Preston: Arkansas Ready to Serve Employers, Workers

Preston: Arkansas Ready to Serve Employers, Workers

Arkansas Commerce Secretary Mike Preston says the COVID-19 pandemic is an “unprecedented” challenge to the state’s economy, but the state is in a good position to cushion the blow to businesses and employees.

With businesses shutting down and workers staying home to try to slow the spread of the new coronavirus, Preston said the state government’s main goal is to support workers and employers. The state’s unemployment insurance trust fund is healthy, with more than $844 million on hand, and Preston said that amount should be enough to handle the rise in unemployment benefit payouts for the next year.

The federal government is about to help, too, as the Senate approved a $2 trillion national aid package that includes payments to workers and guaranteed loan funds for small businesses and corporations. It was expected to be approved by the House on Thursday.

That Congressional relief package includes direct payments form the federal government to low- and middle-income households, and also includes unemployment benefits to be paid on top of state benefits.

Preston said the state is trying to strategically target the essential businesses to have the biggest effect. Gov. Asa Hutchinson and Attorney General Leslie Rutledge contributed a total of $7 million in state funds into what is being called the Quick Action Loan Fund.

“This is going to help us get capital up to those companies to help meet payroll needs and other liquidity issues they are having,” Preston said. “We are going to target that on medium-sized businesses that are a part of the supply chain of essential goods and services. Those that are critical in that chain of getting health care goods out there, groceries, all those things that we need in the next couple of weeks to help keep the economy and our state afloat.”

Preston said the state has set aside funds from its Community Development Block Grant program to use for low-interest and forgivable loans to rural hospitals and clinics.

“We are working around the clock to make sure our state’s businesses are taken care of and our employees, especially those who are displaced, are finding ways they can cope with this and get through this difficult time,” Preston said.

Fluid Situation

The pandemic’s toll on human lives and the economy is hard to predict as statistics change daily and even medical experts aren’t sure how long the COVID-19 virus will be a threat.

“It changes day to day for us,” Preston said.

Mike Preston

That makes planning hard on any level. Hutchinson meets regularly with his 15 Cabinet officers, a number streamlined by last year’s reorganization, and Preston said that is making strategy and decision-making more efficient.

The virus didn’t catch Arkansas totally unawares because the state has strong trade ties with China, where the virus was first reported. Preston said officials began to follow those initial reports but were still surprised by the exponential spread.

“We knew this was going to have global implications because, if nothing else, we trade a lot with China,” Preston said. “We knew this was going to impact our economy. As it spread and looked like it would not be contained to just China, that is when we said, ‘What do we need to start preparing for if this comes here?’ Little did we know it would become the pandemic it would become around the world.”

Preston said the state government has disaster plans ready for tornadoes, floods and other natural events. But however bad a tornado is, it is usually confined to a city or part of a county. COVID-19 threatens and affects the entire state and country.

“Normally in the past if there is a weather incident it is isolated to an area and everyone rallies behind it,” Preston said. “Now we have rally all together and behind everyone to support everyone. Everyone will be impacted.”

That certainly includes the workers and employers of the state. Arkansas’ 3.5% unemployment rate could jump to as high as 8.7% because of the virus, according to Michael Pakko, the state economic forecaster at the Arkansas Economic Development Institute at the University of Arkansas at Little Rock.

The federal relief legislation would call for $1,200 one-time payments to low- and middle-income adults with $500 per child under the age of 17. Workers who lose their job because of COVID-19 would get $600 per week for up to four months in addition to their state unemployment benefits, which top out at $451 per week.

The bonus unemployment benefits could create an incentive for some businesses to lay off employees who might otherwise be kept on the payroll, some experts say.

Jeremy Horpedahl, assistant professor of economics at the University of Central Arkansas at Conway, called the bonus unemployment benefit “the most significant support from the federal government for individuals suffering from the economic slowdown, much more so than the one-time $1,200 check.”

Depending on their previous income, Arkansas workers can collect up to $451 a week in unemployment benefits. The extra $600 will push some workers above $1,000 a week, which could be tempting for both employee and employer.

“The trade-off for Arkansas is … there’s now a larger incentive for workers to ask to be laid off or for business owners and managers to lay off workers they might otherwise keep on knowing they’ll receive larger benefits,” said Horpedahl, who is also a research scholar at the Arkansas Center for Research in Economics at UCA.

And there’s good news and bad news with that as well.

“Fewer people at work might be good for social distancing, but increasing Arkansas’s number of unemployed could add up to a large bill for a state with decreasing tax revenue and inadequate reserves,” Horpedahl wrote in a statement to Arkansas Business.


AEDC Guide for Businesses and Employers
Arkansas Business Resource Guide

Jobs to be Done

The economic activity of the state hasn’t ground to a halt. Essential businesses like grocery stores and hospitals are still running, and the transportation system that feeds and supplies the country hasn’t turned off its engine.

And some companies are hiring. Walmart Inc. of Bentonville announced it would hire 150,000 temporary workers, including 3,000 in Arkansas, that it will pluck from displaced restaurant and hospitality workers.

Other corporations have also announced similar hiring plans. Rick Webb, the director of Grit Studios in Bentonville, consults daily with entrepreneurs and freelance workers and said the chaos is especially hard on part-time hourly workers.

The mass numbers of people staying home has increased the need for drivers to deliver goods, said Webb, who was a senior vice president at Walmart for 11 years. Other entrepreneurs and freelancers are shutting down or delaying special projects as businesses focus on “grinding regular business.”

“There are a lot of folks already working from home that have slowed down if their clients have slowed down,” Webb said.

“Part-time hourly workers are either asking not to work or being asked not to work.”

Webb said the upheaval is an opportunity for future solutions. Technologies will spring from this, Webb said, that will better serve part-time workers.

Freelance workers, often called gig workers because they work gig to gig, have fewer protections than traditional workers. Preston said the state is doing its best to look out for all workers, traditional or gig.

“It is unfortunate that there is not that safety net in place for those individuals,” Preston said. “We are going to have to get creative in how we get those folks back to work.

That is going to take efforts of the state working with chambers of commerce and development organizations.”

Gwen Moritz contributed to this story.