Latunga Childers lost her $8-an-hour job as a McDonald's manager in April. Soon after, she opened an envelope from Alabama unemployment officials expecting to find a check.
Instead, there was a letter declaring her ineligible for benefits. Behind that letter was a complicated fight over the federal stimulus and the strings that come with it.
Alabama stood to receive $100 million in federal stimulus money this spring for benefits to people who lose low-wage jobs, as well as part-timers and seasonal workers. In all, the stimulus provided $7 billion for such workers, an estimated 650,000 people nationally, who typically didn't qualify for any benefits.
But the federal money came with strings attached, and Alabama -- along with Mississippi -- balked. To collect, most states needed to pass new laws governing the distribution of benefits and make other adjustments. Those laws can be repealed later, but that process is often harder than passing new laws in the first place.
In Alabama and some other states, accepting the money required a significant overhaul of the unemployment system, including changing an antiquated system that sometimes undercounts the earnings of applicants. Many states initially bristled at that requirement, fearing it would boost the number of unemployed eligible for benefits and thus further burden the dwindling state trust funds that dole out the money.
They were wary, too, of losing local control over the way benefits are distributed and of the risk that establishing a benefit eventually would force them to raise taxes on businesses, which fund unemployment insurance. The federal funds would fully cover newly eligible recipients for two to four years, depending on the income and unemployment levels of the states.
Still, most states have signed on. Since the stimulus bill was passed, 25 states have overhauled their systems. In all, 33 states and Washington, D.C., now qualify for funds from the so-called modernization act, and seven more have introduced or are contemplating legislation that would make them eligible.
Alabama and Mississippi are the only two states that rejected the modernization act, as well as a separate program that would extend benefits by 13 to 20 weeks for people who exhaust their benefits but haven't found a job. The federal government would have paid the extended benefits through this year. After that, states would have to pay half.
That program is open only to states in which the unemployment rate is above 6.5%. Alabama and Mississippi saw their jobless rates rise to 9.8% and 9.6%, respectively, in May, the latest figures available. The national unemployment rate rose to 9.5% in June.
Todd Stacy, press secretary for Alabama Gov. Robert Riley, said, "The governor thought it was a bad idea to saddle small businesses in this state with an additional tax right at the point where we were hoping to recover." Mr. Stacy said both houses of Alabama's Legislature also failed to pass a bill needed to receive the stimulus funds.
Mississippi Gov. Haley Barbour said the state wasn't aiming to "deny the citizens of Mississippi the quick, easy money provided in the stimulus package," according to a statement released by his office. The Republican governor wanted "to protect the integrity of a system that has existed intact for more than 70 years."
Laura Perry, an executive secretary in Mississippi who lost her job last year, said, "It is outrageous that the rest of the country is getting these benefits and we are left out." After her benefits expired in May, she sold her living-room set. She has been soliciting sponsors to help pay for her son's trips with his school basketball team.