oversight

Unemployment Insurance: States' Use of the 2002 Reed Act Distribution

Published by the Government Accountability Office on 2003-03-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to Congressional Requesters




March 2003
             UNEMPLOYMENT
             INSURANCE
             States’ Use of the 2002
             Reed Act Distribution




GAO-03-496
Contents


Letter                                                                          1


Appendix I      Congressional Briefing Slides                                   5



Appendix II     Balances and Ceilings for Federal UI Payroll Tax
                Accounts                                                       28



Appendix III    Reed Act Distributions                                         29



Appendix IV     Status of CY2002 Reed Act Dollars by State,
                as of 11-30-2002                                               30



Appendix V      CY2002 Reed Act Distribution as a Percent of New
                UI Trust Fund Balances and Average High Cost
                Multiples (AHCM)                                               32



Appendix VI     Unemployment Insurance Benefit Enhancements
                Made in CY2002, by State                                       34



Appendix VII    Effect of Reed Act Distribution on Employer
                Taxes as Reported by States                                    35



Appendix VIII   States with Reed Act Dollars Appropriated by Law
                for UI, ES, or One-Stop Systems, as of 11-30-2002              37




                Page i                          GAO-03-496 Unemployment Insurance
Appendix IX   UI Administrative Activities, by State, for which
              CY2002 Reed Act Dollars had been Appropriated,
              as of 11-30-2002                                                                          38



Appendix X    ES and One-Stop Administrative Activities for which
              CY2002 Reed Act Dollars had been Appropriated,
              as of 11-30-2002                                                                          40



Appendix XI   GAO Contact and Staff Acknowledgments                                                     42
              GAO Contact                                                                               42
              Staff Acknowledgments                                                                     42




              Abbreviations

              ES        Employment Services
              UI        Unemployment Insurance




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              Page ii                                             GAO-03-496 Unemployment Insurance
United States General Accounting Office
Washington, DC 20548




                                   March 6, 2003

                                   The Honorable Edward M. Kennedy
                                   Ranking Minority Member
                                   Committee on Health, Education, Labor, and Pensions
                                   United States Senate

                                   The Honorable Benjamin L. Cardin
                                   Ranking Minority Member
                                   Subcommittee on Human Resources
                                   Committee on Ways and Means
                                   House of Representatives

                                   The Unemployment Insurance (UI) program, administered by the U.S.
                                   Department of Labor in partnership with states, plays a critical role in
                                   ensuring the financial security of America’s workforce. In fiscal year 2002,
                                   state UI programs paid benefits totaling $50.8 billion to 10.6 million
                                   unemployed workers.1 In March 2002, in response to an increase in
                                   unemployment and the September 11, 2001, terrorist attacks, the federal
                                   government passed the Job Creation and Worker Assistance Act of 2002.
                                   This broad stimulus package included a distribution to states of $8 billion
                                   of the unemployment tax revenue it holds in reserve, referred to as a Reed
                                   Act distribution.2 Under the act, these funds may be used to pay UI
                                   benefits, and/or to enhance UI benefits, such as increasing weekly benefit
                                   payments, extending the period of time benefits are paid, or otherwise
                                   expanding eligibility to groups that currently do not qualify for benefits.
                                   The funds may also be used for the administration of UI and employment




                                   1
                                    For UI purposes, federal law designates the District of Columbia, Puerto Rico, and the
                                   Virgin Islands as “states.”
                                   2
                                    The term “Reed Act” refers to a part of the Employment Security Financing Act of 1954.
                                   The Reed Act provides that when federal accounts in the UI trust fund reach their statutory
                                   limits at the end of a federal fiscal year, any excess funds are transferred to state UI trust
                                   funds. Unlike “traditional” Reed Act distributions, this distribution was required regardless
                                   of the ceilings and did not take place at the beginning of a fiscal year.



                                   Page 1                                               GAO-03-496 Unemployment Insurance
services (ES) programs, including one-stop service centers, if appropriated
by state law.3

You asked us to determine how states used their calendar year
(CY) 2002 Reed Act distributions. This report provides information on
(1) the proportion of Reed Act dollars that states have spent, to date;
(2) the proportion of total Reed Act dollars that remains in state UI trust
funds and the effect this has had on employer UI taxes; (3) the proportion
of those Reed Act dollars remaining in state UI trust funds that have been
officially obligated to their trust funds or appropriated by state law for
administering the UI, ES, or one-stop systems; and (4) the makeup of state
UI advisory boards and any proposals they have made for using Reed Act
dollars.

To obtain this information, we surveyed state workforce agency
administrators in 50 states, the District of Columbia, Puerto Rico, and the
Virgin Islands. We also reviewed legislation, federal guidance, and other
documents and data relevant to unemployment insurance and Reed Act
distributions and interviewed Labor officials responsible for overseeing
state activities related to the CY2002 Reed Act distribution. This work was
conducted from August 2002 through February 2003 in accordance with
generally accepted government auditing standards.

On February 24, 2003, we briefed your staff on the results of our work.
This report conveys the information provided during that briefing.

In summary, we found that about 17 percent ($1.34 billion) of the $8 billion
CY2002 Reed Act distribution had been spent as of November 30, 2002,
based on responses to our survey. Most was expended by three states to
pay regular benefits—New York, North Carolina, and Texas. A small
portion ($74 million) was expended on costs associated with
administering UI, ES, or one-stop systems. One state spent Reed Act
dollars to increase weekly UI benefit payments, and five other states said
that the Reed Act dollars enabled their states to make enhancements to UI
benefits during CY2002 using other funds. Three additional states reported
that they plan to spend Reed Act dollars in 2003 to implement UI benefit
enhancements.



3
 The one-stop center system—a centralized service delivery structure consolidating
delivery of most federally funded state and local employment and training assistance—was
mandated by the Workforce Investment Act, passed in 1998.




Page 2                                            GAO-03-496 Unemployment Insurance
Eighty-three percent, or $6.66 billion of the Reed Act distribution had not
been spent as of November 30, 2002, and state workforce officials in
30 states reported that adding these dollars to their UI trust funds enabled
them to avoid automatic employer tax increases or surcharges4 in 2002.
Five states said that they lowered employer tax rates in 2003.5 Twenty-six
states also reported that their employer tax rates would likely have been
higher than they actually were in 2003, had it not been for the Reed Act
distribution. This includes two states whose tax rates were lower in 2003
than 2002.

Nine states formally obligated $1.27 billion of the Reed Act distribution to
remain in their UI trust funds, citing the desire to avoid increases in
employer UI taxes as the most frequent reason for doing this. In addition,
27 states passed laws appropriating a total of 7 percent of the Reed Act
distribution ($590 million) to be used for administrative costs of UI, ES, or
one-stop systems. In general, states reported that few Reed Act dollars
were being used to replace other state and federal funding sources to
administer UI, ES, or one-stop systems.

Twenty-five states have UI advisory boards, which are largely made up of
representatives of worker and employer groups, state workforce agency
officials, or members of the general public. Only five states reported that
their UI advisory board had developed or endorsed a proposal for the use
of the Reed Act dollars.

We provided a draft of this report to officials at the Department of Labor
for their technical review and incorporated their comments where
appropriate.




4
 Forty-nine states set triggers that automatically increase employer taxes or institute
surcharges when trust funds fall below specified levels.
5
 States set employer tax rates annually, and most states had their 2002 tax rates in place
before the Reed Act distribution in March 2002.




Page 3                                               GAO-03-496 Unemployment Insurance
We are sending copies of this report to relevant congressional committees,
the Secretary of Labor, and other interested parties. We will also make
copies available to others upon request. The report is also available at no
charge on GAO’s Web site at http://www.gao.gov. If you or your staffs have
any questions about this report, please contact me at (202) 512-7215 or
Clarita Mrena at (202) 512-3022. Other major contributors are listed in
appendix XI.




Sigurd R. Nilsen, Director
Education, Workforce, and
  Income Security Issues




Page 4                                    GAO-03-496 Unemployment Insurance
                     Appendix I: Congressional Briefing Slides
Appendix I: Congressional Briefing Slides




        States’ Use of the 2002 Reed Act
                  Distribution

                           Briefing for Staff of
         Senator Edward M. Kennedy, Ranking Minority Member,
       Senate Committee on Health, Education, Labor, and Pensions,
                                   and
       Representative Benjamin L. Cardin, Ranking Minority Member,
                   Subcommittee on Human Resources,
                 House Committee on Ways and Means

                                February 24, 2003




                     Page 5                                      GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Key Questions


• What proportion of calendar year (CY) 2002 Reed Act dollars have
  states spent, to date?
• Of the total CY2002 Reed Act dollars, what proportion remains in
  state unemployment insurance (UI) trust funds, and what effect has
  this had on employer taxes up until now?
• Of those Reed Act dollars that remain in state UI trust funds, what
  proportion have states officially obligated to remain in their trust
  funds, and what proportion have they appropriated by state law to
  be used for the administrative costs of (UI), employment services
  (ES), or one-stop systems?
• In addition, what is the makeup of state UI advisory boards and did
  they have proposals for using Reed Act dollars?




                    Page 6                                      GAO-03-496 Unemployment Insurance
                   Appendix I: Congressional Briefing Slides




Scope and Methodology


• Conducted a survey of, and received responses from the 50 states,
  the District of Columbia, Puerto Rico, and the Virgin Islands.
• Reviewed legislation, federal guidance, and other documents and
  data relevant to the UI system and Reed Act distributions.
• Interviewed and obtained data on UI systems from officials at the
  Department of Labor headquarters responsible for overseeing
  states’ activities related to the Reed Act.




                   Page 7                                      GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Summary of Results


• About 17 percent of the $8 billion Reed Act dollars disbursed in
  CY2002 has been spent, primarily on regular UI benefits, and only
  a small portion has been spent on benefit enhancements, UI, ES,
  or one-stop systems.
• Of the $8 billion, 83 percent remains in state trust funds, which has
  prevented automatic increases in employer taxes in 30 states.
• Of those Reed Act dollars remaining in state trust funds, 16
  percent has been officially obligated by some states to remain in
  their trust funds and about 7 percent has been appropriated by
  state law for administrative costs of UI, ES, or one-stop systems.




                    Page 8                                      GAO-03-496 Unemployment Insurance
                   Appendix I: Congressional Briefing Slides




Summary of Results (cont’d)


• In the 25 states that have UI advisory boards, the boards are largely
  made up of representatives of worker and employer groups, state UI
  or workforce agencies, or the general public.
• Only five states reported that the UI advisory boards developed or
  endorsed a proposal for the use of the Reed Act dollars.




                   Page 9                                      GAO-03-496 Unemployment Insurance
                   Appendix I: Congressional Briefing Slides




Background: Unemployment Insurance


• Temporarily replaces a portion of earnings for wage and salary
  workers who become unemployed through no fault of their own.
• Helps stabilize the economy during recessions by providing
  unemployed workers money for basic needs, which helps boost
  demand for goods and services.




                   Page 10                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Background: UI Is Financed by Federal and State
Payroll Taxes Levied on Employers

• Federal UI payroll tax - authorized by the Federal Unemployment
  Tax Act (FUTA)
   • Set at 6.2 percent on the first $7,000 of a worker’s earnings
     (including a 0.2 percent temporary surcharge adopted in 1976).
   • Employers in states with an approved state UI program receive a
     5.4 percent federal tax credit.
   • All states have approved programs, so employers pay 0.8
     percent in federal UI taxes.
• State UI payroll tax - authorized by state law
   • Tax rates vary by state, and states have the option to set a
     higher taxable wage base than $7,000.




                    Page 11                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Background: State UI Taxes on Employers Primarily
Cover the Cost of Regular Benefits and a Portion of
Extended Benefits
• States deposit their taxes with the U.S. Treasury, which maintains
  one trust fund with a separate account for each state from which
  states pay UI benefits.
• State UI tax schedules often vary according to some measure of a
  state’s UI trust fund balance.
• Forty-nine states set triggers that automatically increase employer
  taxes when UI trust funds fall below specified levels.
• When unemployment rises, states can avoid raising taxes or
  borrowing money to pay benefits by building UI trust fund reserves
  when unemployment declines.




                    Page 12                                     GAO-03-496 Unemployment Insurance
                   Appendix I: Congressional Briefing Slides




Background: The 0.8 Percent Federal UI Payroll Tax
Accumulates in Three Separate Accounts

• The Employment Security Administration Account (ESAA) covers
  both federal and state administrative costs of UI and ES.
• The Extended Unemployment Compensation Account (EUCA)
  covers the federal share of extended UI benefits and has been used
  to fund temporary extended unemployment compensation benefits.
• The Federal Unemployment Account (FUA) funds loans to insolvent
  state accounts.
• When the three federal accounts reach their statutory limits, excess
  funds may be transferred to individual state accounts under the
  Reed Act. (See app. II.) There have been eight Reed Act
  distributions since 1956. (See app. III.)




                   Page 13                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Background: Calendar Year 2002 Reed Act
Distribution

• On March 9, 2002, the Job Creation and Worker Assistance Act of
  2002 authorized the distribution of $8 billion to the UI trust funds of
  all 50 states, the District of Columbia, Puerto Rico, and the Virgin
  Islands.
   • Allotted amounts ranged from $1.95 million to the Virgin Islands
      to $936.9 million to California. (See app. IV for allotments by
      state.)
   • In general, each state’s share is based on its proportionate share
      of FUTA taxable wages for CY2000.
   • In 49 states, the distribution increased trust fund amounts by 30
      percent or less. (See app. V for increases.)




                    Page 14                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Background: Calendar Year 2002 Reed Act
Distribution (cont’d)

• A state must have a specific appropriation from its legislature to use
  the funds for administrative costs of state UI and ES systems.
• In addition, Labor issued guidance encouraging the use of CY2002
  Reed Act dollars to support one-stop systems in the same way ES
  dollars are used. This also must be appropriated by state law.
• There is no time limit on the use of the CY2002 Reed Act dollars for
  administrative purposes.
• Once CY2002 Reed Act dollars have been appropriated by the
  state, they need not be expended in two years.




                    Page 15                                     GAO-03-496 Unemployment Insurance
                                      Appendix I: Congressional Briefing Slides




Status of the $8 Billion Reed Act Distribution
(as of November 30, 2002)

                                                         Total dollars spent
                                                         ($1.34 billion)
                                                                                                  Dollars appropriated for
                                                                                                  administrative costs of UI,
                                                                                                  ES, and one-stops (7 % of
                   17%                                                            $ .59 billion   total Reed Act distribution)

                                                                                  $1.27 billion   Dollars obligated to
                                                                                                  trust fund (16 % of total
                                                                                                  Reed Act distribution)



                                                         Total dollars
                                                         in trust fund
                                                         ($6.66 billion)          $4.80 billion   Unobligated dollars in
                                83%                                                               trust fund (60 % of total
                                                                                                  Reed Act distribution)




Source: GAO survey of states.




                                      Page 16                                             GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Seventeen Percent of the Reed Act Dollars Had Been
Spent as of November 30, 2002

• Of the $1.34 billion spent, almost all was spent on regular benefits
  by three states. (See app. IV.)
   • New York spent $302.5 million on regular benefits and $188.8
     million to repay a federal loan—100 percent of its allotment.
   • North Carolina spent $240.9 million on regular benefits—100
     percent of its allotment.
   • Texas spent $534.7 million on regular benefits—90 percent of its
     allotment.




                    Page 17                                     GAO-03-496 Unemployment Insurance
                   Appendix I: Congressional Briefing Slides




Reed Act Dollars From Nine States Enhanced UI
Benefits



• Vermont is the only state that reported spending Reed Act dollars
  on enhancing UI benefits in CY2002. They spent $1.67 million to
  increase weekly UI benefit payments. (See app. VI.)
• Five states (Alabama, Maryland, Minnesota, Oklahoma, and
  Oregon) reported that Reed Act dollars had at least some effect in
  enabling their states to make UI benefit enhancements using funds
  from other sources.
• Connecticut, the District of Columbia, and Georgia reported that
  they are planning to use Reed Act dollars to implement an
  alternative base period in CY2003.




                   Page 18                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Small Amount Spent for Administrative Costs of UI,
ES, or One-Stop Systems, So Far

• In total, only $74 million (1 percent) has been spent on
  administrative costs of the UI, ES, or one-stop systems.
   • Michigan and New Jersey reported spending a total of $40.8
      million on UI, ES, and one-stops, but were unable to provide the
      dollars spent for each program area.
   • Nine states have spent a total of $22 million for UI systems.
   • Six states have spent a total of $11.5 million on ES and one-stop
     systems.




                    Page 19                                     GAO-03-496 Unemployment Insurance
                     Appendix I: Congressional Briefing Slides




Eighty-Three Percent of the Reed Act Dollars Remain
in States’ Trust Funds as of November 30, 2002

• A total of $6.66 billion remains in states’ trust funds.
• State officials from 30 of the 49 states that have automatic employer
  tax increases reported that Reed Act dollars helped them avoid
  automatically triggering these increases, as UI trust fund balances
  declined. (see app. VII.)
• Five states said that they lowered employer tax rates in 2003.
• Twenty-six states reported that their tax rates would likely have
  been higher than they actually were in 2003, had it not been for the
  Reed Act distribution. This includes two states whose tax rates
  were lower in 2003 than in 2002.




                     Page 20                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Nine States Have Obligated Some Reed Act Dollars to
Remain in Their UI Trust Funds

• Nine states made binding policy decisions that obligated 16 percent
  of the $8 billion Reed Act distribution to remain in UI trust funds.
  This accounted for $1.27 billion.
• State officials most frequently cited their desire to avoid raising
  employer taxes as the reason for obligating Reed Act dollars to UI
  trust funds.




                    Page 21                                     GAO-03-496 Unemployment Insurance
                                       Appendix I: Congressional Briefing Slides




Reed Act Dollars Obligated to UI Trust Funds


Dollars (in millions)
1,000
                       States that obligated
              100% of Reed Act dollars to UI trust funds
  800
                                                                   36%

  600


  400

  300                                                                            37%
                                                                   64%
  200

                                                                                 63%     58%
  100                                                                                                34%        30%
              100%
                                100%     100%                                            42%                  70%
                                                     100%                                          66%
      0
          Missouri          Kansas     Nevada     Delaware     California       Ohio   Indiana   Puerto    Nebraska
                                                                                                  Rico
          Obligated to UI Trust fund                    Remaining Reed Act dollars

Source: GAO survey of states.




                                       Page 22                                         GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Twenty-Seven States Appropriated Some Reed Act
Dollars for Administrative Costs of UI, ES, or One-
Stop Systems
• In addition to the $74 million (1 percent) already spent to fund UI,
  ES, or one-stop systems, about 7 percent ($590 million) of the total
  Reed Act distribution has been appropriated for administrative
  purposes and remains in states’ UI trust funds.
• Twenty-seven states have passed laws appropriating funds for
  administrative purposes. (See app. VIII.)
     • Five states appropriated funds for only UI.
     • Six states appropriated funds for only ES/one-stops.
     • Sixteen states appropriated funds for UI and ES/one-stops.
• Eighteen states have legislative proposals pending to use CY2002
  Reed Act dollars for administrative purposes. Twelve previously
  appropriated these funds for these purposes; 6 states have not.




                    Page 23                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Twenty-One States Appropriated Reed Act Dollars for
UI Systems (See app. IX.)

• Uses include:
   • enhancing technology for UI administration;
   • improving claims systems;
   • maintaining or increasing staffing; and
   • enhancing tax filing and payment systems.
• Eighteen of the 21 states reported supporting UI program integrity
  activities with Reed Act funds. Activities include:
   • enhancing technology for UI administration;
   • improving wage reporting by employers; and
   • making enhancements to their claims filing systems.




                    Page 24                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




Twenty-Two States Appropriated Reed Act Dollars for
ES and One-Stop Systems (See app. X.)

• Uses include:
  • enhancing technology;
  • providing labor exchange and other employment services;
  • maintaining or increasing staff;
  • providing reemployment services to UI claimants;
  • providing staff training and professional development; and
  • paying rent, utilities, and maintenance of facilities.




                    Page 25                                     GAO-03-496 Unemployment Insurance
                   Appendix I: Congressional Briefing Slides




Some States Plan to Use Reed Act Dollars to Replace
Funding from Other Sources

• As allowed by law, 9 states reported they plan to use Reed Act
  dollars to replace funding for UI, ES, or one-stop systems that
  previously came from other state and/or federal sources.
   • Five states reported planning to replace funds that previously
     came from state funding sources such as general revenue funds
     or penalty and interest funds.
   • Three states reported planning to replace funds that previously
     came from a combination of state funding sources and federal
     sources such as the Workforce Investment Act or the Temporary
     Assistance to Needy Families (TANF) programs.
   • One state reported planning to replace funds that previously
     came from the TANF program.




                   Page 26                                     GAO-03-496 Unemployment Insurance
                    Appendix I: Congressional Briefing Slides




UI Advisory Boards Had Little Influence on Use of
Reed Act Dollars

• State officials reported having
   • UI advisory boards in 25 states.
   • No UI advisory board or an inactive board in 28 states.
• Most states’ advisory boards included business, labor, UI program
  or other workforce program representatives, or members of the
  general public.
• Five states, Indiana, Nevada, Ohio, Utah, and Wisconsin, reported
  that their UI advisory board developed or endorsed a proposal for
  the use of the Reed Act dollars.




                    Page 27                                     GAO-03-496 Unemployment Insurance
               Appendix II: Balances and Ceilings for
Appendix II: Balances and Ceilings for
               Federal UI Payroll Tax Accounts



Federal UI Payroll Tax Accounts


                   (Dollars in billions)
                                                                                        Account           Projected
                                                                                                                    a
                                                                                   balance as of            ceiling
                   Account                         Purpose                               1-31-03            9-30-03
                   Employment Security             Funds both federal and                 $1.354             $1.632
                   Administration Account          state administrative
                   (ESAA)                          costs of UI and ES.
                   Extended Unemployment           Funds the federal share                $11.246           $19.174
                   Compensation Account            of extended UI benefits.
                   (EUCA)
                   Federal Unemployment            Funds loans to insolvent               $10.903           $19.174
                   Account (FUA)                   state UI trust funds.
                   Total                                                                  $23.503             $39.98
               Source: U.S. Department of Labor.

               Note: There is a statutory cap or ceiling placed on the size of each of these accounts. The ceiling for
               the ESAA account is 40 percent of the appropriated amounts during the fiscal year for which the
               ceiling is being calculated. For the EUCA and FUA accounts, this ceiling is 0.5 percent of the total
               covered wages in the prior calendar year.
               a
                The ceilings for these accounts are calculated each September. By that time, all funds will have
               been appropriated for the year, and total covered wages for the prior year will be known. The
               amounts noted here are Labor’s projections of what the ceilings should be in September 2003 based
               on their estimates, at this time, of the total amount appropriated for 2003, and total covered wages in
               calendar year 2002.




               Page 28                                                    GAO-03-496 Unemployment Insurance
               Appendix III: Reed Act Distributions
Appendix III: Reed Act Distributions



                Distribution date                                              Amount
                July 1, 1956                                                $33.4 million
                July 1, 1957                                                 $71 million
                July 1, 1958                                                $33.5 million
                October 1, 1998                                              $16 million
                October 1, 1999                                             $100 million
                October 1, 2000                                             $100 million
                October 1, 2001                                             $100 million
                March 13, 2002                                                 $8 billion
               Source: U.S. Department of Labor.




               Page 29                                GAO-03-496 Unemployment Insurance
                                         Appendix IV: Status of CY2002 Reed Act
Appendix IV: Status of CY2002 Reed Act   Dollars by State, as of 11-30-2002



Dollars by State, as of 11-30-2002


                                                                                             Unexpended
                                                                   Percent appropriated for      Percent officially   Percent neither
                       Total Reed Act                            administration of UI, ES, or        obligated to       appropriated
State                        allotment       Percent expended             one-stop systems           UI trust fund      nor obligated
Alabama                 $110,623,477                        0                           15.0                      0             85.0
Alaska                     14,820,932                      0.5                          19.7                     0              79.8
Arizona                   144,079,575                       0                              0                     0               100
Arkansas                   63,958,998                       0                              0                     0               100
California                936,873,766                      0.6                           3.7                  64.0              31.6
Colorado                  142,666,574                       0                              0                     0               100
Connecticut               100,418,304                       0                            9.0                     0              91.0
Delaware                   26,024,719                       0                              0                   100                 0
District of Columbia       25,765,401                       0                           31.3                     0              68.7
Florida                   449,667,718                      0.4                           3.2                     0              96.4
                                                                                            a
Georgia                   249,673,858                       0                                                    0               100
Hawaii                     30,761,048                       0                              0                     0               100
        b
Idaho                      32,244,586                     21.7                             0                     0              78.3
Illinois                  376,244,918                       0                              0                     0               100
Indiana                   174,573,012                       0                              0                  42.4              57.6
Iowa                       82,395,262                      1.2                          35.2                     0              63.6
Kansas                     78,166,750                       0                              0                   100                 0
Kentucky                  103,829,381                       0                              0                     0               100
Louisiana                 105,499,296                       0                           24.9                     0              75.1
Maine                      32,486,816                       0                              0                     0               100
Maryland                  142,929,005                       0                              0                     0               100
Massachusetts             193,639,110                       0                            1.3                     0              98.7
Michigan                  291,485,481                     13.9                          85.0                     0                1.2
             b
Minnesota                 163,061,573                      7.4                             0                     0              92.6
Mississippi                64,670,097                      1.4                          23.3                     0              75.3
Missouri                  161,426,814                       0                              0                   100                 0
Montana                    18,551,627                      3.0                          97.0                     0                 0
Nebraska                   48,380,203                       0                              0                  28.9              71.1
Nevada                     68,082,942                       0                              0                   100                 0
New Hampshire              38,475,620                       0                              0                     0               100
New Jersey                242,816,310                      0.2                          15.1                     0              84.8
New Mexico                 38,599,338                       0                              0                     0               100
New York                  491,343,135                     100                              0                     0                 0
North Carolina            240,892,032                     100                              0                     0                 0
North Dakota               15,267,835                      0.4                           1.1                     0              98.5
Ohio                      343,709,635                      0.4                          14.4                  63.0              22.1
Oklahoma                   81,441,628                       0                            2.5                     0              97.5
Oregon                     98,029,105                       0                              0                     0               100
Pennsylvania              337,595,975                      0.1                           4.3                     0              95.6
Puerto Rico                48,875,605                       0                           33.8                  66.2                 0




                                         Page 30                                                GAO-03-496 Unemployment Insurance
                                                           Appendix IV: Status of CY2002 Reed Act
                                                           Dollars by State, as of 11-30-2002




                                                                                                                    Unexpended
                                                                                        Percent appropriated for        Percent officially      Percent neither
                                        Total Reed Act                                administration of UI, ES, or          obligated to          appropriated
 State                                        allotment         Percent expended               one-stop systems             UI trust fund         nor obligated
 Rhode Island                               27,123,409                         0                                9.6                      0                  90.4
 South Carolina                             108,203,982                         1.5                               0                       0                 98.5
 South Dakota                                 19,140,671                          0                               0                       0                 100
 Tennessee                                  162,633,730                           0                             4.6                       0                 95.4
 Texas                                      596,446,497                        89.7                               0                       0                 10.3
 Utah                                         61,627,678                          0                             3.5                       0                 96.5
 Vermont                                      16,395,967                       10.2                               0                       0                 89.8
 Virgin Islands                                1,950,917                        5.1                             2.9                       0                 92.0
 Virginia                                   214,949,942                         1.2                            13.2                       0                 85.6
 Washington                                 167,011,815                           0                               0                       0                 100
 West Virginia                                36,210,068                          0                            10.3                       0                 89.7
 Wisconsin                                  166,214,419                           0                               0                       0                 100
 Wyoming                                      12,043,444                          0                               0                       0                 100
 United States                          $8,000,000,000                         16.8                             7.4                    15.9                 60.0
Source: GAO data and U.S. Department of Labor data.
                                                           a
                                                            Appropriated Reed Act funds for administration of UI, but could not specify the dollar amount
                                                           allocated for this purpose.
                                                           b
                                                           Appropriated Reed Act funds for administration of UI, ES, or one-stop systems and expended all the
                                                           dollars appropriated.




                                                           Page 31                                                    GAO-03-496 Unemployment Insurance
                                                Appendix V: CY2002 Reed Act Distribution as
Appendix V: CY2002 Reed Act Distribution as     a Percent of New UI Trust Fund Balances and
                                                Average High Cost Multiples (AHCM)


a Percent of New UI Trust Fund Balances and
Average High Cost Multiples (AHCM)

                       UI trust fund balance                 2002 Reed         Distribution as
                               as of 12-31-01            Act allotment       percent of new UI                 AHCM                  AHCM
                                                                                              a
State                   (dollars in millions)      (dollars in millions)   trust fund balance     as of December 2000   as of December 2001
Alabama                               $324.4                     $110.6                     25                   .065                   0.5
Alaska                                 231.9                       14.8                      6                   1.03                  1.03
Arizona                                954.0                      144.1                     13                   1.68                  1.57
Arkansas                               179.2                       64.0                     26                   0.68                  0.45
California                           5,689.4                      936.9                     14                   0.78                  0.77
Colorado                               684.5                      142.7                     17                   1.05                  0.89
Connecticut                            629.7                      100.4                     14                   0.96                   0.7
Delaware                               312.5                       26.0                      8                   2.02                  1.83
District of Columbia                   278.3                       25.8                      8                   1.05                  1.07
Florida                              1,761.8                      449.7                     20                    1.4                  1.17
Georgia                              1,542.4                      249.7                     14                   1.79                  1.43
Hawaii                                 306.5                       30.8                      9                   1.56                  1.47
Idaho                                  233.4                       32.2                     12                   0.95                  0.79
Illinois                             1,382.4                      376.2                     21                   0.48                  0.32
Indiana                              1,330.3                      174.6                     12                   1.57                  1.31
Iowa                                   772.8                       82.4                     10                   1.24                  1.15
Kansas                                 473.7                       78.2                     14                   0.93                  0.87
Kentucky                               544.3                      103.8                     16                   0.77                  0.59
Louisiana                            1,508.9                      105.5                      7                   1.36                   1.3
Maine                                  410.3                       32.5                      7                   1.43                  1.66
Maryland                               826.3                      142.9                     15                   0.94                  0.84
Massachusetts                        1,770.5                      193.6                     10                   1.01                  0.83
Michigan                             2,601.3                      291.5                     10                   0.75                  0.65
Minnesota                              450.0                      163.1                     27                   0.58                  0.36
Mississippi                            658.7                       64.7                      9                   1.98                  1.87
Missouri                               276.3                      161.4                     37                   0.55                  0.32
Montana                                186.9                       18.6                      9                   1.42                  1.41
Nebraska                               144.1                       48.4                     25                   0.99                  0.78
Nevada                                 481.3                       68.1                     12                   1.07                  0.97
New Hampshire                          317.0                       38.5                     11                   2.01                  1.91
New Jersey                           3,121.7                      242.8                      7                   1.15                  1.16
New Mexico                             581.3                       38.6                      6                   2.79                  2.74
New York                               474.9                      491.3                     51                   0.31                  0.12
North Carolina                         626.3                      240.9                     28                   0.91                  0.48
North Dakota                            33.4                       15.3                     31                   0.28                  0.28
Ohio                                 1,904.0                      343.7                     15                   0.64                  0.55
Oklahoma                               491.0                       81.4                     14                   1.46                  1.21
Oregon                               1,467.7                       98.0                      6                   1.48                  1.41
Pennsylvania                         2,380.4                      337.6                     12                   0.68                  0.56
Puerto Rico                            507.0                       48.9                      9                   1.24                  1.16




                                                Page 32                                               GAO-03-496 Unemployment Insurance
                                                             Appendix V: CY2002 Reed Act Distribution as
                                                             a Percent of New UI Trust Fund Balances and
                                                             Average High Cost Multiples (AHCM)




                                    UI trust fund balance                  2002 Reed           Distribution as
                                            as of 12-31-01             Act allotment         percent of new UI                  AHCM                      AHCM
                                                                                                              a
 State                               (dollars in millions)       (dollars in millions)     trust fund balance      as of December 2000       as of December 2001
 Rhode Island                                       277.8                         27.1                        9                      0.89                      0.83
 South Carolina                                     627.2                       108.2                        15                      1.29                      1.03
 South Dakota                                        45.5                        19.1                        30                      0.84                      0.72
 Tennessee                                          650.7                       162.6                        20                        0.9                     0.66
 Texas                                              439.8                       596.4                        58                      0.26                      0.15
 Utah                                               564.8                        61.6                        10                      1.61                      1.42
 Vermont                                            308.4                        16.4                         5                      2.54                      2.46
 Virgin Islands                                      64.1                          2.0                        3                      3.33                      3.03
 Virginia                                           905.5                       214.9                        19                      1.32                      1.07
 Washington                                       1,796.1                       167.0                         9                      1.04                      0.96
 West Virginia                                      239.6                        36.2                        13                      0.52                      0.54
 Wisconsin                                        1,585.1                       166.2                         9                      1.08                      0.93
 Wyoming                                            195.1                        12.0                         6                      1.61                      1.56
 United States                                  $46,550.7                      $8,000                        15                      0.91                      0.78
Source: U.S. Department of Labor.

                                                             Note: The average high cost multiple (AHCM) indicates how many years a state can pay benefits
                                                             before its trust fund became insolvent. It is based on the average amount a state paid out in UI
                                                             benefits during its 3 highest cost years in the previous 20 years, without collecting any additional
                                                             revenue. As a guideline, the Department of Labor uses a reserve multiple of 1.0 as a minimally
                                                             acceptable level of solvency.
                                                             a
                                                             Percentage of new UI trust fund balance was calculated by dividing the amount of the Reed Act
                                                             allotment by the sum of that amount and the UI trust fund balance as of 12-31-01.




                                                             Page 33                                                    GAO-03-496 Unemployment Insurance
                                                     Appendix VI: Unemployment Insurance
Appendix VI: Unemployment Insurance                  Benefit Enhancements Made in CY2002, by
                                                     State


Benefit Enhancements Made in CY2002, by
State

                             Used/planned to
                                use Reed Act
                                    dollars to                                                                                     Extend
                            enhance benefits,                                                                  Increase         benefits to
                               or distribution                              Expand          Increase         maximum           individuals
                                    otherwise    Test/implement        eligibility to      weekly UI         number of           who have        Other
                             enabled state to    alternative base         part-time            benefit        weeks of          exhausted changes to UI
                                                                                                                                                       a
 State                                   do so             period          workers         payments         potential UI         coverage     benefits
 Alabama                        Enabled                                                      •
 California                                                                •                 •                                                       •
 Colorado                                                                                    •
 Connecticut                    Plans to use             •                                   •
 District of                    Plans to use             •                                   •
 Columbia
 Georgia                        Plans to use             •                                   •
 Idaho                                                                                       •
 Indiana                                                                                     •
 Iowa                                                                                        •
 Maryland                         Enabled                                                    •                                     •                 •
 Michigan                                                                                    •
 Minnesota                        Enabled                                                    •                  •                  •
 New Hampshire                                                                               •
 New Jersey                                                                                                                        •                 •
 Ohio                                                                                        •
 Oklahoma                         Enabled                •
 Oregon                           Enabled                                                    •
 Rhode Island                                                                                                                                        •
 South Carolina                                                                              •
 Texas                                                                                       •                                     •
 Vermont                           Used                                                      •
 Virgin Islands                                                                              •
 Washington                                                                                                                        •                 •
 Wisconsin                                                                 •                 •                                     •                 •
 Wyoming                                                                                     •                                                       •
 Total: 25                           9                   4                 2                 21                 1                 6                  7
Source: GAO survey of states.
                                                     a
                                                      Other changes include activities such as: elimination of the waiting week, reduction of social security
                                                     offsets, and increasing the replacement rate for benefits.




                                                     Page 34                                                    GAO-03-496 Unemployment Insurance
                                        Appendix VII: Effect of Reed Act Distribution
Appendix VII: Effect of Reed Act Distribution
                                        on Employer Taxes as Reported by States



on Employer Taxes as Reported by States


                                                   2003 tax rates compared to 2002 tax rates
                                    Reed Act
                                    funds
                 Automatic          prevented
                 increases in UI    triggering
                 tax/surcharge      an                                                            Without the Reed Act
                 triggered if       increase in                                                   distribution, tax rates
                 trust fund falls   a tax or                                                      for 2003 would likely
                 below certain      surcharge Higher in 2003 Same in 2003       Lower in 2003     have been higher than
State            level              in 2002a    than in 2002    as in 2002      than in 2002      they were
Alabama                  •                •                            •                                      •
Alaska                   •                                                             •
Arizona                                                                •                                      •
Arkansas                •                 •            •                                                      •
California              •                 •            •                                                      •
Colorado                •                 •                            •                                      •
Connecticut             •                 •                            •
Delaware                •                 •                            •                                      •
District of             •                                                              •                      •
Columbia
Florida                 •               •               •                                                     •
Georgia                 •                                                 •
Hawaii                  •                               •
Idaho                   •                                                 •
Illinois                •                                                 •
Indiana                 •               •               •
Iowa                    •               •               •
Kansas                  •                               •                                                     •
Kentucky                •               •               •                                                     •
Louisiana               •                                                 •
Maine                   •                                                               •                     •
Maryland                •               •                                 •                                   •
Massachusetts           •               •                                 •
Michigan                •                               •
Minnesota               •               •               •                                                     •
Mississippi             •               •                                 •                                   •
Missouri                •               •               •
Montana                 •               •                                 •                                   •
Nebraska                                                •
Nevada                                                                    •                                   •
New Hampshire           •               •               •                                                     •
New Jersey              •                                                 •
New Mexico              •                                                 •
New York                •               •               •
North Carolina          •               •               •                                                     •
North Dakota                                                              •



                                        Page 35                                         GAO-03-496 Unemployment Insurance
                                                       Appendix VII: Effect of Reed Act Distribution
                                                       on Employer Taxes as Reported by States




                                                                  2003 tax rates compared to 2002 tax rates
                                                   Reed Act
                                                   funds
                                Automatic          prevented
                                increases in UI    triggering
                                tax/surcharge      an                                                                              Without the Reed Act
                                triggered if       increase in                                                                     distribution, tax rates
                                trust fund falls   a tax or                                                                        for 2003 would likely
                                below certain      surcharge Higher in 2003 Same in 2003       Lower in 2003                       have been higher than
 State                          level              in 2002a    than in 2002    as in 2002      than in 2002                        they were
 Ohio                                   •                •                            •                                                        •
 Oklahoma                               •                •            •
 Oregon                                 •                •            •
 Pennsylvania                           •                •            •                                                                        •
 Puerto Ricob                           •
 Rhode Island                           •                                                           •
 South Carolina                         •                  •                 •
                                        •                                    •
                c
 South Dakota
 Tennessee                              •                  •                                        •                                          •
 Texas                                  •                  •                 •                                                                 •
 Utah                                   •                  •                 •                                                                 •
 Vermont                                •                  •                                        •                                          •
 Virgin Islands                         •                                                                              •
 Virginia                               •                  •                 •                                                                 •
 Washington                             •                  •                 •                                                                 •
 West Virginia                          •                                                           •
 Wisconsin                              •                                    •
 Wyoming                                •                                                                              •
 Total                                 49              30                    25                     22                 5                      26
Source: GAO survey of states.
                                                       a
                                                       According to the Department of Labor, for most states, any increases triggered in CY2002 would not
                                                       have gone into effect until CY2003.
                                                       b
                                                           Data for this state was not available.
                                                       c
                                                           Data for this state is preliminary. Final rates have not been determined.




                                                       Page 36                                                        GAO-03-496 Unemployment Insurance
                                                  Appendix VIII: States with Reed Act Dollars
Appendix VIII: States with Reed Act Dollars       Appropriated by Law for UI, ES, or One-Stop
                                                  Systems, as of 11-30-2002


Appropriated by Law for UI, ES, or One-Stop
Systems, as of 11-30-2002

                                                                                                    Reed Act dollars appropriated for UI, ES, or
                                                                                                                one-stop systems
                                                        Reed Act dollars         Reed Act dollars                         Amount remaining in
                                Total Reed Act        appropriated for UI     appropriated for ES    Amount spent as of      the trust fund as of
 State                                allotment                  system       or one-stop system               11-30-02                  11-30-02
 Alabama                         $110,623,477                •                        •                                0             $16,593,522
 Alaska                             14,820,932                •                        •                         $76,656               2,923,344
 California                        936,873,766                •                        •                       5,700,000              34,936,000
 Connecticut                       100,418,304                •                        •                               0               9,000,000
 District of Columbia               25,765,401                •                                                        0               8,060,000
 Florida                           449,667,718                                         •                       1,684,530              14,544,970
 Georgia                           249,673,858                •                                                         a                       a


 Idaho                              32,244,586                •                        •                       7,000,000                       0
 Iowa                               82,395,262                •                                                  992,109              29,007,891
 Louisiana                         105,499,296                •                        •                               0              26,316,771
 Massachusetts                     193,639,110                                         •                               0               2,425,000
 Michigan                          291,485,481                •                        •                      40,378,377             247,621,623
 Minnesota                         163,061,573                •                                               12,000,000                       0
 Mississippi                        64,670,097                                         •                         905,889              15,094,111
 Montana                            18,551,627                •                        •                         565,143              17,986,484
 New Jersey                        242,816,310                •                        •                         433,514              36,566,486
 North Dakota                       15,267,835                •                                                   57,868                 173,604
 Ohio                              343,709,635                •                        •                       1,531,288              49,468,712
 Oklahoma                           81,441,628                                         •                               0               2,000,000
 Pennsylvania                      337,595,975                •                        •                         444,337              14,555,663
 Puerto Rico                        48,875,605                •                        •                               0              16,500,000
 Rhode Island                       27,123,409                                         •                               0               2,600,000
 Tennessee                         162,633,730                •                        •                               0               7,400,000
 Utah                               61,627,678                                         •                               0               2,160,000
 Virgin Islands                      1,950,917                •                        •                          98,548                  56,577
 Virginia                          214,949,942                •                        •                       2,529,421              28,376,035
 West Virginia                      36,210,068                •                        •                               0               3,745,000
 Total: 27                      $4,413,593,220               21                       22                     $74,397,680            $588,111,793
Source: GAO survey of states.
                                                  a
                                                  State was unable to report dollar amount.




                                                  Page 37                                              GAO-03-496 Unemployment Insurance
                                                     Appendix IX: UI Administrative Activities, by
Appendix IX: UI Administrative Activities, by        State, for which CY2002 Reed Act Dollars had
                                                     been Appropriated, as of 11-30-2002


State, for which CY2002 Reed Act Dollars had
been Appropriated, as of 11-30-2002

                                                                                                                   Direct
                                                                          Tax filing and                           deposit/
                                General              Claims system        paying               Appeals system      debit      Program
 State                          technology   Staff   developments         enhancements         improvements        cards      integrity   Other
 Alabama                              •         •            •                      •                                               •
 Alaska                                                                            •
 California                                     •                                                                                  •        •
 Connecticut                         •                       •                     •                                               •
 District of Columbia                           •                                                                       •          •        •
            a
 Georgia
 Idaho                               •          •            •                                                                     •
 Iowa                                •                       •                     •                     •              •          •
 Louisiana                           •                       •                     •                                               •        •
 Michigan                                       •                                                                                  •        •
 Minnesota                           •                       •                     •                     •              •          •
 Montana                             •          •            •                                                                     •
 New Jersey                          •                       •                                           •                         •
 North Dakota                        •                                                                                             •
 Ohio                                •          •            •                     •                     •                         •
                  a
 Pennsylvania
 Puerto Rico                         •          •            •                     •                     •              •          •
 Tennessee                           •          •            •                     •                                               •        •
 Virgin Islands                      •                       •                                                                     •        •
 Virginia                                       •                                                                                  •
 West Virginia                       •                       •                                                                     •        •
 Total: 21                           14        10           13                     8                     5              4          18       7
Source: GAO survey of states.
                                                     a
                                                      State was unable to report how dollars were allocated.




                                                     Page 38                                                   GAO-03-496 Unemployment Insurance
Appendix IX: UI Administrative Activities, by
State, for which CY2002 Reed Act Dollars had
been Appropriated, as of 11-30-2002




Page 39                                         GAO-03-496 Unemployment Insurance
                                                   Appendix X: ES and One-Stop Administrative
Appendix X: ES and One-Stop Administrative         Activities for which CY2002 Reed Act Dollars
                                                   had been Appropriated, as of 11-30-2002


Activities for which CY2002 Reed Act Dollars
had been Appropriated, as of 11-30-2002

                           Labor exchange
                           and employment   Maintain or       Shared cost of operating    Reemployment services   Pay rent, utilities, or
 State                     services         increase staff    one-stop centers            to UI claimants         maintain facilities
 Alabama
 Alaska
 California                       •                 •                                                                          •
 Connecticut                      •                 •                                               •                          •
 Florida                          •                                       •                                                    •
 Idaho                            •                 •                                               •
 Louisiana                        •                                                                 •
 Massachusetts                    •                 •                                               •
 Michigan
 Mississippi
 Montana                          •                 •                     •                                                    •
 New Jersey                       •                                       •                         •
 Ohio                             •                 •                                               •
 Oklahoma                         •                 •                     •                                                    •
 Pennsylvania                     •                 •                     •                         •                          •
 Puerto Rico                                        •                                               •                          •
 Rhode Island                     •                 •                     •                         •                          •
 Tennessee
 Utah                             •                 •
 Virgin Islands
 Virginia                         •                 •                     •                         •                          •
 West Virginia
 Total: 22                       14                12                     7                         10                         9
Source: GAO survey of states.




                                                   Page 40                                           GAO-03-496 Unemployment Insurance
                                         Appendix X: ES and One-Stop Administrative
                                         Activities for which CY2002 Reed Act Dollars
                                         had been Appropriated, as of 11-30-2002




                                                                    Improve access for
                     Resource room                                  those with disabilities
                     resources, outreach or Training/professional   or limited English         Buy buildings or
Enhance technology   informational material development of staff    proficiency                land               Other
          •
         •


         •                                                                      •
         •                     •
         •                     •                       •                        •
         •                     •                       •                        •
         •                                                                                                                •
         •                                                                                                                •
                                                                                                       •
         •                                             •
         •                     •                       •                        •                                         •
         •                     •                       •                                                                  •
         •                     •
         •                                             •
         •                                             •
                               •
         •                                                                                             •                  •


                                                                                                                          •
         •                     •                       •                        •                                         •
         •                     •                       •
        17                     9                       9                        5                      2                  7




                                         Page 41                                              GAO-03-496 Unemployment Insurance
                  Appendix XI: GAO Contact and Staff
Appendix XI: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Clarita Mrena, (202) 512-3022
GAO Contact
                  Laura Heald, Carolyn Blocker, Cheri Harrington, Stuart Kaufman, Daniel
Staff             Schwimer, and Barbara Hills made significant contributions to this
Acknowledgments   briefing.




(130191)
                  Page 42                                  GAO-03-496 Unemployment Insurance
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