formulas raised the maximum potential durations of benefits from 26 to 30 weeks, 26 to 39 weeks, and 18 to 20 weeks, respectively. One more State enacted an extended duration provision, making six States in all with such “standby” duration provisions.

In addition to changes resulting from new State legislation, the operation of the flexible maximum weekly benefit amount provisions of six State laws produced increases in their maximum. In these laws, the maximum weekly benefit amount is periodically computed and set as a specified percent of the statewide average weekly wage. Because of increased wage levels, two such States raised the maximum weekly amount by $1 on January 1, 1960, to $41 and $43; and on July 1, 1960, three States increased the maximum amount by $2 and one State by $3 to maximums ranging from $38 to $49.

State maximum basic weekly amounts as of July 1960 ranged from $26 to $55. In 17 States with nearly half of the Nation's covered workers, the maximum is now $40 or more. More than one-fourth of the covered workers are in the seven States with maximums of at least $45. These conditions are seen in the following tabulation. (In States which include allowances for dependents, the "basic" weekly benefit is the benefit for a claimant with no dependents, as defined by law.)

About 26 percent of the workers are in the nine States whose basic maximums are at least 50 percent of the statewide average weekly wages, as shown in the following table. The basic maximums range from 61 percent down to 28 percent of average weekly wages.

Under the formulas in most of the State laws, a worker will be compensated at one-half of his weekly wage loss if this amount is not above the maximum dollar rate given in the law. However, these specific maximums often fail to keep pace with increases in wages. Since in 26 States over half of all claimants were receiving the maximum weekly benefit amount, it can be assumed that many of them earned more than double that amount when they were working. Thus it is probable that in these States benefits for many claimants are less than half their full-time weekly wages.

Maximum duration of benefits, as shown in the following table, now ranges from 20 weeks in two States to 39 weeks in one State. Forty-two States, with 87 percent of the covered workers, have a maximum potential duration of 26 weeks or more.

In considering the duration of benefits in the 39 States which have variable duration, it should be remembered that the maximum duration for many claimants may be a great deal lower than the stated maximum. For instance, in one State, duration for a worker drawing the minimum weekly benefit amount is 6 weeks, in another it is 8 weeks, in two more, 9 weeks, and in 10 States it is 10 weeks. At other weekly benefit levels, duration may be even further below the maximum for the State.

Veterans, Ex-Servicemen, Federal Civilian Employees

During fiscal year 1960, three groups of claimants-veterans, ex-servicemen, and former Federal civilian employees-were paid from Federal funds rather than from the proceeds of State taxes.

The Federal program covering veterans, which began in October 1952, terminated in January 1960. Although envisioned as temporary from the outset, this program for veterans of the Korean conflict (defined as active military service between June 27, 1950, and January 31, 1955) continued for about 7 years.

During this period, more than 1.3 million individual veterans were paid some $454-2 million in benefits.

In fiscal year 1960, some 8,300 individual veterans were paid $4.5 million in benefits. No benefits were payable for any week commencing after January 31, 1960.

A permanent program covering ex-servicemen was enacted in August 1958 by an amendment to title XV of the Social Security Act. This program provided, beginning in October 1958, that military personnel would be entitled to unemployment benefits upon separation from active service in the Armed Forces. During fiscal year 1960, more than 186,000 individual ex-servicemen were paid $76.8 million in benefits.

Under the two programs, for Korean veterans and ex-servicemen, a total of $81.3 million in benefits was paid.

Title XV of the Social Security Act, enacted in August 1954, also established a permanent program of unemployment insurance for Federal civilian workers, beginning in January 1955. In fiscal year 1960, about 157,000 initial claims were filed by workers whose only recent employment had been with the Federal Government. Some $53.2 million in benefits was paid to Federal civilian workers for an estimated 1.6 million weeks of unemployment.

A development in coverage of Federal employees was the approval by the President on April 22, 1960, of an act to repeal section 1505 of title XV, dealing with the treatment of terminal leave payments for Government workers. Previously, Federal law allocated a lump-sum terminal leave payment to the period immediately following separation from Government employment. Unemployment insurance benefits based on such employment were not payable during this period. By Public Law 86-442, the terminal leave payments of Federal employees are treated in accordance with the unemployment insurance laws of the State to which their wages are assigned. Thus, Federal civilian workers are treated in exactly the same manner as people in private industry who receive similar leave payments upon separation from employment.

Financing Benefits

In spite of the fact that aggregate State tax collections increased in every month of fiscal 1960 over corresponding months of the previous year, the sum of the 51 State reserve funds on June 30, 1960, was slightly below the level at the end of fiscal 1959. The explanation is that benefit payments in fiscal 1960 remained at relatively high levels. For the last third of fiscal 1960, benefit payments were substantially higher than in the latter part of 1959. Benefit payments for the year totaled $2.4 billion, while revenues, including taxes collected from employers and interest earned on the reserve in the trust fund, came to $2.3 billion. The net effect of financial transactions during the year (benefit payments, collections, interest, and loan transactions) was that State reserve funds declined from $6.71 billion on June 30, 1959, to $6.69 billion on June 30, 1960. Twentyeight States ended the fiscal year with higher balances than they had at the

end of the previous fiscal year, but in 21 of these the increases amounted to less than 7 percent. Of the 23 States which ended the year with lower reserves, the decreases ranged from 0.6 to 22.7 percent, with 20 States having decreases of less than 10 percent.

The purpose of reserves is to reduce dependence on current tax income during periods of high benefit costs and in particular to avoid the need for excessive and untimely tax increases. During periods of heavy unemployment, a substantial decline in reserves can be expected; during the periods of relatively low unemploy ment, reserves are accumulated to meet the large benefit outlays of recession years. The severe drain on funds during the recent recession revealed inadequacies of the tax policies of some States, whose tax structures had not been geared to potential liability, i.e., the level of benefits that they might expect to have over a period of years.

Concern for strengthening financing was evident in many legislative changes during the 1959 sessions. The modifications affecting benefit financing included revisions in the overall tax structures to increase tax rates and increases in the maximum and/or minimum rates. The result is that the national average tax rate for calendar 1960 is estimated to be 1.9 percent of taxable payrolls, compared with 1.7 percent in the preceding year. Most of the States will share in the increase, with 18 States now providing rates above 2.7 percent. Sixteen of these have a maximum rate of 3.9 percent or higher, and 5 States have met 4.2 or 4.5 percent as the maximum rate. (A minimum rate of zero prevails in 15 States.) In addition, with the increase to $3,600 of the taxable wages base in California effective January 1, 1960, there are now six States that have raised the limit of taxable wages above the first $3,000 of a worker's annual earnings with an employer. Included is Alaska, which beginning in 1960 increased its tax base from $4,200 to $7,200.

A Federal loan fund is maintained to give States a resource whenever their reserves fall to a low level. The Federal fund is accumulated according to provisions of the Administrative Financing Act of 1954. Whenever the annual Federal unemployment tax revenues exceed the administrative expenditures of the employment security program during a year, the exceess is used first to establish and maintain a $200 million fund in the Federal unemployment account. Once the cash balance in the loan fund reaches $200 million, all additional excess Federal tax collections are returned to the States for use in financing benefits, and under certain circumstances may be appropriated by State legislatures for administrative expenditures not financed by Federal grants for that purpose, as provided by the Social Security Act.

On June 30, 1959, the cash balance in the Federal loan fund was $1.4 million. During this fiscal year, only Alaska borrowed from the loan fund ($500,000 on January 4, 1960). Pennsylvania was given an additional sum ($1,504,000 on April 29, 1960) as part of the original loan it had requested in fiscal 1959; the full amount of the original loan was not available at the time of the request. As a result of interest earnings on the total assets of the loan fund, the cash balance in the loan fund on June 30, 1960, increased to $5.4 million. This does not in

clude the $2.5 million in excess Federal taxes collected during fiscal year 1960, which has been credited to the loan fund as of July 1, 1960.

Two States, Alaska and Pennsylvania, were still eligible for loans at the end of fiscal 1960. Outstanding loans to States totaled $219,709,000: Alaska, $8,765,000; Michigan, $113,000,000; and Pennsylvania, $97,944,000.

States engaged during the year in considerable research bearing on financial policy and financing. In addition to financing studies for approximating future benefit costs, they also made studies to explore the cost of a variety of legislative changes that may be considered. The importance of unemployment insurance financing to the States is indicated by the fact that fully three-fifths of them reported research activity in this area at the end of the fiscal year.

Current Problems in Administration

The best record in the history of the program was achieved during the year in the promptness of benefit payments. In the October-December quarter, for instance, 88 percent of first payments were issued within 14 days after the first week of compensable unemployment, and only 1 percent of all claimants had to wait more than 6 weeks.

The basic claimstaking procedures were subjected to a searching reexamination and discussion in a series of Bureau-sponsored conferences during the year. In these conferences, attention was given to the kinds of interviews held in the various stages of the claimant's unemployment. A great deal of experimentation has been done, for example, in the development and use of visual aids in instructing claimants about the terms on which benefits are payable under the law, and on the individual's responsibilities as a claimant. For these purposes, many States have been developing flip charts, slides with or without recorded lectures, and moving pictures for use before benefits are paid.

Benefit Operations

The trend toward decentralization of benefit operations continued with the adoption by Massachusetts of a new system of local office payment. This makes a total of seven States in which, when the claimant testifies to a week of unemployment, payments are made on the spot instead of being requisitioned from a central office.

Considerations of administrative costs are involved in all questions of methods and procedures. More often than not, the development of new procedures is prompted by the need to find economical ways to do the job. In 1950, the Bureau established time allowances which are used in the budgeting process for most of the unemployment insurance operations.

Representing the time necessary for an individual to perform one unit of workload, these time allowances may now be outdated because of new developments in administration since they were established. With this possibility in view, the Bureau initiated a series of time and cost studies in State agencies looking toward either the validation or the revision of the time allowances.