drawn from statewide numbers, which means that they do not differentiate between different communities.

Pugel argues that a prime example of this is found in Kentucky's Black population, who made up 9.7% of the state workforce in 2021, but comprised 17% of unemployment insurance claims.

Know before you vote

Representatives Deanna Frazier Gordon and Bill Wesley voted no to House Bill 4, while Senator Jared Carpenter voted yes for House Bill 4. Governor Andy Beshear vetoed this bill, but his veto was overridden by a Republican majority.

Before the Legislative Session begins on Jan. 3, take the opportunity to see who represents you using the Find your Legislator tool: https://apps.legislature.ky.gov/findyourlegislator/findyourlegislator.html.

You can also track bills that matter to you using the Bill Watch tool: https://www.kentucky.gov/Services/Pages/billwatch.aspx.