Ducey to use relief dollars to shore up unemployment fund

Gov. Doug Ducey is planning to put federal cash given to the state for COVID-19 relief into the soon-to-be-insolvent unemployment trust fund to save companies from having to replenish the account on their own.

But unemployed Arizonans will have to continue to live on no more than $240 a week. Before taxes.

Daniel Scarpinato, the governor’s chief of staff, said his boss believes that the state’s $1.8 billion allocation from the $2.2 trillion Coronavirus Aid, Relief and Economic Securities Act is designed to help Arizona blunt the economic effects of the COVID-19 outbreak. Some of that has gone directly to local governments, schools, the state health department and local hospitals.

He said, though, that the virus also has affected the unemployment rate, which is why the trust account from which jobless benefits are paid is going broke. And that, he said, makes it appropriate to use the CARES funds rather than put the burden on employers.

“I can’t think of any better way for them to get to real people than to ensure that we’re protecting our social safety net,” he said.

But that help for “real people” doesn’t include boosting the benefits for the more than 400,000 workers currently collecting unemployment insurance who have been fired or laid off through no fault of their own. Those benefits that haven’t been adjusted in 16 years and are the second lowest in the nation, with only Mississippi paying less.

“Governor Ducey’s focus right now as we deal with this pandemic and the effect it’s had on our economy is making sure that less people are unemployed, that more people have a job, that we have more jobs available,” Scarpinato said. What that means, he said, is creating an economic environment where jobs are being created “so that people don’t have to be on unemployment, that they can get back to work, that they can earn their paycheck and have their livelihoods back.”

And the governor himself, asked about the $240-a-week cap, said the answer is simple: Get a job.

“There are jobs available,” he said, saying that employment levels in Arizona are at 96.9 percent of what they were before the pandemic.

That theme was echoed by Ducey’s chief of staff.

“The governor has an interest in creating jobs, in getting people back to work,” Scarpinato said. “That’s the best way to help people who are on unemployment.”

But even in the best of circumstances there always will be those who are laid off or fired. Even when the state’s jobless rate hovered in the 4 percent range more than a year ago, about 17,000 people were collecting benefits every week.

Still, Scarpinato sniffed at the idea that raising the cap above $240 is a good idea.

“What you’re suggesting would be less than they would make in a job,” he said.

“They’re looking for work,” Scarpinato continued. “We want to make sure that there’s jobs available so they can transition from unemployment back into the workforce.”

And what of those folks who do find themselves unemployed, can’t immediately find work, and have to live on no more than $240 a week?

“Our message would be the governor is fighting for you,” Scarpinato said. “You actually have to have a policy on helping people find employment, having employment available for our workers so that they don’t have to be on a program that’s not going to pay them as much as a job.”

Both the move to tap CARES funds to bail out the trust fund and Ducey’s refusal to consider higher benefits are tied to his belief that the best thing for the Arizona economy is keeping costs down for employers through direct financial help and not raising their costs through higher jobless benefits.

Those benefits are paid through the trust fund which is financed by a tax paid by employers on the first $7,000 of each worker’s salary.

The actual levy depends on how often employees are fired or laid off. Premiums range from less than 1 percent for companies that retain their workers to more than 13 percent for those who do not.

Before the COVID-19-induced recession and Ducey-approved restrictions on business operations, the trust fund had more than $1.1 billion.

It is now in the $163 million range. And projections are it will become insolvent as early as this coming month, or December at the latest.

Under normal circumstances, the U.S. Department of Labor would replenish the fund and then impose an additional levy on employers to pay it back. Scarpinato said Ducey thinks it’s a bad idea to add to the financial burden of Arizona businesses as they are getting back on their feet.

The alternative?

Arizona has somewhere between $400 million and $500 million left in CARES dollars. So Gretchen Conger, Ducey’s deputy chief of staff, said the plan is to start funneling some of that cash into the trust account to keep it from going broke — and keep employers from having to dip into their pockets to keep it from having to borrow money.

It’s a maneuver that appears to lack precedent.

The last time the fund ran out of money was a decade ago, during a prior recession, with the account at one point going $600 million in the red. But that loan was paid back not with state dollars but instead with a surcharge on employers.

Scarpinato said this is different.

“We believe unemployment is, particularly in this scenario, directly tied to COVID,” he said.

More to the point, he said, lots of employers also have been hit hard by the economic fallout from the pandemic “and are working to come out the other side and stay in business.”

“That’s really important for our workers, for our economy, so that we can fund things like K-12 education and all the important things in the state,” Scarpinato said. Anyway, he said, it’s not like the state has shorted any legitimate need of CARES dollars.

Not everyone feels that way.

Officials from several of the state’s smaller cities complained earlier this year when Ducey started doling out CARES dollars.

He gave them only about $115 for each resident. By contrast, Phoenix, Tucson and Mesa, whose share came directly from the feds — and over which Ducey had no control — got $174 per capita.

Asked why the smaller allocation, the governor admitted at the time that he wanted to save some of that cash for exactly what he plans to do now: help businesses by shoring up the unemployment trust fund rather than forcing it borrow the dollars — and have employers pay it back.