Governors and state officials aired their frustrations on Monday with a memo from President Trump that would require states to cover a portion of enhanced unemployment benefits for their residents.
Trump’s order would put a further strain on state governments already facing budget constraints as the coronavirus pandemic has dried up revenue sources.
The timing of the memo adds insult to injury for some states. The president spent weeks railing against including state aid in any final stimulus measure, deriding it as a “bailout” for Democratic-run states.
And the White House last week informed dozens of governors they would be required to shoulder 25 percent of costs associated with using the National Guard to respond to the pandemic.
The additional costs for states received a frosty reception among governors on a weekly conference call with Vice President Pence, according to a person on the call. Pence at one point acknowledged that the cost-sharing with states was not the administration’s first choice, the person said.
New York Gov. Andrew Cuomo (D) on Monday compared the unemployment burden placed on states to “handing a drowning man an anchor.” He said he expected it would be challenged in court, noting that it could cost his state $4 billion through the end of 2020.
California Gov. Gavin Newsom (D) said the 25 percent match for unemployment benefits would cost the state roughly $700 million a week.
“For the state to absorb $700 million per week … would create a burden the likes which even a state as large as California can never absorb without, again, massive cuts to important services,” Newsom said in a news briefing.
A senior administration official blamed Senate Minority Leader Charles Schumer (D-N.Y.) and Speaker Nancy Pelosi (D-Calif.) for the breakdown in unemployment benefits, which expired last month.
“So while the House failed to compromise and immediately left town, the President took action to protect the American people and provide them economic relief amid the pandemic,” the official said. “It’s not anyone’s first choice, but governors’ ire should be directed at the obstructionists Pelosi/Schumer who played politics with the coronavirus crisis.”
The executive order would reroute disaster relief funds from the Federal Emergency Management Agency (FEMA) toward unemployment, providing $300 in additional weekly benefits. States would be responsible for an additional $100, bringing the total to $400, about a third lower than the $600 benefit that expired in July.
But Labor Department guidance obtained by The Hill showed that states could count existing benefits toward their $100 contribution, essentially leaving the benefit at $300, or opt to use leftover Coronavirus Relief Funds, many of which have already been obligated.
Treasury Secretary Steven Mnuchin said states could turn to unspent state-level Coronavirus Relief Funds from March’s CARES Act to cover the remaining $100, noting that only about a quarter of the funds have been spent.
But a survey from the National Association of State Budget Officers in late July found that closer to 75 percent of the funds had already been obligated, even if they had not yet gone out the door.
Arkansas Gov. Asa Hutchinson (R) said on Monday’s call with the vice president that he would have reconsidered allocating his CARES Act funding elsewhere if he’d known it could be used to help with unemployment benefits, according to the source on the call.
“I said we do have the CARES Act funds for the state share but we would have to reallocate some of our funding and we will need to have legislative approval,” Hutchinson said in a statement to The Hill. “This is all doable but Congress is the best answer to get the financial assistance to those who need it. This is urgent for many people and Congress needs to act.”
Whether or not states ultimately pay out the extra cash, they will still have to retool their creaky unemployment systems to account for it, which would take both time and money.
“They have to develop the accounting system to recognize what mechanism the state is using to provide that $100,” said Wayne Vroman, a benefits expert at the Urban Institute.
Democrats called the executive orders ineffective and questioned their legality.
“I’ve called them paltry, or three words that I’ve used, which now seem to be in the currency, are unworkable, narrow, and scanty. They just won’t work,” Schumer said on MSNBC’s “Morning Joe” on Monday.
Just getting the new unemployment scheme set up, he added, would take “a month or two,” leaving the more than 31 million Americans collecting benefits in a lurch through at least September absent new legislation.
House Appropriations Committee Chairwoman Nita Lowey (D-N.Y.) said the problems needed a legislative fix and decried the effects Trump’s orders would have on states.
“President Trump’s executive actions push more fiscal burdens onto already struggling states while doing very little to meet the real needs of Americans,” she said.
Economists such as Josh Bivens, from the left-leaning Economic Policy Institute, say that putting more of an onus on states during a recession will backfire and lead to more economic hardship.
With changes expected to take months to carry out and just $44 billion of FEMA funds available to begin with, Bivens said carrying out the order would burden states with a lot of work for a very small payoff. At the current level of unemployment, the fund would be exhausted in just more than a month.
“It’s going to take a long time to set up, and it’s not going to last a long time at all,” he said.
Covering a portion of the enhanced unemployment benefits is the latest instance of the Trump administration shifting costs of a response to the pandemic to states.
Trump last week reauthorized funding for states to use the National Guard to assist in their individual responses. But states, with a few exceptions, will now be expected to cover 25 percent of the costs through the end of the year after the federal government had covered the full cost for months.
The Guard has aided states by running testing states, assisting with food banks, and distributing personal protective equipment and medical supplies. Louisiana Gov. John Bel Edwards (D) estimated it would cost his state $10 million to pay its share of National Guard costs through 2020.
Numerous states are facing a budget crunch after the pandemic wiped out surpluses and forced governors to draw on rainy day funds to maintain services. The National Governors Association on Monday renewed its request for $500 billion in unrestricted state aid to bolster the economic recovery and response to the pandemic.
But funding for states has been one of the biggest points of difference between Democrats and the White House in negotiations on a relief package. Democrats had pushed for $915 billion, while Republicans offered $150 billion.
Trump has repeatedly cast the idea of state funding as a “bailout” for blue states, even though the additional burdens in covering unemployment benefits and the National Guard will affect red states as well.
“The president’s always been clear here that he wants to support state and local governments but only for COVID-related matters, and he doesn’t want to bail out blue states that had structural problems long before this,” White House press secretary Kayleigh McEnany said Monday.
It remains unclear whether or when negotiations on legislation will resume. Top Democrats denied claims from Trump on Monday that they had phoned him and begged to restart the talks.
Mnuchin said the White House was “willing to compromise” and get a deal “this week” if the final outcome was “fair.”