Jobless to get boost in federal funds

A sign warning against COVID-19 is seen in front of a closed restaurant Friday, March 27, 2020, in Phoenix. Gov. Doug Ducey accepted federal aid Aug. 14 that will provide an additional $300 a week in unemployment benefits. (AP Photo/Matt York)

Gov. Doug Ducey on Friday accepted a federal offer of an extra $300 a week in unemployment benefits to more than 370,000 Arizonans out of work to replace the $600 payments that expired at the end of July.

In a press release, the governor described the move as the state “partnering” with the Trump administration.

But that partnership involves no state cash — or even cash the federal government has given to Arizona as part of the Coronavirus Aid, Relief and Economic Security Act.

Doug Ducey

All Arizona will provide is the regular state unemployment benefits which are capped at $240 a week, a figure the governor has shown no interest in adjusting. And that is paid for not by the state but by a tax on employers based on how often they lay off workers.

Daniel Scarpinato, the governor’s chief of staff, acknowledged that Ducey had the option of boosting the additional aid by $100 a week, to $400, using money left over from the $1.9 billion in CARES funding that he did not distribute in May to cities or others. He estimated the price tag as something in excess of $40 million a week.

But he said the governor decided instead he wants to help replenish the trust fund that fuels the regular state jobless benefits — that $240 a week — to keep the taxes from going up on the businesses that fund it.

Scarpinato said the aid could start flowing within days.

He also pointed out that the extra cash is retroactive to Aug. 1. That means eligible Arizonans would be paid next week not only for that week but for the two weeks they missed.

That extra cash, however, won’t last long.

The federal dollars are coming out of the Disaster Relief Fund. But President Trump has limited that withdrawal to about $44 billion, an amount that is estimated to provide just five weeks of payments.

Scarpinato acknowledged the limited duration. But he said it provides time to break the stalemate in Congress that allowed the $600 additional benefits to expire.

“That’s why it’s so important for Congress to do something,” he said.

“They need to work together,” Scarpinato continued. “They need to do their job and get this done.”

Talks broke down after Democrats demanded the full amount. Republicans countered with $200 a week, followed by some figure tied to what people were earning before.

The governor’s decision not to add another $100 a week — a move that would have restored two-thirds of the extra payments that expired — was a conscious determination to prioritize employer finances over additional dollars for those who lost their jobs due to both the pandemic as well as Ducey’s own orders shuttering some businesses and limiting operations at others.

President Donald Trump holds the pens he used to sign four executive orders addressing the economic fallout from the COVID-19 pandemic from his Trump National Golf Club in Bedminster, N.J., Saturday, Aug. 8, 2020. Trump signed the executive orders and bypassed the nation’s lawmakers as he claimed the authority to defer payroll taxes and replace an expired unemployment benefit with a lower amount after negotiations with Congress on a new coronavirus rescue package collapsed. (AP Photo/Susan Walsh)

At the heart of that is the trust fund. It is fueled by a tax paid by employers on the first $7,000 of each worker’s salary.

The presumptive rate for new employers is 2%, or $140 a year. But the actual rate varies from 0.05% to 12.85%, depending on how often companies fire or lay off workers without cause.

Arizona’s double-digit unemployment rate has taken the fund from $1.12 billion in March to $580 million as of Aug. 8, the most recent figures available.

At this rate, the fund would run out of money in November or December.

But benefits would continue, with the state borrowing the needed money from the federal government. That is what happened during the last recession when the fund went $420 million in debt.

But that, in turn, required employers to pay a surcharge to pay that off. Scarpinato said that’s something the governor wants to avoid this time around.

“Most businesses in Arizona are small businesses,” he said.

“They’ve been hit very hard,” Scarpinato continued. “We want to do everything we can to avoid raising taxes during this pandemic.”

And the fact the state does have the money for an additional $100 a week to bring the total to $400?

“The state has to protect the social safety net on an ongoing, long-term basis,” he said.

Anyway, Scarpinato said, the arrangement means that eligible Arizonans will get $300 more than they would otherwise receive if they had to rely only on state benefits.

That, however, still leaves the fact that, at some point, there will no longer be federal funds to supplement what each state provides in benefits. And that will leave Arizonans who lose their jobs through no fault of their own with only the state benefit.

On paper, unemployment compensation is supposed to provide one-half of what someone was earning before being fired or laid off. But Arizona lawmakers have capped payments at $240 a week, a figure that has not been adjusted since 2004. Only Mississippi pays less.

Scarpinato acknowledged calls to raise the cap, specifically citing a proposal by the Grand Canyon Institute to boost that to $490 a week — half the state average wage — with automatic adjustments after that. But he sidestepped repeated questions of whether the governor at some point would be willing to consider that, instead focusing on that extra $300, as temporary as that may be.

“This provides immediate help to Arizonans,” Scarpinato said.