Aug 11, 2020 - Economy

A quandary for state unemployment agencies

Animated illustration of the American flag with the stars shaking in fear.

Illustration: Aïda Amer/Axios

State agencies charged with paying unemployment benefits to jobless residents have their backs against the wall as they rush to parse President Trump's executive actions on coronavirus aid.

Why it matters: States are being asked to pitch in $100 per unemployed resident, but it’s a heavy lift for cash-strapped states that are still unclear about the details and may not opt-in at all. It leaves the states and jobless residents in a state of limbo.

Driving the news: Trump signed four actions on Saturday, including a presidential memorandum that calls for restarting supplemental unemployment benefits at $400 per week. But the memorandum says the federal government will only pay $300, while states will kick in the rest.

  • A Department of Labor memo to states obtained by Bloomberg says states are not obliged to bankroll the additional $100 — meaning that some people would only receive the $300 put forward by the federal government.

Meanwhile, confusion reigns, and governors are casting doubt that their states can afford to put up the money for additional unemployment funds.

  • New York Gov. Andrew Cuomo (D), whose state has 1.5 million residents on some form of unemployment, said Trump's plan would set the state back $4 billion and called the prospect of states kicking in the money "simply impossible."
  • Kentucky Gov. Andy Beshear (D) said Trump's plan was "not workable in its current form" and estimated it would cost Kentucky $1.5 billion.
  • California's Gavin Newsom (D) said Monday that the state can't afford the unemployment plan. "There is no money sitting in the piggy bank," he told reporters.

Where it stands: Labor Secretary Eugene Scalia said over the weekend that the department would work with states to "provide the relief made available" by Trump's executive action.

But several state unemployment offices — including in Georgia, Arkansas and Alaska — told Axios on Monday they're still awaiting formal guidance.

  • "We are actively engaging our federal partners on how exactly the benefits would be paid out, and awaiting formal guidance from the U.S. Department of Labor on the State of Minnesota’s role," a spokesperson for Minnesota's employment agency said in a statement.
  • "We don't know what the federal government is going to do. We don't know how it'll work," Beshear told reporters on Monday.
  • Ohio Gov. Mike DeWine told CNN Sunday the state was exploring paying the extra $100: “We’re looking at it right now to see if we can do this.”
  • A DOL spokesperson said the agency would give formal guidance to states in “the next few days,” as well as offer ”technical assistance” to states that want to offer the benefits under Trump’s plan.

Any changes to state unemployment systems would take weeks to implement, officials warned Monday. It's a problem that plagued states at the onset of the coronavirus, when they rushed to refresh decades-old systems to process claims for the millions of suddenly unemployed.

  • Beshear said he's advocating for the re-up of $600 because the state already knows how to administer it. "If we have to make any changes to our computer system put in in 2000 ... it's going to keep people from getting those funds."
  • Cuomo echoed that view: “Don't redesign the mouse trap, because the states won't be able to implement that for weeks — and time is not on our side.”

Further complications: The money that the federal government could put up per Trump's memorandum — $44 billion from Department of Homeland Security’s Disaster Relief Fund — would dry up by October unless there's a significant drop-off in the number of Americans on unemployment rolls, as the Washington Post points out.

  • And it's unclear whether Pandemic Unemployment Assistance recipients — the self-employed, gig workers and others with limited work histories who typically wouldn’t receive benefits — would be eligible for the aid outlined in Trump's memo.

The bottom line: The clock is ticking — and bills are still mounting — for the more than 30 million Americans who have been relying on unemployment benefits to make ends meet. They've already seen their financial cushions dwindle with the expiration of the enhanced $600 in benefits.

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