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Could Arizona’s $1.1 billion unemployment fund run dry?

Posted at 9:45 PM, May 20, 2020
and last updated 2020-05-21 10:14:24-04

State leaders are mulling options just in case the state’s $1.1 billion Unemployment Insurance Trust Fund runs out of money this year.

The trust fund is composed of contributions from Arizona employers based on the number of eligible workers they have on staff. They pay more than what’s needed for claims in good economic times in order to prepare for recession.

“Like any other insurance, it’s the thing you never want to use," said state Rep. Mitzi Epstein, D-Ahwatukee. “Every year you pay into it, and it works.“

The state is experiencing unprecedented unemployment due to the coronavirus pandemic. More than 300,000 Arizonans have claims after layoffs and shutdowns.

“We don’t feel like this is going to be a long-term spike,” said State Rep. Regina Cobb, R-Kingman. “People are meant to get back to work.”

A spokesman for the Arizona Department of Economic Security, which controls the fund, told ABC15 as Arizona 'returns stronger,' consistent with the Governor's plan, they are not projecting insolvency within the year.

Agency staff are “monitoring changes in employment, the economy, and the trust fund closely and will update our estimates,” he said.

Other economic projections are less rosy. Arizona could stretch its Unemployment Insurance Trust Fund dollars for only 20 weeks, according to an estimate last month by the Tax Foundation, a national nonprofit research group.

“My guess is it takes them at least through the whole year,” said longtime Valley economist Elliott Pollack. “Unemployment will probably peak in May or June, and it will come down slowly, but it will come down.“

If and when the fund hits zero, people who have valid unemployment claims will not see any changes. Arizona has options, including borrowing money from the federal government, to cover unemployment checks.

“They can always use the general fund to pay things back, but usually the additional tax is on employers,” explained Grand Canyon Institute researcher David Wells.

After Arizona’s last recession, Wells said, the federal loan was repaid by companies contributing $20 extra per employee for one year.

Governor Doug Ducey could also use some of the $1.8 billion allocated to the state by the federal CARES Act. However, municipal and county government leaders have urged the governor to distribute most of the CARES money to offset their local cost for pandemic response. Local government leaders say that would allow them to assist struggling businesses and families immediately.

“It’s disturbing to me that a businessman such as him [Ducey] would not have these funds go directly to assist these businesses to stay open, so they, themselves, and their employees are not burdening the unemployment area,” said Supervisor Mike Goodman at a Pinal County meeting last week.

Pinal County is taking legal action to try to force CARES distribution.