The group tasked with disbursing the $1.25 billion Arkansas received from the CARES Act has approved new funds to go toward stabilizing the state’s Unemployment Insurance Trust Fund.
Members of the state CARES Act steering committee on Friday voted to approve the infusion of $165 million from the federal coronavirus bailout to the fund at a meeting held virtually. This comes as the panel faced a deadline of Sept. 30 to stabilize the fund, otherwise employers would have to pay an extra $10 per employee per year in taxes.
Democratic State Sen. Will Bond of Little Rock was one of two committee members to vote against the proposal, saying the money could be better spent elsewhere.
“CARES Act money is supposed to address pandemic-related costs. Unemployment benefits is one, but there are certain industries and businesses and people that are incredibly, directly impacted that we have not helped yet with this money,” Bond said. “We should use the money more wisely to directly help those businesses that have been shuttered or about to be shuttered.”
The other member to vote against the proposal, Democratic Rep. Fred Allen of Little Rock, voiced his concern over the quick turnaround time for the funding, as well as a perceived lack of benefit for small business owners.
“It appears right now that our backs are against the wall, and we don’t have a choice… it’s not going to benefit a lot of the small businesses in Arkansas, and the majority of people that’s going to benefit from this is going to be big business,” Allen said.
Department of Finance and Administration Director Larry Walther responded, saying any increase in taxes impacts businesses already struggling because of the pandemic.
“It’s proportional to the number of employees, so one can assume that it’s going to be just as difficult on a small business that has five or 10 [employees] as one that has 100 in terms of the proportionality, because the per-employee change would be the same,” Walther said.
According to Commerce Secretary Mike Preston, not stabilizing the trust fund by the Sept. 30 deadline would have triggered an automatic increase in payments to the trust fund under Arkansas law. He said that would amount to businesses having to pay $10 per employee per year, a total of roughly $10 million considering the state’s workforce of about 1 million employees.
According to the Arkansas Division of Workforce Services, employers in the state already face a 30% increase in unemployment taxes next year because of new state legislation increasing the amount of an employee’s wages on which employers must pay unemployment taxes.
The Arkansas Unemployment Insurance Trust Fund provides payments to unemployed workers, and is funded by employers based on payroll taxes. Arkansas was forced to borrow hundreds of millions of dollars from the federal government in March 2009 when the trust fund was depleted due to a rise in unemployment during the Great Recession.
The new funding brings the balance in the state’s Unemployment Insurance Trust Fund over the $750 million mark. Arkansas still has about $113 million in funding from the CARES Act yet to be allocated.