$50M in relief backed to ease insurance rise in Arkansas

Aid requests also favored from prison, parks agencies

Blooming magnolias frame the state capitol building in Little Rock Monday morning, May 18, 2020. (Arkansas Democrat-Gazette/JOHN SYKES)

A state panel, appointed by Gov. Asa Hutchinson to recommend the best uses of federal coronavirus relief funds, on Tuesday endorsed the state Department of Commerce's request for $50 million to mitigate unemployment insurance rate increases for employers.

The 15-member CARES Act steering committee also recommended approval of the Department of Parks, Heritage and Tourism's request to open the door for reallocating up to $10 million of these federal funds -- currently allocated to cities and counties -- to reimburse convention and visitors bureaus, public convention and concert facilities and advertising and promotion commissions for covid-related expenses.

The panel also voted to support the Department of Correction's request for $2 million in federal funds for pay for employees at prisons affected by covid-19 and another state Department of Parks, Heritage and Tourism request for $400,000 for a marketing program aimed at slowing the spread of covid-19 for the public health and economic recovery.

[CORONAVIRUS: Click here for our complete coverage » arkansasonline.com/coronavirus]

The CARES Act is the federal Coronavirus Aid, Relief, and Economic Security Act enacted by Congress and President Donald Trump in March. Hutchinson appointed the 15-member steering committee, comprised of nine administration officials and six lawmakers, to recommend the best uses of the state's share of $1.25 billion in federal coronavirus relief funds.

Division of Workforce Services Director Charisse Childers said in a memo to the steering committee that the state's unemployment insurance trust fund is funded solely by Arkansas employers through experience-based contributions or through required reimbursements.

Childers said base unemployment insurance rates are determined by an employee's's contribution and benefit charges through June 30 of the preceding year.

"Unless action is taken, the high claims volume caused by the COVID-19 pandemic during the second quarter of 2020 (April, May and June) will cause employers' 2021 UI tax rates to significantly increase," she wrote in her memo. "Such an increase in UI taxes will put a financial strain on employers and create an obstacle to hiring. The top industries that are vulnerable to UI rate increases are the industries most severely impacted by the pandemic."

Employers may make voluntary contributions to their accounts in order to mitigate benefit claim charges and avoid an increase to their unemployment insurance base tax rate, Childers said.

The Workforce Services Division "administratively can deem the state's previous CARES Act $165 million contribution to the UI trust fund as being a voluntary contribution on behalf of employers," she wrote in her memo. "By transferring an additional $50 million in CARE Act funds to the UI trust fund (bringing the total transferred to $215 million), [the Workforce Services Division] can deem as voluntary employer contributions an amount sufficient to mitigate the increased benefit charges caused by the pandemic," Childers said.

Commerce Secretary Mike Preston said there were about $207 million of charges against the trust fund for about 26,000 businesses, and the hardest-hit industries included manufacturers, hotels, restaurants, hospitals, clinics and retailers.

"This is going to mean an average increase in the [unemployment insurance] tax rate of about 36% for those businesses," he said.

For example, one large business in Arkansas would see its annual cost for each employee's insurance increase from $21 per employee to $340 per employee.

Sen. Missy Irvin, R-Mountain View, said that the impact on those businesses would be great.

"On most cases, they are either still behind or they are catching up and, if they get hit with this [rate increase] at the beginning of next year, then it is just really going to put them in a huge predicament," she said.

Preston said laws in other states allow "a non charge for a quarter," meaning no business would have to make up what was claimed from that quarter, but Arkansas doesn't have that authority under state law.

An executive order is another option, and "that would work for a temporary fix, but whenever the emergency is over, the executive order ends, then the rates would increase, so it would be back on those businesses to pick up the difference," he said.

Preston said the third quarter of this year won't be used for calculating unemployment insurance tax rate until this time next year, "so we have time in the legislative session to work on an administrative fix that would allow us to [change state law] and have the ability to do that."

But Sen. Will Bond, D-Little Rock, who was the lone steering committee member to vote against endorsing the Department of Commerce's request for $50 million in federal coronavirus relief funds, said that "we are using money that may be needed for vaccine delivery, for teachers or senior centers or things that this money could used for money."

"I agree employers should not be punished, but I just don't think this is the way to do it," he said.

Secretary Stacy Hurst said the Parks, Heritage and Tourism Department is seeking the reallocation of $10 million in federal coronavirus relief funds allocated to cities and counties for advertising and promotion commissions, convention and visitor bureaus and public facilities.

"Essentially, we would have to wait and see if there is money available at the end of the city and county claim period, which I understand ... is Dec. 15," she said. "Then, we would be able to then quickly pivot and reallocate money to A&P's, CVB's and public facilities."

Commission Chairwoman Elizabeth Smith said entities that would benefit from this program will be able to submit their requests, and department officials can start working on how much they are going to need.

"Then when the dollars are available from the cities and counties it would just go straight through and it would be paid out by the cities and counties because they are already set up to receive funding ... [and] these are governmental entities," she said.

The state's cities and counties are each eligible for up to $75 million in federal coronavirus relief funds.

The steering committee also recommended approval of the state Department of Corrections' request for $2 million for continuity-of-care pay at its facilities affected by covid-19. The money will cover one-time $500 bonus payments to Arkansas Division of Corrections and Division of Community Corrections staff members who have worked at facilities where the virus has been detected.

Hurst said the Parks, Heritage and Tourism Department is seeking $400,000 in federal coronavirus relief funds for a marketing campaign aimed at slowing the spread of covid-19 in collaboration with the state Department of Health, University of Arkansas for Medical Sciences and the state's economic recovery task force.

This funding will be combined with $200,000 funding from the state Department of Health, she said.

"We would do a statewide blitz [and] we would engage a more creative message, a more personal message that hopefully that will have the greatest impact for behavioral change," Hurst said. "We are very interested in slowing the spread to avoid overwhelming our health facilities, but also to avoid an economic slowdown."

State officials also would like to engage some private-sector partners and do minority outreach "and really make a really good push going into the winter to stop the spread of covid," she said.

Irvin, the Republican senator, said she thought the messages should emphasize personal responsibility. Irvin, who contracted the virus earlier this year, also said the messages should include those who have survived covid-19.

"After going through and after having covid and having it be something that I unfortunately transmitted to people that I love, I really want to make sure that we are real focused about the messaging and to making sure that people understand clearly how the best way to do this and how to prevent the spread of it," she said.