Arkansas legislators approved using $165 million in federal relief funds to shore up the state unemployment insurance trust fund.
Legislative leadership approved an emergency request to allocate the $165 million in order to prevent increases in rates that businesses have to pay into the fund to keep it solvent.
However, approval of the funding was not a smooth process. The Legislative Council convened in a hastily called meeting to express frustration that officials at the Division of Workforce Services (DWS) failed to inform legislators until the eleventh hour that automatic rate increases in unemployment insurance were imminent.
The division administers claims for unemployment, which have set records due to layoffs caused by the spread of the coronavirus. Also, during the pandemic the division has received many more fraudulent claims than is normal.
The dramatic increase in unemployment filings has threatened to deplete the trust fund below certain thresholds. If the fund balance were to fall below those thresholds, businesses would be hit with automatic increases in the rates they must pay in order to maintain the fund’s solvency.
Legislators expressed frustration that DWS officials failed to keep them informed of the rapid decrease in the unemployment fund.
By the time they were notified of the problem, legislators had almost no time to work on a solution and their options were limited. Legislators were under extreme pressure to approve the DWS request in order to prevent a rate increase on businesses that already have been hard hit by the pandemic.
Several lawmakers expressed frustration that it was not the first time that a lack of communication had put them in a difficult position with constituents. For example, at the beginning of the pandemic, when laid off workers had to wait extremely long periods of time to submit their claims for unemployment, legislators received a flood of complaints about the slowness of the system.
One senator said that the legislature is consistently the last body to be informed about executive branch decisions, and perhaps he would support new laws to require more timely and more accurate financial reporting from state agencies to legislative committees.
Also, legislators wanted assurances from DWS officials that failures to anticipate trust fund depletions will not occur again.
In the economic recession of 2008 and 2009, claims filed by unemployed workers drained the fund to the extent that Arkansas had to borrow $360 million from the federal government. That had serious financial consequences for Arkansas businesses and workers.
Act 802 0f 2009 raised the amount that companies have to pay into the fund and Act 861 of 2009 reduced benefits for laid off workers.
Act 512 of 2019 sets the taxable wage base that determines how much businesses have to pay in unemployment insurance. This year the taxable wage base is $7,000 but will go up to $10,000 in 2021, according to DWS officials who spoke to the Legislative Council. In effect, that will increase the rates that businesses pay for unemployment insurance.
The Legislative Council is the committee of lawmakers that monitors the operations of state government during the interims between regular sessions.