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 specifically exempt religious organizations from having to provide unemployment insurance to those who work for them in educational and child care services. The only requirement is that those services include some religious instruction, though HB 2645 does not say how much -- or how little -- would qualify.
The move came despite opposition from several Democratic lawmakers who questioned the whole idea of what amounts to giving religious schools a tax break.
That's because 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 that have 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, of $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.
A final roll-call vote is needed on the bill, which already has been approved by the House, to send it to the governor.
Existing law already says religious orders and organizations are not subject to 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 that this 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 that the agency last year "clarified'' its interpretation of the Arizona law which she said is based on federal statutes of when an employer is required to pay unemployment insurance taxes on its workers. These laws, she said, clearly require that 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 said he disagrees, saying he believes these schools and care centers are really 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 "and when he is old he will not depart from it.''
But 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 these church-run schools.
"I do see as religious instruction the way that mathematics is presented,'' he said.
"It's presented in a way where you use Biblical terms,'' Montenegro explained. "You can use Biblical examples.''
He acknowledged, though, that the calculations remain the same, whether counting prophets or apples.
Rep. Debbie McCune Davis, D-Phoenix, said these schools are holding themselves out to be educational institutions. And McCune Davis pointed out that 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. And at that point, she continued, they should not be able to claim a religious exemption.
But Monica Stern, an accountant whose clients include private schools that would be affected, countered that the scholarships are awarded to the parents and not the school. She said they decide which private or parochial school to send their children.
Sen. Ed Ableser, D-Tempe, said he has been on a church payroll in a clerical capacity. And he said there are legitimate reasons to exempt clerical workers from the law.
"I understand the separation between the government and the church,'' said But he said he also has worked in church-operated schools. And Ableser said those who are hired by the church specifically for educational services should get the same protections if they are laid off as any other worker.
Those protections allow someone who loses a job to collect up to one-half of what they were earning for up to 26 weeks. But payments are capped at $240 a week, the second-lowest rate in the nation following Mississippi.
Stern said more than just future expenses are at issue.
She said DES auditors have gone back through the books of some of her clients and are seeking payments going back four years. Stern told lawmakers that one of her schools -- she did not name names -- could end up having to seek bankruptcy protection if the assessment has to be paid.
This legislation, however, may not help: It is prospective only and, even if it becomes law, would not take effect until later this year.
This is the second tax break for religious institutions being considered by lawmakers this year.
The House already has approved a measure which would extend the property tax exemption now granted to churches and other houses of worship to vacant land held by religious institutions. The Senate is to take up that measure Thursday.