U.S. DEPARTMENT OF LABOR Employment and Training Administration Washington, D. C. 20210 |
CLASSIFICATION
UI |
| CORRESPONDENCE
SYMBOL
TEURA | |
| ISSUE
DATE
April 13, 1994 | |
| RESCISSIONS
| EXPIRATION
DATE
|
DIRECTIVE |
: |
UIS INFORMATION BULLETIN NO. 09-94 |
TO |
: |
ALL REGIONAL ADMINISTRATORS |
FROM |
: |
MARY ANN WYRSCH |
SUBJECT |
: |
Administrative Financing Initiative (AFI) Update |
Background. Since early calendar year (CY) 1992, the Unemployment Insurance Service (UIS) has been designing and developing an administrative financing proposal as required by Public Law 102-164, which was enacted in November 1991. The law required that a report be provided to the Congress by December 31, 1994 and allowed for a one-year review period before the Department could implement the proposal.
The building blocks of the proposal include the development of national unit costs (NUCs) for the benefit and tax functions. It took most of CY 1993 to obtain the necessary cost information from the States in order to calculate these NUCs. With the numbers provided by the States, UIS calculated AFI allocations for several years. This analysis provided the first indication of how the proposed system might allocate resources since, until then, the work had been done primarily at the theoretical level.
On December 7 and 8, 1993, UIS presented the entire theoretical construct of the proposal, details of the methodology, and sample allocations using the new approach for the first time to the AFI work group at the Interstate Conference of Employment Security Agencies (ICESA). Since then, the sample allocations and methodology have been circulated among all the States.
Current Status. As a result of the feedback from the ICESA work group at the December meeting, UIS changed the original AFI methodology in the following ways:
Contingency will be based on a "step-down" procedure. In other words, the first 10 percent of workload above base will be funded at 90 percent of the States' base unit cost; the next 10 percent of workload above base will be funded at 80 percent of base unit cost, etc. This formula will bottom out at 60 percent of base unit cost.
AFI will use a national cost adjustment factor instead of a unique factor for each State.
The "Small State" adjustment factor was increased.
Additional State cost data that were not available prior to the ICESA meeting have been factored in.
Outlook. The general reception that the Regions and States have given AFI to date indicates that further work needs to be done to address concerns that have been raised. To resolve these problems, UIS is conducting further analysis on the following issues:
the redistribution of resources among States;
how the formula affects individual States;
possible adjustments to how base AWIU is determined;
possible adjustments to the Benefit Adustment Factor;
phase-in and hold-harmless methodologies.
In addition, further input from States and other stakeholders is necessary in order to refine the proposed methodology.
Revised Schedule. The project plan provided for UIS to publish in April 1994 a Federal Register notice (FRN) which would describe the process and sample allocations and solicit comments from stakeholders, and then to submit by December 31, 1994 a final report to Congress; however, in view of the above considerations, UIS has decided, with ICESA concurrence, that a one-year delay in the report would be prudent.
Therefore, the revised AFI schedule is as follows:
| Completion Date | Item |
|---|---|
| May 1994 | Issue UIS Information Bulletin whichdescribes AFI in simple terms. |
| May 1994 | Issue a comprehensive reference paper for individuals seeking more detailed information. |
| May - Sept. 1994 | Discuss AFI with States and receive feedback. Analyze possible modifications. |
| Sept. - Oct. 1994 | Finalize modifications to AFI. |
| Nov. - Jan. 1995 | Develop and publish FRN for comment. |
| Jan. - Nov. 1995 | Make changes to AFI based on comments to FRN. |
| Dec. 1995 | Submit final report to Congress. |
Comments. We welcome any comments, constructive criticism, oralternative approaches to the methodology or any of its components. We will address these concerns and provide additional feedback during the year throughfuture UIS Information Bulletins.
Please address any questions or comments to Bob DesLong-champs at (202)219-4620 or Tim Felegie at (202)219-4359.