NCPA - National Center for Policy Analysis

ARIZONA LOSES $60 MILLION A YEAR TO UNEMPLOYMENT INSURANCE "OVERPAYMENTS"

May 17, 2004

Recipients of unemployment insurance in Arizona receive benefits longer than the national average, according to the Goldwater Institute, and the state pays out more than it should.

  • The average duration of insured unemployment in Arizona was 17.2 weeks in 2003.
  • Forty-six percent of individuals who received unemployment benefits remained unemployed for the time that benefits were available.
  • Furthermore, $60 million of the $357 million Arizona paid out in unemployment benefits in 2002 are considered 'overpayments,' and this 17 percent figure is well above the national average of 9.1 percent, according to the U.S. Department of Labor.

Economist William Conerly faults Arizona's emphasis on paying benefits over putting people back to work. The state encourages telephone and Internet claims instead of face-to-face contact with Arizona's Department of Economic Security, thereby diminishing the recommendations and reminders that the unemployed receive through personal contact.

Moreover, the main reason for Arizona's overpayments, according to Conerly, is the state's inadvertent continuation of benefits to those who become employed. Arizona has not used its New Hires database, designed to detect discrepancies, in a vigilant manner to crack down on fraud.

Conerly says Arizona officials should be more committed to reemployment by eliminating telephone and Internet claims in favor of personal contact and advice. He also suggests a 'work option,' which would offer subsidies for employers to create positions for less-trained and educated workers; it would involve a diversion tax, but the money saved in paying out benefits would outweigh the tax.

Source: William B. Conerly, Ph.D., "Getting Back to Work: Reforming Unemployment Insurance to Increase Employment," Goldwater Institute, no. 190, January 26, 2004.

 

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