ion's manpower policy. The Employment Service was created in 1933 by the Wagner-Peyser Act to make available, free of charge, job search and placement assistance for individuals and recruiting and referral services for employers. Services are available in more than 1,800 state employment service offices. In 1982, Congress amended the Wagner-Peyser Act to devolve most Employment Service administrative responsibility to the states. Financial responsibility (revenue and appropriations) for the Employment Service, however, remains with the federal government. The Social Security Act of 1935 imposed the federal mandate of an unemployment insurance (UI) system on the states. Together, the Federal Unemployment Tax Act (FUTA) and the Social Security Act established the framework for administering and financing the UI system. FUTA generally determines covered employment and imposes certain requirements on state programs, but states generally determine eligibility for UI, weekly benefit amounts, and the duration of benefits (Department of Labor 12-22).
The ES system currently is financed by two separate taxes, with two different tax forms for the two levels of government. These taxes are (1) a FUTA tax on the first $7,000 of each employee's wages and (2) state unemployment insurance taxes that average 0.9 percent of total wages. The current FUTA tax rate is 6.2 percent, which is offset by a credit of 5.4 percentage points for employers in states with programs approved by the federal government; this offset makes the effective FUTA tax rate 0.8 percent. Furthermore, the current FUTA tax rate of 0.8 percent is made up of two components: a permanent tax rate of 0.6 percent and a temporary surtax of 0.2 percent. The surtax, passed in 1976 to restore depleted federal UI trust funds, was supposed to expire in 1987. Since 1987, it has been extended four times -- primarily to fund extended benefits programs -- and is now supposed to expire in 1998. R...