Extra $300 in Arizonans' unemployment checks will go away as soon as next week, state warns
Ryan Randazzo
More than 400,000 Arizonans receiving unemployment benefits need to prepare for the $300 supplement in those payments to end abruptly, perhaps as soon as next week.
When the extra federal money runs out, Arizonans on unemployment will be paid the state maximum of $240 a week unless another emergency measure comes through.
That was the message from Arizona's director of the Department of Economic Security on Wednesday.
“Unfortunately, we are going to have very little notice when this happens," DES Director Michael Wisehart said. "And so it is likely that the ($300) benefit will stop abruptly for individuals."
Wisehart met with Arizona reporters on a Zoom call to discuss the ongoing troubles with fraud that are delaying payments to thousands of people, the department's efforts to hire more people to process claims, and the likelihood that Arizona will need to borrow money from the U.S. Labor Department in about two months to keep paying unemployment.
But the most immediate issue is the supplement expiring.
"So getting the word out that individuals need to continue to plan, need to continue to work with their congressional delegation to express the need that is going to continue to exist in Arizona as we move forward," Wisehart said.
About 420,000 people on unemployment and "pandemic unemployment assistance," or PUA, are receiving the $300 supplement today.
$300 supplement came from Trump
When the coronavirus pandemic hit the U.S. in March, Congress passed a $600 weekly supplement for the millions of people suddenly seeking unemployment. That expired in July. Absent another move by Congress, President Donald Trump allowed states to use an emergency fund to pay an additional $300 a week.
The $300 weekly supplement is known as "lost wages assistance," or LWA, and is paid through a grant via the Federal Emergency Management Agency.
Arizona was the first state in the nation to pay the supplement.
Officials estimated the fund would last five weeks, depending how many states took advantage of it. It's been paid for five weeks now, but just a handful of other states have paid it so far.
But still other states are getting the money out, and it is retroactive to the week of Aug. 1.
Arizona has authorization from FEMA to pay the supplement this week, and is working on authorization to pay it next week, a sixth week, he said.
The payments cover the previous week of missed work, so the "sixth week" of payments would cover work people missed in the current week, from Aug. 30 through Sept. 5.
"It is likely that after the sixth week there will be some amount of jeopardy to the availability of these funds going forward," Wisehart said. "As we head toward the seventh week it becomes more of a challenge for the dollars to be available."
The $300 will stop being paid when the $44 billion designated for LWA is spent or when the Federal Disaster Relief Fund Balance drops to $25 billion.
"We really don't have a good sense what is actually going to get paid from other states," Wisehart said, which makes it hard to predict when the fund will be drawn down.
Thousands still wait for benefits
Wisehart also said DES continues to hire employees to deal with the record number of applications, which has left some people waiting several weeks to get paid.
“The thing that continues to be heartbreaking for all of us is that the need continues to be significant out in our communities,” he said.
Last week, another 131,000 new claims for benefits came in to DES, and many are suspected to be fraudulent because such a high number of claims is unusual, he said.
DES reports it has a backlog of 12,000 claims for regular unemployment insurance, which has been decreasing in recent weeks.
It has another 900,000 claims for PUA that need to be reviewed, though most of those claims likely are fraudulent, Wisehart said.
PUA was established by Congress to compensate people who were self-employed, contract workers, or otherwise didn't qualify for regular unemployment but lost income because of the pandemic.
Because their employment isn't verified with a job site like regular unemployment, the PUA system has been a popular target of fraud.
Wisehart said previously that if just 5% of the PUA claims the state has paid are fraudulent, then criminals have collected in the neighborhood of $500 million from the system.
So DES is being more meticulous with PUA claims now. In recent weeks, a batch of 90,000 PUA claims was paid, followed by another batch of 5,000, all determined by DES to be legitimate.
"That work has not ended," he said. "We continue to go through those potentially fraudulent claims."
Some of the claims not only must be verified to ensure they are legitimate, but that the claimants actually qualify for benefits.
DES has a pilot project with a company called ID.me, which he said he hopes will allow the state to more quickly verify legitimate claims and get people paid.
The department has 30,000 reports of fraud, which includes people who have complained their identity was used to access benefits, in addition to 900,000 or so claims yet to be reviewed, he said.
He said people who have waited weeks for PUA benefits should continue to file weekly claims with DES so that once the department verifies their claim they get paid for each week they were out of work.
State likely will need to borrow to pay future benefits
Unemployment taxes are paid by employers into a trust fund the state uses to pay unemployment benefits, and that fund has about eight weeks left before it runs out.
That means Arizona will, like it did during the Great Recession, need to borrow from the Labor Department to keep paying regular unemployment, Wisehart said.
The fund was about $1.1 billion heading into the pandemic and is about $484 million today, with $50 million or so being paid out each week in state unemployment.
PUA is a federal program and while DES administers those payments, the money comes from the federal government, not the state unemployment fund.
"Obviously the pandemic is not going to end soon," Wisehart said. "Insolvency has significant repercussions on our businesses as they begin to ramp up and have to pay those taxes."
Several other states, including California and New York, already have insolvent funds and many other states are on the brink of depleting their funds.
Reach reporter Ryan Randazzo at ryan.randazzo@arizonarepublic.com or 602-444-4331. Follow him on Twitter @UtilityReporter.