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Posted on: August 14, 2020

President’s Supplemental Unemployment Compensation Plan Poses Problems

As reported in our Monday Daily Update, President Trump took action last weekend, to address a few aspects of the economic crisis, caused by the Coronavirus. His Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019 looked to address the July expiration of the $600 a week federal supplement to state unemployment benefits. It would divert $44 billion of FEMA Disaster Relief Funding to a program that could add up $400 a week to state unemployment benefits. Federal FEMA funding would cover $300 of the total if States agree to provide the other $100. The memo orders the aid to continue through December 6, or until funding is exhausted.

States may provide claimants a lost wages supplement of up to $400, composed of a $300 federal contribution from the Disaster Relief Fund (DRF) and an additional amount up to $100 from state funds. The state-funded portion may be sourced from the Coronavirus Aid Relief (CRF) and Economic Security Fund allocation. The total lost wages supplemental payment may not exceed $400. States may instead provide claimants the lost wages supplement of $300 paid entirely from the $300 federal contribution and satisfy the match, with no additional state payout, by leveraging existing state funding used to pay regular state unemployment benefits. In this case, the state must demonstrate at the aggregate level that the total of its state-funded unemployment benefits to claimants receiving the lost wages supplement were at least 25% of the total lost wages assistance benefits paid in conjunction with all of the unemployment programs.

According to the U.S. Bureau of Labor Statistics, there were 750,000 unemployed New Jerseyans, at the end of June. At $100, each, it would cost the State $75 million, each week, to provide the full $400 supplement.

Further, most of the CRF and Economic Security Funds have already been allocated or obligated by the States for other purposes. Use of the funding to offset the State portion of the unemployment benefit may reduce the amount of money states have promised to local governments.

Using DRF during hurricane season could also severely limit the ability of FEMA to respond to and provide assistance to local governments that may be impacted by large scale disasters. FEMA also recently released a notice of funding opportunity for the new Building Resilient Infrastructures and Communities (BRIC) grant program to states, local communities, tribes and territories (SLTTs) for pre-disaster mitigation activities. However, the use of the DRF, which funds the BRIC grants, for unemployment benefits could also reduce the amount of money that is available to state and local governments for disaster mitigation.

It is important that Congress act immediately to extend the unemployment benefits in the next relief package and that the federal government does not siphon funding from the critical DRF program to supplement unemployment benefits.

Contact: Jon Moran, Senior Legislative Analyst, jmoran@njlm.org, 609-695-3481 x121.

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