DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 12-99
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	GRACE A. KILBANE Director Unemployment Insurance Service
SUBJECT	:	Reed Act Distributions for Federal Fiscal Year 1999

1. Purpose. To announce a distribution of Reed Act funds for Federal fiscal year 1999 and to remind States of the Federal law requirements concerning these distributions.

2. References. Section 903 of the Social Security Act (SSA), Unemployment Insurance Program Letter (UIPL) No. 39-97, and UIPL No. 44-97.

3. Background.  Section 903, SSA, provides that when, among other things, three accounts in the Unemployment Trust Fund (UTF) reach their statutory limits at the end of a Federal fiscal year, any excess funds will be transferred to the individual State accounts in the UTF. (The Federal fiscal year ends September 30.) The three accounts are the Employment Security Administration Account, which pays for the Federal and State administration of the unemployment compensation (UC) and employment service programs; the Extended Unemployment Compensation Account, which pays for the Federal share of extended benefits; and the Federal Unemployment Account, which provides for advances to States for the payment of UC. These transfers are called "Reed Act" distributions. Prior to this year, only three Reed Act distributions had occurred--in 1956, 1957, and 1958.

4. Fiscal Year 1999 Reed Act Distribution. On November 30, 1998, a Reed Act distribution totaling $15,934,986.93 occurred. The amounts transferred to the individual State accounts are listed in the attachment. The amount of each State's share is based on the proportion of wages subject to the Federal Unemployment Tax Act (FUTA) attributable to the State during calendar year 1997 to the aggregate amount of wages subject to FUTA during the same year for all States. The Secretary of Labor determines the amount of each State's share and certifies it to the Secretary of the Treasury for payment. The effective date of the transfer is October 1, 1998.

   The same Federal restrictions that apply to the use of the previous distributions of Reed Act moneys apply to the fiscal year 1999 distribution. That is, the use of the moneys is limited to payment of UC and the administration of the State's UC law and public employment offices. If the moneys are to be used for administrative purposes, the State's legislature must appropriate the moneys and the appropriation must meet the requirements of Section 903(c)(2), SSA. These requirements are explained in detail on pages 9 through 11 of UIPL 39-97, which contains a comprehensive discussion of Reed Act requirements. Draft language for State use in developing the State appropriation is also contained in UIPL 39-97.

   States should note that the provisions of Federal law relating to the capped $100,000,000 Reed Act distributions projected to be made in Federal fiscal years 2000 through 2002 do not apply to this year's distribution. Among other things, these capped distributions are limited to the administration of the State's UC law. These provisions are described on pages 4 and 5 of UIPL 44-97.

5. Action. Appropriate staff should be provided with copies of this UIPL.

6. Inquiries. Please direct inquiries to the appropriate Regional Office.

   Attachment - State Shares of Fiscal Year 1999 Distribution