Gov. Laura Kelly drew stiff criticism from Republican legislators Tuesday for turning down a plan to use part of the state’s share of federal COVID-19 relief dollars to shore up the unemployment trust fund.
Kansas has continued to see over 70,000 claimants drawing on unemployment insurance, not counting those receiving money from an array of new federal programs that have been made available.
The fear is that will draw down the trust fund that underrates those claims, with Gov. Laura Kelly saying during a State Finance Council meeting Friday that it will be out of money by "early spring."
Twenty states already have encountered that problem and have used low-interest loans from the federal government in an effort to bolster their unemployment coffers.
Kansas could do the same, Kelly said, believing that it would be better to prioritize driving out CARES Act funds to other entities first.
"We will not be the first state to empty its coffers," Kelly said.
But because taxes levied on employers subsidize the fund, there are concerns that businesses will be shelling out more to pay back any borrowing at a time when employers are already hurting because of COVID-19.
During a State Finance Council meeting, Kelly shot down a plan put forth by Republican leaders to divert some of the state’s remaining CARES Act money to help shore up the trust fund.
That move drew harsh rebukes from lawmakers and the business community during a Tuesday meeting of the Special Committee on Economic Recovery.
"It is on our businesses to replenish this because our governor won’t stand up for them," said Rep. Sean Tarwater, R-Stilwell.
Other states have used CARES Act in that way, such as Georgia diverting $1.3 billion to its trust fund.
That figure in Kansas would likely have been much smaller, with lawmakers proposing roughly $25 million be transferred to the trust fund — much less than the $300 million that business groups requested for the purpose earlier this year.
Much of the state’s CARES Act money has already been doled out to county governments, private businesses and state agencies.
But members of the committee said that perhaps too much of the money had been given to local governments.
Some have argued that it will be unwieldy for counties and cities to spend their share of the money on COVID-19-related expenses by the end of the year, as is required.
"We are so fiscally irresponsible in this state," said Sen. Richard Hildebrand, R-Galena.
Kansas Department of Transportation Secretary Julie Lorenz left the door open for the idea to be reconsidered.
"I think it is appropriate to have backup plans," Lorenz said on Friday. "I would ask that we get these dollars to Kansans who need them as fast as possible and then if we need the backup plans we go to the backup plans."
Lawmakers also levied stiff questions at officials from the Kansas Department of Labor, arguing the department needs to do more to halt fraudulent claims that have poured in over the past several months.
All 50 states have been under siege with fraudulent claims in the Pandemic Unemployment Assistance program, the temporary aid program launched during the pandemic.
It is separate from the state’s unemployment program and is paid for entirely by the federal government, meaning it doesn’t have any bearing on state finances.
Peter Brady, a deputy secretary at KDOL, said Tuesday that over 100,000 fraudulent claims had been submitted, over double what was previously indicated by acting Labor Secretary Ryan Wright last month.
As many as 80 or 90% of all PUA claims filed at one point had been fraudulent, Brady said.
He was unable to say how many had been paid out, although KDOL officials had previously admitted that it was likely some bogus claims had slipped through the cracks.
Phil Hays, director of the Kansas State Council of the Society of Human Resource Management, said his group found in an internal survey that over 80% of businesses had encountered fraudsters trying to get benefits on behalf of a current or former employee.
If that were to hold statewide, he said, over 60,000 businesses could be affected. To help them, he called for KDOL to expand its fraud response team and improve communication with the business community and with the public on social media.
"We’re paying out to fraudsters out of state and out of the country while Kansans can’t put food on the table," he said.
And Hays alleged that some Kansans receiving unemployment were declining job offers in order to continue collecting their benefits, something he had encountered while hiring for his own company.
While those individuals were subsequently reported to KDOL, he alleged their benefits hadn’t been halted as is required by state law.
"People who are able-bodied and able to work shouldn’t get a get-out-of-jail-free card when there are jobs out there today," he said.
He worried there will be a rush of individuals entering the job market once unemployment benefits start to time out, a concern echoed by lawmakers who said some job seekers were suffering from complacency.
"I’m not feeling much sympathy for these folks right now," said Sen. Gene Sullentrop, R-Wichita.
But other lawmakers argued that job-seekers were forced to balance other considerations, such as finding a post that allows them to address child care needs or which doesn’t place them at a high risk of contracting the virus.
"These people are not being lazy, they are being smart and playing the long game here," said Rep. Stephanie Clayton, D-Overland Park.
Hays acknowledged that point but noted that counties across the state are again implementing some restrictions on business operations to counter rising COVID-19 case counts, meaning the problem is likely to get worse before it gets better.
"I don’t think anyone was ready for this," he said.