Across the country, state and local governments are reducing costs and inefficiencies associated with issuing paper unemployment benefit checks by offering residents prepaid cards.
For Georgia, the only two ways to receive unemployment benefits are through a paper check or direct deposit into a bank account.
This is an unnecessary inconvenience, and sometimes a cost, on Georgia households with no access to a bank account. More than one of 10 Georgia households (12.2 percent) have no bank account, according to the latest FDIC National Survey of Unbanked and Underbanked Households.
That’s higher than the national figure of 7.7 percent. It’s even higher for African-American and Hispanic households in Georgia, where 22 percent and 45 percent, respectively, do not have access to a bank account.
Other states have resolved this issue by issuing prepaid cards. Mississippi’s Department of Employment Security, or MDES, for example, transitioned to prepaid cards as the default payment option for issuing unemployment benefits. Both the state and the beneficiaries benefited from the change.
It’s a compelling case for why Georgia should also adopt prepaid cards as the primary method of issuing unemployment payments.
Mississippi’s move eliminated the expense of printing and mailing more than 1 million unemployment checks a year at a cost of $1.18 per check. Plus it could shift the resources once wasted on investigating lost, stolen or forged checks.
The move paid off when the recession took hold in 2008 and administrative demands on MDES increased substantially with the increase in unemployment.
The advantages for recipients were just as significant. Ninety percent of Mississippi residents receiving unemployment benefits were able to access the funds at least two days earlier than if they had been paid by check. They also no longer had to pay check-cashing fees or worry about carrying cash around.
The agency’s partner, MasterCard, also offers Zero Liability protection, ensuring that card users are not liable for fraudulent transactions.
Fees for ATM withdrawals and other transactions may apply, but the card offers a cheaper option for those without bank accounts who typically have to pay to cash a check.
Shifting to the more cost-effective prepaid cards is a benefit to the taxpayer, as government costs shrink, and the private sector — such as the card issuer company involved.
But the taxpayer would receive the greater benefit: The cost of issuing paper checks compared with the cost of depositing money on a prepaid card is approximately $1 versus 10 cents.
Georgia allows state employees and people receiving child support to accept payments on a prepaid card. It’s time to expand access. In a state where so many are without a bank account and the unemployment rate is 9.1 percent, we should strive to deliver services in a way that doesn’t needlessly burden those most impacted by the recent recession and weak economic recovery.
Taxpayers deserve a state government that protects their tax dollars by delivering services in the most efficient, cost-effective, market-oriented way possible.
It isn’t too much to ask that the recipients of unemployment benefits be able to take advantage of payment options that empower them and minimize inconvenience.
Kelly McCutchen is president and CEO of the Georgia Public Policy Foundation.
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