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Unemployment fund expected to dry up in weeks

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Hundreds of thousands of unemployed Arizonans are within weeks of losing more than half of their benefits.

And that would leave them with just the $240 a week — if not less — that the state provides, the second lowest in the nation.

Michael Wisehart, director of the state Department of Economic Security, said Wednesday he has been assured there are sufficient federal dollars to pay the $300 in extra benefits in the special federal Lost Wage Assistance program for this week. That is the fifth week that has been available.

Wisehart also said he believes there’s enough federal cash for a sixth week.

He said though, that given that other states are drawing against the $44 billion federal allocation, the dollars will dry up before Week 7. And he said it likely will come without warning.

But Gov. Doug Ducey has no plans to have the state step in and try to make up even part of the difference.

“We’ve known these funds were limited,” said press aide Patrick Ptak. He said that’s why Arizona moved quickly to accept the offer by President Trump to get a share of that federal cash.

Michael Wisehart

Michael Wisehart

And going forward for Arizona’s unemployed?

“As we’ve said all along, Congress needs to work together to extend these benefits long-term,” Ptak said.

Complicating matters, Wisehart said that the economy remains soft and Arizonans continue to lose their jobs.

He said about 131,000 people made first-time applications for benefits last week. That compares with 86,000 the prior week and just 50,000 the week before.

The situation is even more dire than that.

Wisehart said the unemployment trust fund — the dollars set aside by a tax on employers to pay regular state benefits — will become insolvent in about eight weeks.

Put simply, the account which had $1.1 billion in it before the COVID-19 outbreak and the restrictions imposed by Ducey on business operations is now down to about $400 million. And Wisehart said the state is burning through the cash at about $50 million a week, with no end in sight.

“Obviously the pandemic isn’t going to end soon,” he said.

That won’t mean an end to regular state jobless benefits. Instead, it will mean Arizona will have to borrow money from the U.S. Department of Labor.

“But you have to pay that money back, through taxes on employers, going forward,” Wisehart said. And that, in turn, could provide a new financial impediment to companies still reeling with the effects of the pandemic.

Ptak said his boss has set aside more than $400 million Arizona got from the Coronavirus Aid, Relief, and Economic Security Act. That could be used to pay jobless benefits going forward rather than forcing the state to borrow and raising taxes on employers.

But with $50 million a week more going out in benefits than what is being collected from employers, that becomes only a temporary solution.

Doug Ducey

Doug Ducey

That still leaves the question of the nearly 400,000 Arizonans who will lose that extra $300 a week sometime this month.

State law entitles those who lost their jobs through no fault of their own to collect half of what they were earning, with the proceeds coming from a levy paid by all employers on the first $7,000 of each worker’s salary. But lawmakers capped that at $240 a week; only Mississippi pays less.

There has been little pressure on lawmakers to alter that given what has been the state’s relatively low unemployment plus strong job market. In fact, in a typical pre-COVID week only about 18,000 Arizonans were collecting benefits.

As recently as July, Ducey refused to discuss altering the cap.

“It’s a hypothetical question because unemployment wasn’t really an issue before the pandemic,” he said. In fact, he said, that in pre-COVID times there were plenty of jobs out there for people to find “at any time.”

All that changed with the economic chaos caused by COVID-19 and the business closures.

But Ducey repeatedly sidestepped questions about the ability of Arizonans to survive on $240 a week — the same as it has been since 2004 — by pointing out the federal government was providing another $600 a week through Pandemic Unemployment Compensation program. And when those dollars ran out, President Trump agreed to put up $44 billion from the federal Disaster Relief Fund for the $300-a-week Lost Wage Assistance program.

Assuming no congressional action, that leaves Arizona’s jobless with just that $240 maximum — and no interest by Ducey in revisiting that.

“Unfortunately, we are going to have very little notice when this happens,” Wisehart said of the end of the $300 Lost Wage Assistance.

Part of the problem is that it’s not just Arizona drawing down on that $44 billion. Other states have their own claims.

“We really don’t have a good sense of what’s going to be paid from other states or when it ends,” he continued. “But when it ends, it’s going to happen abruptly.”

Wisehart said part of his message is for those people now getting the benefits to plan ahead for when they will no longer be there.

What might also help, he said, is working with members of Congress to come up with a new plan to provide expanded unemployment benefits — and quickly.

If — and presumably when — the trust fund balance goes to zero, it won’t be the first time.

Arizona had to start borrowing money a decade ago during the last economic downturn. It got so bad that the state eventually was in the red to the federal government to the tune of $600 million.

All that led to a surcharge on top of the tax that employers already pay. While the rate varies depending on how often companies lay off workers, the presumptive rate for new employers is 2 percent of the first $7,000, or $140 a year.

But paying off the note last time added another $42 a year per worker.

On top of that, the state had to increase the levy for years after recovery to rebuild the fund.

One comment

  1. Before they run out of cash, it would be great if DES managed to pay all the people the amounts owed to them since their account was erroneously locked down due to their slipshod “fraud detwction” program. My brother is entitled to $240 plus the $600 or $300, but he hasn’t been paid a dime0 since June 23rd.

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