LITTLE ROCK — The Legislature’s failure to significantly address the state’s nearly $200 million recession-era unemployment debt to the federal government leaves the burden on businesses and workers to cover the cost, labor and management representatives say.
Businesses pay higher unemployment taxes to help retire the debt. For laid-off workers, unemployment checks reflect benefit limits enacted two years ago. Checks would have been even less in the coming months if a bill to lower the maximum weekly benefit by $125 had not failed during the legislative session.
Four of six bills designed to address the debt payment and replenish the Unemployment Insurance Trust Fund, while easing the burden on employers, were approved by the Legislature and signed into law by Gov. Mike Beebe during the recent session.
Montine McNulty, director of the Arkansas Hospitality Association, which supported the six bills, said her organization wanted lawmakers to do more. So did Alan Hughes, president of the Arkansas AFL-CIO, but he was pleased that a pair of proposals that would affect workers failed.
“It’s pretty hard to swallow to sit here and know that people are struggling,” Hughes said. “These are not lazy people. These are people like construction people who only get to work seasonal. They might work nine or 10 months out of the year and the rest of the time they are hunting for jobs in between and having to draw unemployment [between] those jobs. They are looking for work. They just can’t find it. It’s just not available.”
The state owes the federal government for money it borrowed to keep unemployment benefits flowing to thousands of out-of-work Arkansans during the recession. At the end of last month the balance was $198.1 million, down from $360 million.
To address the debt, the Legislature in 2009 raised the unemployment insurance rate employers pay by 20 percent. During the legislative session this year, lawmakers approved Act 861, which capped the maximum unemployment benefits and cuts the benefit period by a week to 25. It also eliminates wage indexing and changes some of the eligibility requirements for workers seeking unemployment.
The balance should be paid off by the end of 2014 “barring any unforeseen economic conditions,” said Kimberly Freidman, spokesman for the state Department of Workforce Services.
She said the Unemployment Trust Fund, which ran dry forcing the state to borrow the money during the recession, is slowly being replenished and is now at $101 million.
McNulty said last week that the restaurants and other small businesses her organization represents are struggling with the additional unemployment taxes they have to pay to address the debt and replenish the trust fund. She said businesses understand the importance of unemployment benefits and of making sure the Insurance Trust Fund is solvent, but businesses are struggling and without them there would be no jobs.
“Whoever would have imagined we would have had unemployment rates we did,” she said.
Arkansas’ unemployment rate reached 8.3 percent in late summer 2011. The current rate is 7.2 percent.
This year, the Hospitality Association supported Senate Bill 875 by Sen. Bart Hester, R-Cave Springs, which passed the Senate but stalled in a House committee. It would have reduced the average maximum weekly insurance benefit from $451 to $325. The average maximum weekly benefit among the six states surrounding Arkansas is $320.
SB 875 also would have reduced the unemployment rate employers pay when the trust fund reached $169 million.
Also rejected in the House Public Health and Welfare Committee was SB 850 by Sen. Jim Hendren, R-Gravett, which would have lowered the unemployment insurance rate paid by employers from 8 percent to 6 percent.
Hughes said the Arkansas AFL-CIO opposed both bills out of concern for the amount of money in the trust fund. The union would like for the trust fund balance to be $500 million or more before the unemployment insurance rate paid by employers is reduced.
Gov. Mike Beebe said last week that legislation approved by lawmakers in 2009 and 2011 was working to pay off the debt and replenish the trust fund, and he said he was satisfied with measures passed this year.
“You want a cushion in there but I can’t tell you an exact amount,” Beebe said, adding he would “be guided by what (the DWS director and others) think would be prudent.”
“Of course we went through the worst recession since the Great Depression, so that was kind of unprecedented,” he said.
Freidman said Friday that DWS has not ever set a desired amount for the trust fund.
One proposal that was approved by the Legislature and signed by the governor was SB 542 by Sen. Missy Irvin, R-Mountain View, which changed the penalty for making false statements in applications for unemployment benefits from a 50 percent decrease in benefits to termination of benefits. The termination of benefits applies only to the benefits payable within the benefit year of the claim.
The measure also stipulates that the disqualification ends after 2.5 years, down from five years, which was in the law.
Hughes said SB 542, now Act 1242, and the others that were approved and signed into law were all supported by the Arkansas AFL-CIO after negotiations and amendments.
• SB 780, Act 1077, by Sen. Cecile Bledsoe, R-Rogers, which clarifies the process for disqualification from unemployment benefits after being fired for misconduct.
• SB 857, Act 1040, by Sen. Alan Clark, R-Lonsdale, which requires DWS to make quarterly reports to the Legislative Council on the department’s efforts to enforce laws that require people on unemployment to seek suitable employment or lose benefits.
• SB 1116, Act 1191, by Ronald Caldwell, R-Wynne, which increased the unemployment contribution insurance rate on employers who are currently in deficit on their unemployment insurance balance.