Great News for Arizona Employers
The state has finally crawled out from under the federal unemployment insurance debt amassed during the recent financial crisis and is on its way to restoring a healthy reserve fund for the next economic emergency.
Arizona’s unemployment insurance debt at its high point reached around the $600 million marks. Not only has their state unemployment insurance (UI) fund cleared the debt, there is also now a $160 million balance. When the repayment was first announced in May, the state unemployment rate was at 6.2% and it has continued to improve. In 2015 it was 5.8% and in January 2019 it was 5.1%, according to the Bureau of Labor Statistics.
What This Means for Employers in Arizona
Employment taxes are expected to decrease, though they may remain where they are temporary until an adequate balance is restored to the state’s unemployment insurance fund. According to Mark Darmer, Deputy Director of Programs at Arizona’s Department of Economic Security, the current $42 per worker levy is expected to continue as it is until at least 2016 or 2017.
The current outlook after repaying Arizona’s unemployment insurance debt is good. Even while waiting for the decrease to kick in, there is also the relief of no additional unemployment fund-related tax increase on the horizon. Currently, Arizona employers pay an average of $160 per employee each year which varies across employers.
In addition to this, restoring the health of the state’s UI system also helps the economy by making Arizona more attractive to new employers.Get a clear understanding of complex federal and state legislation underlying UI tax with this comprehensive guide on unemployment claims management.
What Caused Arizona’s Unemployment Insurance Debt
Arizona was forced to take on this federal debt during the Great Recession when state unemployment insurance reserves of $1 billion dollars proved inadequate for the ongoing elevated rates of unemployment. During 2009-2010, nearly half of the states across the country found themselves in similar circumstances, requiring emergency aid from the Federal government as they were ill-prepared for a financial crisis of this magnitude. Nationally, the UI crisis has proven to be a costly lesson in financial crisis preparedness, with employers footing the bill.
Only five states and the Virgin Islands continue to carry federal unemployment insurance loan (FUA) debt. As of June 25th, the combined debt balance for all states and territories is $7.1 billion, with the bulk of it ($5.7 billion) belonging to California. In perspective, that is quite impressive given that just two years ago, the cumulative debt was $28.8 billion owed by 23 states and territories. At the time, California’s debt was roughly twice what is now.
Arizona’s Recovery from Great Recession
The recession and slow recovery have tested the nation’s unemployment insurance system as never before. Unlike the two recessions that preceded the 2007 downturn, Arizona fell further and its recovery took longer.
The Great Recession technically began in December 2007 and ended in June 2009. The change was even more dramatic in Arizona, which had one of the nation’s strongest labor markets entering the downturn. Employment in this state reached the bottom in February 2010. By that time, the nation had erased 8.7 million jobs or 6.3 % of all the workers it had at the outset. Compared with other states, only Nevada lost a greater share of its workers during the downturn.
Arizona formally matched its pre-recession employment levels in December 2015, closing a job hole that lasted eight years and lingered 19 months longer than the nation’s. Repayment of Arizona’s unemployment insurance debt resulted in creating jobs, attracting new employers, growing businesses, and improving overall prosperity.With automated UCM system, employers can rely on timely and detailed responses to state enquiries, resulting in significantly improved handling of UI claims.
Editor’s Note: This post has been updated for accuracy and comprehensiveness.