Q&A: Dan McElroy on emergency unemployment benefits

Congress is now on recess, and one of the major pieces of legislation that did not pass the U.S. Senate was an extension of federal emergency unemployment benefits. Unless Congress acts, about 70,000 people in Minnesota could soon see their benefits expire. Between 500 and 900 Minnesotans a week exhaust all of their benefits.

Dan McElroy, commissioner of the Minnesota Department of Employment and Economic Development, spoke with MPR's Tom Crann about how the unemployment benefit system works. Below is an edited transcript of their conversation.

Tom Crann: First, could you briefly explain to us what extended unemployment benefits are?

Dan McElroy: The easiest way to think about it is that our basic program that we've had since 1935 provides 26 weeks of benefits to those who've lost their jobs through no fault of their own. That is what we had prior to this recession. It's what we've had for a long time during "normal" times.

As part of the stimulus act passed in February 2009, Congress extended that with a program called Emergency Unemployment Compensation. It expired at the end of last year and has twice been extended. The last extension concluded the first week in June. That provided three tiers of extended benefits, and those additional benefits are now in a phase-out period. So it's a little misleading to say they've ended, but they're being phased out. After someone had 26 weeks on the regular program they'd go into a tier of 20 weeks of emergency unemployment, followed by a tier of 14 weeks and the third tier of 13 weeks. Because of the phase-out, one cannot enter a new tier until or unless Congress should extend the program.

Crann: After the federal emergency benefits run out, what happens for unemployed Minnesotans?

McElroy: Then they'll move to a 13-week extended benefit. It comes from the state, it's in current law. It's triggered because our unemployment rates are above 6.5 percent. It gives people a final opportunity or time in which to find work. So our No. 1 message to people calling us or expressing concern is that unemployment insurance from the beginning was designed to be a temporary wage replacement while people found their next employment. It's extended during recessions because it takes longer to find a job.

Crann: How are unemployment benefits, whether emergency benefits or the standard ones, funded? Where does the money come from?

McElroy: All of the money for unemployment benefits comes from taxes paid for by employers. The 26 weeks that we refer to as regular unemployment insurance is paid for from a state unemployment tax account and the state trust fund. The extensions in the emergency unemployment are paid for entirely from the federal unemployment insurance trust account. And the program extended benefits, the regular statutory program triggered by high unemployment rates, is paid for under normal times 50 percent by state funds and 50 percent federal funds.

Crann: How many Minnesotans are affected by the fact that Congress has not passed an unemployment benefit extension?

McElroy: In the short term, we've seen what we call exhaustions -- people running out of benefits -- gradually increase. It had been running about 500 a week, but the last two weeks it's been about 900 a week. That will get higher as people use up their entitlement to 13 weeks of extended benefits. As of last Friday, there were just short of 70,000 people on the emergency unemployment program. Our hope of course is that many of them will get jobs prior to running out of benefits.

Crann: Do you think that Congress should act and that the federal government should extend unemployment benefits? Does that make it easier on states?

McElroy: It makes it easier on workers. I don't believe it should go on forever. That hasn't been our system. Our system has been an incentive to get people back to work. But we continue to be in a fairly deep recession; it takes a while for people to get back to work. The debate is whether or not the extender bill has to include dramatically more than unemployment and whether or not it's important to pay for the cost by offsetting other expenditures or whether paying for it in increased deficit is good public policy. Personally, I think we should find a way to pay for it, and that the emphasis should be focused on getting people back to work.

(Interview transcribed by MPR's Elizabeth Dunbar.)