Their Take: Proposed Modification of State’s Unemployment Insurance

by Alexis Glascock

The COVID-19 pandemic has caused considerable economic unrest throughout Arizona. Business closures and restricted commerce caused the state’s unemployment levels to jump 9.2% from 5.0% in March of 2020 to 14.2% the following month. At one point, 1.03 million Arizonans were out of work. As businesses have adjusted to the “new normal” and COVID-19 restrictions have been relaxed, unemployment rates have fallen steadily to a current rate of 6.9%. While this figure is still higher than pre-pandemic levels, the decrease signifies economic recovery and a shift in the direction of growth.

Unemployed workers who are out of work and actively searching for employment are currently eligible to receive up to one-twenty fifth of lost wages or $240 per week (whichever is lesser) in state unemployment benefits. Under current law, benefits are administered by the Department of Economic Security and paid through the Unemployment Compensation Fund for a maximum of 26 weeks per claimant. The Unemployment Compensation Fund is paid for by employers with a 6% tax on the first $7,000 of each individual employee’s pay.

In response to requests to increase the unemployment insurance benefit level, which is low by comparison to other states, Arizona Senate President Karen Fann proposed legislation that modifies the state’s current unemployment insurance program. President Fann’s bill includes three major provisions aimed at changing the current system. First, President Fann would like to increase the maximum weekly benefit by 33% from $240 to $320. Second, President Fann would like to modify the duration of unemployment benefits dependent upon the state’s unemployment rate in the calendar quarter prior to filing a claim. If the state’s unemployment rate was between 4.25% and 6% the duration of benefits is decreased from 26 weeks to 22 weeks. If the unemployment rate was less than 4.25% the duration of benefits is reduced to 20 weeks. If the state unemployment rate was greater than 6% (it currently sits at 6.9%), there is no reduction to the duration of benefits. The last modification to the current unemployment insurance system is an increase in the maximum taxable wages from $7,000 to $8,000. This change will increase costs for employers by an estimated 14.2% or $60 per year per employee.

The bill originated in the Senate and has since been transmitted to the House where it is awaiting a its first full vote of the House legislative members. This is the first of two votes required to pass out of the House. If passed, the bill will be referred back to the Senate for the approval of amendments introduced in the House and then sent to Governor Ducey for signing.

Alexis Glascock is a government relations and regulatory attorney with the Fennemore law firm.

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