On August 8 Trump signed a Memorandum extending federal unemployment benefits, at $400 per week. Is this really happening?
A Quick History of the Federal Unemployment Benefits
The CARES Act’s $600 per week additional federal unemployment benefits expired on July 31, 2020. Section 2104 of the CARES Act. Back in May the U.S. House of Representatives had passed the HEROES Act extending these $600 benefits through January 31, 2021. Section 50001 of the HEROES Act. Then on July 27 the Senate announced its HEALS Act; it reduced the additional federal benefit to $200 per week. (This was to last through September, and then transition into a total unemployment amount of 70% of lost wages.) The Senate bill did not come up for a vote in the Senate. Intense efforts to reconcile the House of Representatives’ HEROES Act and the Senate’s HEALS Act have so far gone nowhere.
Trump’s Memorandum on Authorizing the Other Needs Assistance Program
Then on August 8, 2020, President Trump signed a “Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019.”
This Memorandum creates an “Assistance Program for Lost Wages.” This potentially provides for a weekly “lost wages assistance” of $400 per week. Theoretically it would cover the period from August 1 through December 6, 2020. See Sections 4 through 6 of the Memorandum.
But there are a series of practical challenges.
Can the President Act without Congress on This?
The Constitution gives Congress the power of the purse: to make laws about collecting and spending tax money. U.S. Constitution, Article 1, Section 8. Not the President. The Memorandum is clearly about spending billions of dollars of tax money. So how does Trump get around this?
He uses a law passed by Congress, the Disaster Mitigation Act of 2000. This law mostly pertains to federal housing assistance after a major disaster. But it also allows the president to provide for “Financial Assistance to Address Other Needs.” Specifically, the law allows for “financial assistance . . . to address . . . other necessary expenses or serious needs resulting from the major disaster.” 42 U.S.C Section 5174(e)(2).
This law empowers “the President, in consultation with the Governor of a State, . . . [to] provide [the] financial assistance . . . to individuals and households . . . .” 42 U.S.C Section 5174(a)(1).
So there’s at least a sensible argument that Trump can spend money to extend unemployment benefits needed from the pandemic.
But Where Does this Unemployment Benefits Money Come From?
Under the Memorandum the new unemployment money comes from two sources.
First, the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund “has more than $70 billion in emergency assistance funding available.” The Memorandum directs “up to $44 billion” of this money to go towards the unemployment benefits. The remaining “at least $25 billion” in to be “set aside” for “ongoing . . . and potential 2020 disaster costs.” 75% of the $400 weekly benefits are to come from this $44 billion from the Disaster Relief Fund.
Second, the Memorandum says that the remaining 25% to fund the extended benefits is to come from the states. It references the CARES Act’s $150 billion earmarked to states and some other local governments for COVID-related costs. The Memorandum asserts that “more than $80 billion [of these] dollars remain available.”
Are These Sources of Money Actually Available?
Start with the 75% federal share. To keep it simple here, assume that above-mentioned Disaster Mitigation Act contemplates supplemental unemployment benefits to be a “serious need” for people unemployed during the pandemic. Let’s put aside the wisdom of dedicating nearly 2/3rds of this natural disaster fund for this purpose.
One bit of reality is that the $44 billion the Memorandum earmarks for this purpose is only enough to cover 4 or 5 weeks of benefits. That barely makes a dent in the August to December period referenced.
How about the States’ Share?
As for the states’ 25% share, this provision comes with a bunch of practical challenges.
First, many states vehemently disagree with the Memorandum’s assertion that “more than $80 billion remain available” from the CARES Act. The states counter that this money is necessary for other absolutely critical pandemic purposes. In many cases already been explicitly earmarked for those purposes.
Second, beyond these CARES funds, the Memorandum has states use “other State funding,” to pay its 25% share. But states are in dire financial straits. Tax collection is significantly down and expenses are significantly up because of the pandemic. This includes huge increases in state unemployment benefit payouts, which continue at historic highs. State legislatures are going into emergency sessions to address the severe shortfall. Unlike the federal government, states must balance their budgets every year. They simply do not have money to pay for this new program.
Third, the Memorandum also says that “States should also identify funds to be spent without a federal match” if the federal money runs out. So after 5 weeks of the federal government paying 75%, the states are supposed to pay for the entire program. If there’s no money for 25%, there certainly isn’t money for 100% of the cost.
So Where Do These Unemployment Benefits Now Stand?
Arguably the Memorandum was mostly meant as leverage to get Congress to agree on some kind of unemployment benefits extension. It’s been more than a week (as of this writing on August 17) but there’s been no progress there.
If you had been kept afloat by the $600 weekly federal unemployment benefits, this is an intensely frustrating time. Contact your Louisville bankruptcy lawyers to see if we can help.