Policymakers should audit, not expand, the unemployment insurance program

Governor Jan Brewer may call a special legislative session to extend unemployment insurance (UI) payments from 79 to 99 weeks. Senate President Russell Pearce and others are concerned that extending the length of time the unemployed can receive government payments discourages their search for work. They have good reason to be concerned. A number of economic studies have estimated that the availability of extended unemployment benefits tends to postpone an active search for employment by the average worker.

There are additional reasons state legislators should not rush to extend unemployment payments under the current system. The state’s UI program seems to suffer a long-standing ineffectiveness in its ability to weed out unemployed workers who are ineligible to receive benefits. The Arizona Auditor General’s office concluded in 2005 – the date of its most recent performance review of the state’s Division of Employment and Rehabilitation Services – that “the Division’s accuracy rate in determining whether claimants are eligible for UI benefits is significantly below [U.S. Department of Labor] standards and national averages.”

The most recent Department of Labor data show that Arizona’s overpayment rate was 9.23 percent, almost twice the national average of 4.91 percent. That amounts to $86.7 million in unemployment checks paid to individuals who were not eligible for benefits.

If legislators consider extending unemployment benefits, they should first require a new audit of the state’s UI program. In the near term, the legislature should exercise its oversight capacity to make sure the Division of Employment and Rehabilitation Services takes tangible steps to tighten the state’s eligibility control procedures. Both would be vital steps to ensure the program is cost-effectively serving both the unemployed and taxpayers.

Stephen Slivinski is senior economist for the Goldwater Institute.

Editor’s Note: Gov. Brewer called a special session for June 10, 2011.

Learn More:

Office of the Auditor General: Performance Review of Arizona’s Unemployment Insurance Program (2005)

Associated Press: Good news on Arizona unemployment equals bad news

U.S. Department of Labor: Calendar Year 2009 Benefit Accuracy Measurement Data Summary