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GOP Budget Deal Could Raise Arizona's Unemployment Benefits, But Not For Another Year

By Ben Giles
Howard Fischer, Capitol Media Services
Published: Thursday, May 20, 2021 - 4:53pm
Updated: Monday, June 14, 2021 - 8:14am

Arizona's unemployed are going to have to wait at least a year to see an increase in benefits. Even then, they may not get them.

A deal negotiated between Gov. Doug Ducey and legislative leaders does include a plan to boost the maximum benefit by $80 a week, to $320. That would be the first increase in 17 years. It also would raise Arizona from having the second-lowest cap in the nation, with only Mississippi lower.

But unlike a plan already approved by the Senate, it would not take effect this year. That's because it is contingent on several things happening — all of which are designed to financially shield employers.

First, it is contingent on an employer-financed trust fund that pays for those benefits reaching $1.1 billion. That's where it was before the COVID-induced recession and jump in unemployment rates. The fund effectively went broke this year and only remains in positive territory because it was bailed out when the state put millions of tax dollars into the account. With the number of unemployed dropping, it now stands at about $337 million.

Second, the state unemployment rate also has to be at least 5% or less before the benefits would increase. It peaked at 14.2% and is currently at 6.7%. The last time it was at 5% was four years ago.

Third, once the benefits actually do go up, the maximum number of weeks someone could collect will drop by two to 24 weeks.

And regardless of anything else, the earliest Arizonans would be able to collect higher benefits is July 1, 2022.

Aides to Ducey say that is designed to protect employers. Unemployment benefits are supposed to be a safety net for those who are fired or laid off through no fault of their own. By law, those benefits are supposed to equal half of what someone was earning. But that has been subject to a cap of $240.

The issue of protecting employers stems from the fact that those payments are financed by a tax that they pay on the first $7,000 of each worker's salary. What employers actually pay in taxes is based on how often a company lays off workers, with current rates of less than 1% to more than 13%. The Department of Economic Security estimates the average tax rate is in the 2.3% range, meaning about $160 per worker.

Matt Gress, the governor's chief economic adviser, said all the triggers — and the delayed date to get the fund replenished — is to ensure that employers don't end up paying more, at least not now while they are still recovering economically.

"The employer tax rate is set by the amount of money in the trust fund,'' he said. "So the more that's in the trust fund, the less employers have to contribute.''

Gress figures that the delay, coupled with a healthy trust fund and other limits, would result in a 1.4% tax average rate — but with a twist: Employers would pay that on the first $8,000 of each worker's salary, or just $112 a year.

The deal does include a sweetener of sorts. Under current law, any earnings of more than $30 a week are deducted from benefits. The new proposal would set that figure at $160 before benefits are reduced, essentially allowing and encouraging people to accept part-time work.