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New Mexico scales down unemployment benefits, battles fraud

August 20, 2021 GMT
New Mexico Workforce Solutions Secretary Ricky Serna discusses plans for reform to the state's system for distributing unemployment benefits that include a major expansion in staffing, at a news conference on Friday, June 11, 2021, at the state Capitol building in Santa Fe, N.M. Gov. Michelle Lujan Grisham said she will use federal funds to replenish the state's depleted unemployment insurance trust and avoid future tax increases on businesses. The Workforce Solutions Department that oversees unemployment claims is embarking is hiring 110 new employees and embarking on reforms aimed at improving efficiency and service. (AP Photo/Morgan Lee)
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New Mexico Workforce Solutions Secretary Ricky Serna discusses plans for reform to the state's system for distributing unemployment benefits that include a major expansion in staffing, at a news conference on Friday, June 11, 2021, at the state Capitol building in Santa Fe, N.M. Gov. Michelle Lujan Grisham said she will use federal funds to replenish the state's depleted unemployment insurance trust and avoid future tax increases on businesses. The Workforce Solutions Department that oversees unemployment claims is embarking is hiring 110 new employees and embarking on reforms aimed at improving efficiency and service. (AP Photo/Morgan Lee)
1 of 3
New Mexico Workforce Solutions Secretary Ricky Serna discusses plans for reform to the state's system for distributing unemployment benefits that include a major expansion in staffing, at a news conference on Friday, June 11, 2021, at the state Capitol building in Santa Fe, N.M. Gov. Michelle Lujan Grisham said she will use federal funds to replenish the state's depleted unemployment insurance trust and avoid future tax increases on businesses. The Workforce Solutions Department that oversees unemployment claims is embarking is hiring 110 new employees and embarking on reforms aimed at improving efficiency and service. (AP Photo/Morgan Lee)

SANTA FE, N.M. (AP) — State labor officials warned Thursday that unemployment benefits are scheduled to come to a close for about 50,000 New Mexico residents in early September, as the federal government ends supplemental payments to people who lost jobs or self-employment income during the pandemic.

Employers are warily watching whether those individuals will return to work and stabilize the state’s unemployment insurance trust fund that is sustained by payroll taxes. The fund has been whipsawed by the pandemic and related financial crisis, while employers were temporarily shielded from tax rate increases.

New Mexico had the nation’s highest June unemployment rate, at 7.9%. The state is bracing for the expiration Sept. 4 of four federal programs that boosted the maximum weekly unemployment benefit per worker of roughly $484 in New Mexico to $784, while temporarily extending benefits to the self-employed and gig-economy workers.

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Workforce Solutions Secretary Ricky Serna told a panel of state legislators that roughly 67,000 resident are currently receiving unemployment benefits, down from a record high of 148,000 in June 2020.

Of those, only 14,000 receive standard state unemployment benefits, the longstanding program sustained by payroll taxes and a state-managed trust fund. The remainder are unlikely to continue receiving benefits.

Serna outlined efforts by Gov. Michelle Lujan Grisham and the state Legislature to shield employers from tax increases associated with unprecedented payouts of $3.7 billion in unemployment benefits since the outset of the pandemic in March 2020.

Serna said special “hold harmless” legislation enacted in June 2020 was successful in shielding employers from major tax rate increases as unemployment claims surged during the pandemic, depleting a $460 million unemployment trust and saddling the state with $284 million in debt.

“Fewer businesses saw an increase, and overall that increase to those businesses was smaller, when you make a comparison to the prior year,” Serna said. “So the provisions that this legislature put in place to hold businesses harmless were really effective.”

The state unemployment trust was replenished in June to its pre-pandemic balance of $460 million, thanks to a new tranche of federal pandemic relief authorized in March by President Joe Biden after he won congressional approval.

New Mexico Business Coalition President Carla Sonntag said employers are wary that the federal government might extend supplemental employment benefits, possibly influencing individual decisions about whether to return to work. She says high unemployment rates inevitably draw down the unemployment trust and could lead to payroll tax increases when rates are recalculated in 2022.

“We have been flowing (money) out of the fund, and we don’t have enough people employed where businesses are paying to replenish the fund,” she said. “So we’re not finding the equilibrium we’ve had before.”

At the same time, state unemployment officials say they are grappling with a surge in attempts to hijack unemployment benefit payments and federal bonuses away from New Mexico residents.

Serna said thousands of New Mexico residents last weekend received fraudulent text messages asking for claim information.

He said the balance of paid unemployment claims flagged for fraud has decreased to roughly $68 million, down from an estimated $120 million earlier in the year, as suspicious claims are investigated and cleared or referred to prosecution.

Separately, the state has made overpayments of unemployment benefits estimated at $130 million under circumstances not associated with fraud.

Lujan Grisham, a Democrat, offered incentive payments of between $400 and $1,000 over the summer for people who return to work before the expiration of the extra federal unemployment payment.

About 22 states, mostly led by Republican governors, already have stopped accepting the $300 weekly federal supplemental over concerns that it may discourage people from returning to work when jobs are available.