The U.S. economy just had its worse performance ever as businesses shut down across the country as well as much travel decline.
The $400 in extra unemployment aid for millions of out-of-work Americans is actually $300 in most states. And it won’t arrive for weeks, experts warn.
Americans may just get three weeks’ worth of payments, according to guidance from the Federal Emergency Management Agency, which will run the relief program through its Disaster Relief Fund, following an executive action from President Donald Trump this month.
After coronavirus aid talks hit a stalemate in Congress, Trump called for a $300-per-week federally funded jobless benefit for workers who were unemployed due to the pandemic, with states asked to provide another $100 a week.
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But the legality of Trump’s memorandum remains up in the air. FEMA typically funds emergency responses to natural disasters, and states can’t normally pay unemployment insurance that isn’t authorized by Congress.
States will have to reconfigure their systems to distribute the funds, which threatens to result in long delays, according to Andrew Stettner, senior fellow at The Century Foundation.
“It will take weeks if not months for states to set up new procedures,” Stettner says. “It’s unfortunate because people can’t find work. We just don’t have enough jobs out there. We need to be boosting these benefits.”
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The scramble for enhanced unemployment aid comes after a $600-a-week federal supplement enacted by Washington lawmakers in the spring lapsed at the end of July for more than 25 million Americans. The cut in federal benefits to $300 would reduce weekly payments from $908 per person to $608 on average nationwide, according to The Century Foundation.
The new program is supposed to run through Dec. 6, according to Trump’s order, or until the FEMA aid runs out. But experts believe the money will last only five weeks if all states participate, since FEMA’s Disaster Relief Fund is capped at $44 billion, according to an estimate from the Committee for a Responsible Federal Budget, a bipartisan public policy organization.
That would leave millions of Americans without the additional benefits again in just a matter of weeks, with Congress in recess until Labor Day.
Here’s what you need to know about the benefits:
How much will benefits be?
President Trump signed an executive action Aug. 8 calling for $400 in weekly unemployment benefits to replace the $600 federal supplement that expired in late July. Unlike the $600, which was in addition to any estate unemployment aid, states would be asked to pay a quarter of the $400, or $100. But governors complained it would be difficult to find the extra money during the recession, which has hit their budgets hard.
The Trump administration then backtracked and said workers would get only $300 per week. A state wouldn’t have to put in additional funds if it already pays a worker $100 a week in benefits. The Department of Labor has since given guidance that regular state unemployment will qualify as their 25% contribution. But the benefits are contingent on states applying for the aid.
This means that states have two options: Count existing benefits as a match, or kick in an additional $100, experts say. But so far, not many states have chosen the latter.
Will any states opt to pay $400?
Yes. Unemployed people in Montana and Kentucky, for instance, are poised to become the first to receive the promised $400. FEMA’s grant funding will allow Montana and Kentucky to provide those unemployed due to the pandemic $400 per week – $100 in state funds and $300 in federal funds – on top of their regular unemployment benefit, the agency said.
Kentucky had signaled earlier this week that it had been considering whether to use some of its federal coronavirus relief money from the CARES Act, which will add $100 to the $300 benefit provided by FEMA, Gov. Andy Beshear said.
States may pay for their portion of the benefits by using money provided to them under the relief package passed this year, Trump’s executive action says.
Who is eligible?
Unemployed workers who receive less than $100 in state benefits won’t receive the extra $300 because their weekly benefit would fall short of triggering the state match to get the federal funds.
More than three dozen states have minimum unemployment benefits below $100, according to the Labor Department.
States have to apply for a FEMA grant to get the $300 from the federal government, which as of Friday had approved funding for 13 states – Arizona, Kentucky, Colorado, Iowa, Louisiana, Missouri, Montana, Michigan, New Mexico, Utah, Oklahoma, Idaho and Maryland, according to FEMA.
Other states have signaled they will apply for the aid, including Alabama, Alaska, Arkansas, California, Indiana, North Carolina, Texas, Tennessee, Virginia, West Virginia and Washington.
South Dakota, however, opted to decline Trump’s offer, with Gov. Kristi Noem saying workers didn’t need the help, citing improvements in the state’s economy.
When will workers get benefits?
The Trump administration has pledged the additional aid would reach workers in a matter of weeks, but that has been met with criticism.
States applying for the federal grants will get an “initial obligation of three weeks of needed funding,” according to a recent memo issued by FEMA. The agency will make additional disbursements to states on a weekly basis “in order to ensure that funding remains available for the states who apply for the grant assistance.”
Are unemployment benefits retroactive?
Yes. Once their state is set up, people already receiving benefits will see the supplemental aid come through with their regular state payments, retroactive to Aug. 1, the FEMA guidance says. States that began reconfiguring their systems on Aug. 8 could start administering payments by Aug. 29, according to the Department of Labor.
Experts worry about how long it could take. Many states already lacked the technology to deal with the massive wave of layoffs and furloughs in the spring, causing issues for their computer systems.
In Kentucky, Beshear said that those receiving benefits for the weeks of July 26 to Aug. 15 will be eligible to receive the additional $400, but said that people likely won’t start receiving the money until early September.
How long will it take?
The new federal relief aid rollout must be run separately from state unemployment benefits programs, according to Michele Evermore, senior researcher and policy analyst for the National Employment Law Project. That will take time, she added, since states can’t use their current unemployment insurance infrastructure to pay a benefit that isn’t authorized by Congress.
The language in Trump’s memorandum says these benefits must be paid “in conjunction with the state’s unemployment insurance system,” which means that states will have to set up a new way to add these payments to existing benefits.
Have any states started paying yet?
Yes. Arizona this week became the first state to send out benefits, according to the Arizona Department of Economic Security. The state has issued about $201 million in benefits to about 400,000 claimants thus far, which includes the beginning of retroactive payments for the weeks ending Aug. 1 and Aug. 8.
The DES anticipates receiving funding on a week-by-week basis, and will make payments until federal funding is exhausted. The state had implemented a new system toward the beginning of the shutdown for Pandemic Unemployment Assistance, a federally funded unemployment program created by the CARES Act in the spring, DES said.
“We recognized the need in our community for this additional assistance and worked as swiftly as possible with FEMA and the Department of Labor to make the necessary system changes to our existing systems,” a DES spokesperson told USA TODAY in an email.
Who gets left out?
The measure threatens to leave behind many low-wage workers. At least 1 million unemployed workers earn less than $100 a week, or about 6% of individuals on basic state unemployment, according to Eliza Forsythe, a labor economist and assistant professor at the University of Illinois at Urbana-Champaign. That disproportionately affects female, low-wage and part-time workers, she said.
To be sure, nearly everyone who is on Pandemic Unemployment Assistance, which includes self-employed and others who don’t qualify for standard unemployment, should be above that $100 a week threshold, Forsythe says.
How long will the benefits last?
Trump directed the use of funds from FEMA’s Disaster Relief Fund, which would be capped at $44 billion, lasting until December. But experts say states will run through the funds quickly.
More than 25 million people had received the $600 weekly bonus. With the enhanced unemployment aid capped at $44 billion, Stettner estimates that the additional aid will last just over a month, or about $10 billion per week, if the same number of people receive the bonus and if every state participates.
States approved for the program are guaranteed three weeks of funding, according to FEMA.
The program will run until Dec. 6, according to Trump’s memorandum, or until the $44 billion in FEMA aid runs out. It could also end earlier if the Disaster Relief Fund depletes to $25 billion, or Congress passes new legislation on federal unemployment benefits, whichever happens first. The fund had a balance of $74 billion as of July 31, according to FEMA.
How will states pay for this?
States can’t use any existing unemployment funds or regular state staff for the program, according to Stettner. The additional aid is available in states approved for funding by FEMA. States have until Sept. 10 to apply for the funds.
What will happen when funds run out?
The Trump administration is tapping into up to $44 billion in FEMA’s Disaster Relief Fund. But the amount could be cut at any moment if the funds are needed for their usual purpose of natural disaster relief, experts say, which further complicates funding in the midst of hurricane season.
Is it legal?
It’s unclear whether Trump has the authority to extend enhanced jobless benefits by executive action while sidestepping Congress. Critics have claimed that states can’t pay unemployment insurance that isn’t authorized by Congress, leaving the legality of the executive action up in the air.
Democrats wanted to extend the full $600 benefit, but Republicans balked, arguing it was a disincentive for some Americans to return to work because they would receive more in unemployment than they earned on the job. Republicans wanted to bring the benefit down to $200. Trump’s original decision to order $400 in benefits splits the difference.
Talks for a new stimulus deal dissolved by the time lawmakers left Washington this month with no deal and no plans to return until September.
Forsythe fears that some cash-strapped states will be hesitant to adopt the policy if it’s later deemed illegal, leaving them on the hook to pay back the funds.
“This is unprecedented. We’ve never done anything like this before,” Forsythe says. “If it turns out this is illegal, that creates a huge issue for states. They may not be able to get reimbursed.”
Evermore of the National Employment Law Project agrees.
“My biggest fear is that states will rush to get this up and running, but then later find out there are legal issues. Then millions of people who really need this money might have to pay it back,” Evermore says. “It’s just more fear and uncertainty in an already troubled world.”
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