Montana to axe expanded unemployment benefits funded by feds, create back-to-work cash bonus

May 05, 2021

Daily Montanan

The state Department of Labor and Industry on Tuesday paired its announcement of a new direct payment-based workforce incentive created from federal COVID-19 aid with news that Montana will soon be the first state to decline federally-funded, expanded unemployment insurance benefits related to the pandemic, increased payments that would otherwise be available through September.

This means that beginning June 27, the state will no longer offer $300 weekly payments in supplemental federal funds to unemployment claimants, bringing the maximum weekly unemployment benefit in Montana down to around $550. At the same date, Montanans will no longer be eligible for federal Pandemic Emergency Unemployment Compensation benefits, which offers payments to those who exhausted their standard UI payments; for the Pandemic Unemployment Assistance program; or for the Mixed Earner Unemployment Compensation program. The state will also reinstate eligibility rules waived under the Democratic administration of former Gov. Steve Bullock by which would-be claimants must be seeking work in order to be eligible for unemployment benefits.

All of Montana’s roughly 25,000 unemployment claimants were receiving the extra $300, while more than 15,000 were receiving additional benefits through the PEUC or PUA programs, which were created through the CARES II Act and other federal COVID-19 aid legislation.

“This is really unprecedented, these are federal dollars that Montanans will now not be able to access,” said Heather O’Loughlin, co-director of research and development, at the liberal-leaning Montana Budget and Policy Center. 

The executive branch handed down these changes as part of a broader effort to incentivize a return to work, citing long-standing claims from the business community about a dire workforce shortage hindering economic recovery. On Tuesday, DLI Workforce Services Division Administrator Scott Eychner pitched a new program to a panel of lawmakers assembled to dole out economic development funds from the American Rescue Plan Act under which those receiving benefits as of May 4 can receive a one-time, $1,200 payment if they accept a job and work at least four weeks.

“This is a monetary incentive to individuals currently receiving unemployment benefits with the intent to expeditiously return them to employment,” Eychner explained. 

In a press statement, Gov. Greg Gianforte said that enhanced unemployment benefits were doing “more harm than good,” and that returning to pre-pandemic criteria in concert with the new bonus would help fill job openings.

Eychner did not explain that the bonus program would be accompanied by tightening unemployment requirements to the steering committee, which passed the executive’s recommendations on a voice vote.

“Certainly, I wouldn’t have voted for that policy if I knew” about the unemployment policy changes, said Rep. Kim Abbott, D-Helena, who sits on the Economic Stabilization, Transformation and Workforce Development Steering Committee, one of several workgroups formed under House Bill 632 to help guide the state’s allocation of nearly $3 billion in ARPA funds. “Clearly the worldview here is people are making more money at home, so there’s no incentive to go to work. That’s not my worldview.”

Abbott said the policy changes make “a whole bunch of assumptions about childcare infrastructure capacity (and) about adequate jobs being available.”

Democrats have argued throughout the session that the best way to address a workforce shortage is to improve training and development — and for employers to offer more competitive wages.

“You get 1200 bucks for four weeks at a minimum wage job, and then what?” pondered Rep. Mary Caferro, D-Helena, the top Democrat on the House Appropriations Committee last session. “Businesses need to pay a good wage. That’s what gets people back to work.”

The $1,200 payments were previously discussed during debate on HB632, which implemented the ARPA funds, as a potential alternative to proposals from the Democratic minority for direct payments to essential workers making under a certain amount. Up to $15 million in ARPA money can be used to finance the bonuses, Eychner said, which will be available on a first-come first-served basis through October 31 of this year. If all the money is spent, he estimated that around 12,500 claimants would receive bonuses, which will be treated as taxable income, the department said.

The idea is that the bonus payments, in addition to incentivizing a return to the workplace, can also be used to pay expenses related to child and eldercare, transportation and so on.

Jessica Nelson, a spokeswoman for the Department of Labor and Industry, said that anyone who is eligible for the enhanced benefits through June 26 will still receive them, even if they’re among the Montanans whose claims are caught up in the department’s backlog — something it received ARPA money to address.

Tuesday’s announcements are essentially grounded in the assumption that increased unemployment benefits during the pandemic — which, for many, exceeded the weekly take-home from the jobs from which they’d been laid off — is slowing the return to work. Gianforte’s office shared statements from business owners and advocacy groups who bemoaned the unavailability of workers in industries like construction and restaurants.

But research conducted since the introduction of enhanced benefits as part of the country’s initial response to the pandemic consistently shows little relationship between higher unemployment payments — or the elimination of those payments — and employment.

“People are smart enough to understand that a job now and likely in the future is better than temporary uninsurance payments,” explained University of Montana economist Bryce Ward in March.

O’Loughlin, of the Montana Budget and Policy Center, said the bonus program and elimination of enhanced benefits essentially assumes that there’s a one-to-one match for all of the roughly 14,000 job vacancies that Eychner estimated there are in the state. But that may not be accurate.

“There needs to be more context about what positions are open,” she said. “We are still in a pandemic, and what we have been experiencing is an inequitable recovery — not all sectors are recovering equally. We could likely see this supposed replacement of UI benefits that we know are stable … with a program that is likely going to help a smaller subset of the population.”

Montana Budget & Policy Center

Shaping policy for a stronger Montana.

MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.