PHOENIX - Hundreds of teachers at religious schools around the state could soon be at risk of being laid off with no prospect of collecting jobless benefits.
On a voice vote Wednesday, the Senate agreed to exempt religious organizations from having to provide unemployment insurance to those who work for them in educational and child-care services. HB 2645 requires only that those services include some undefined level of religious instruction.
Democratic lawmakers questioned giving a tax break to religious schools.
Companies do not pay jobless benefits themselves, but instead are required to obtain insurance through the state. The premiums are based on how frequently an employer lays off workers.
Companies with low layoff rates can pay a fraction of a percent of the worker's first $7,000 of salary. But those with a history of letting workers go can be charged up to 5.4 percent of that salary, or $378 a year.
That does not include surcharges the state has imposed on employers to pay off the money it had to borrow from the federal government after the unemployment insurance trust fund went broke during the recession.
The bill has already been approved by the House. A final roll-call vote will send it to the governor.
Religious organizations are already exempt from state laws which entitle those who lose their jobs through no fault of their own to benefits.
Rep. Steve Montenegro, R-Avondale, said it was always understood the exemption extended to religious schools. He said all that changed several years ago when the Department of Economic Security, which administers the state's unemployment insurance program, changed its policies.
This, he said, simply returns Arizona law to the way it was.
DES spokeswoman Nicole Moon said said there has been no change in policy.
But Moon acknowledged the agency last year "clarified" its interpretation of the Arizona law, which she said is based on federal statutes addressing when an employer is required to pay unemployment insurance taxes on its workers. These laws, she said, clearly require the organization be "operated primarily for a religious purpose."
That led to the review of the schools.
"It was determined that these specific entities did not operate primarily for religious purposes," she said. Instead, Moon said, DES officials said the primary purpose was secular.
In the case of K-12 schools, she said, they are set up to provide a general education to enable students to earn a diploma or prepare for college or other post-secondary training. And she said child-care centers exist primarily to provide adult supervision and care youngsters need to ensure their health and safety.
All that, she said, means workers at these schools and child-care centers have to be provided with unemployment insurance by their employers.
Montenegro disagrees, saying he believes these schools and care centers are religious operations.
"If it's a preschool or daycare, it's mostly seen as ministry," he said, based on the idea of teaching a child certain things at the earliest stages of development.
Montenegro acknowledged his legislation does not limit the exemption to those teaching in early grades. But he said the special consideration is justified, saying that religion permeates everything taught at church-run schools.
Rep. Debbie McCune Davis, D-Phoenix, said these schools are holding themselves out to be educational institutions, noting students who attend these schools can pay their tuition with scholarships that are funded by individual and corporate tax credits.
"If they're accepting an educational tax credit, their primary mission is educational," she said.
Thus, she continued, they should not be able to claim a religious exemption.