Lapsed unemployment benefits put Arkansas and nation’s job market at risk
August 17-23, 2020
By Daily Record Staff
As millions of unemployed workers across the country await word on progress of President Donald Trump’s order to extend unemployment benefits, several economic forecasters are warning a long delay could further damage to the U.S. job market and economy.
In addition, the recent spike in COVID-19 cases and deaths in Arkansas and across the U.S. has caused employers to slow hiring in July and early August. In a recent report by the St. Louis Federal Reserve, researchers noted that in states with the most notable COVID-19 increases, such as Arizona, Florida and Texas, there has also been mild employment recovery since early June.
“The coronavirus pandemic has caused great harm to the economy and the labor market,” said St. Louis Fed senior economist Maximiliano Dvorkin in an Aug. 4 research note. “The recent evolution in our coincident employment index suggests that the recent recovery in employment has halted and that the increase in COVID-19 may be the main cause for this. Thus, a strong economic recovery may need a healthy recovery from the pandemic.”
The report by the St. Louis Fed district, which oversees Arkansas and several other states, was published just a week after a $600 per week unemployment benefit for millions of U.S. workers expired on July 25. In the following week, talks between Democrats and Republicans stalled over the extended benefit and other emergency pandemic funding before Congress’s monthlong recess in August.
In the original 880-page Coronavirus Aid, Relief and Economic Security (CARES) Act that appropriated a massive $260 billion in new unemployment benefits, many households were receiving an extra payment of $600 per week over a 13-week period.
In Arkansas, the expired CARES Act not only increased the robust $600 per week payment over nearly four months for every person who lost their job due to COVID-19, but sidelined workers also continued to receive their weekly unemployment compensation from the state. Across the U.S., the national average for state jobless benefits before the pandemic was 26 weeks.
That means an out-of-work individual in Arkansas could stay in the unemployment line for 25 weeks with cash benefits topping out at $451 week before COVID-19. Under the CARES Act, jobless workers in Natural State were able to receive benefits topping out at more than $1000 per week and extend their stay on the unemployment rolls to nearly 40 weeks.
President’s order puts $400 per week extension in limbo
Under Trump’s presidential memorandum to provide a short-term extension of federal unemployment benefits, out-of-work Americans would keep the extended benefit of $400 per week through the end of 2020, backdated to Aug. 1. That amount splits the difference between $200 and $600 extension proposed in Congress by Democrats and Republicans, respectively.
In a press conference at the White House announcing his executive order on Aug. 8, President Trump blamed Democrats for stalling negotiations on the new emergency relief package as total COVID-19 cases topped 5 million and the Nov. 3 presidential election looms less than 90 days away.
“Because many of the relief programs created by the Congress have expired or will shortly expire, my Administration and the Republican leadership in the United States Senate have proposed multiple options to continue to provide needed relief to Americans,” Trump said at the White House press briefing.
“But Democratic Members of Congress have twice blocked temporary extensions of supplemental unemployment benefits,” Trump continued. “Political games that harm American lives are unacceptable, especially during a global pandemic, and therefore I am taking action to provide financial security to Americans.”
Taking note of the President Trump’s lead, U.S. Department of Labor officials announced a week ago they will begin working closely with Arkansas and other states and the Department of Homeland Security and FEMA to assist in providing the $400 extension made available by the president’s executive order.
“Today’s Presidential memorandum reflects President Trump’s determination to identify and deploy all the authorities available to him to support Americans out of work as a result of the pandemic,” said U.S. Labor Department Secretary Eugene Scalia. “The memorandum follows the refusal of Democratic leadership to allow even a short-term extension of federal unemployment benefits while the parties negotiated a longer-term plan.”
As of today, Democrats and Republican leaders had not come back to the negotiating table to pass new federal legislation to keep the economy from falling into a deeper recession as U.S. health officials accelerate efforts to find and then manufacture a COVID-19 vaccine for at least 100 million Americans. So far, the two sides have only come to an agreement on a $1,200 payment to most American families and sizable funding for American public schools to reopen ahead of the Labor Day weekend in September.
In the earlier CARES Act signed by Trump in late March, Congress first approved a stimulus payment of at least $1200 to most American families making less than $75,000 annually. That legislation also included the popular $650 billion Paycheck Protection Program that gave business owners forgivable loans to keep workers on payroll after the pandemic shut down the economy in the spring.
In May, House Democrats approved the so-called Health and Economic Recovery Omnibus Emergency Solutions Act, or the HEROES Act, an 1800-page coronavirus relief bill that extends the $600 per week unemployment insurance supplement through Jan. 31, 2021. That bill also allows the supplement to continue through March 31, 2021 for those who have not exhausted their benefits.
The House bill backed by Democrats among other things, also approves additional funding for voter protections for the upcoming 2020 presidential election, $25 billion for the U.S. Postal Service, and additional food stamp spending.
On the other hand, Republicans are proposing a smaller $1 trillion bill known as the Health, Economic Assistance, Liability Protection and Schools Act, or HEALS Act, penned by U.S. Senate Majority Leader Mitch McConnell. That legislation would cut unemployment benefits to $200 per week until states can implement a 70% wage replacement program.
Gov. Hutchinson: $265 million needed for Arkansas unemployment payments
Notwithstanding the president’s executive order, there is still a lot of uncertainty concerning how Arkansas will refill funds needed for the extended $400 benefit through the Pandemic Unemployment Assistance (PUA) program and how it will impact state budget coffers without new funding.
In his daily COVID-19 press briefing at the State Capitol on Monday, Gov. Asa Hutchinson addressed several scenarios that could play out following President Trump’s unfunded mandate to extend unemployment compensation to nearly 120,000 Arkansans.
Hutchinson said he, Department of Commerce Secretary Mike President and state Department of Finance and Administration Secretary Larry Walther worked over the Aug. 9 weekend “trying to get a handle on what [Trump’s order] exactly would mean.”
“For Arkansas – and let me just first say that I believe the president is simply doing his best to get the money to the citizens of the United States that are in great need,” said Hutchinson. “This is an economic crisis where we have Arkansans that are hurting, and the president is just clearly trying to get relief to them quickly and I think that is the motivation behind what he is doing.
“The solution is for Congress to reach an agreement that we can have to continued ability to provide the unemployment compensation at a similar level of increased support for those on unemployment,” added Hutchinson, criticizing the Democrats’ $3 trillion stimulus package.
Under President Trump’s order, Arkansas and other states will be asked to cover 25% of costs using existing funding such as the tens of billions of dollars available to them through the CARES Act. Hutchinson said Arkansas can cover those estimated $265 million in additional costs for extended unemployment benefits through the end of 2020, “but it would be challenging and take some time.”
To comply with the presidential order, Hutchinson said Arkansas would have to adjust some of budget priorities, which is $5.68 billion for fiscal 2021. The term-limited Republican governor said Arkansas has already has more than $250 million CARES Act funding in reserve but would have to dip into those funds to meet the federal 25% requirement.
There would also have to be legislative approved from the Arkansas General Assembly to tap into federal FEMA funds intended for other purposes. That requirement would also be unpredictable, Hutchinson said, noting that the Legislative Council has held up nearly $100 million in CARES Act appropriations intended to aid the spike in COVID-19 cases for minority populations in Northwest Arkansas.
If Congress moved swiftly to reach an agreement to approve a new COVID-19 emergency bill, then Arkansas would not have to not to adjust its current budget. “That would be fairer to the state,” said Hutchinson.
In his executive order, President Trump also OK’ed a payroll tax holiday to most American families making less than $100,000 per year. Trump has also stated that if he is elected in November, he would make that payroll tax extension permanent, which Democrats say would put Social Security and Medicaid funding at risk.
Two other president memos also provided protection to COVID-19-impacted renters and homeowners from evictions through and student loan payment deferments, respectively. In circumventing Congress, all four executive orders could be challenged in federal court, which could further delay the unemployment extension and other benefits for several weeks.
In the recent negotiations between the White House, and House and Senate leaders, both parties have agreed on providing billions in COVID-19 funding for local school reopening and at least another $1,200 stimulus check to most American families, which mirrors the similar proposal approved in the CARES Act that cost more than $560 billion.
PHOTO CAPTIONS: (Photos courtesy of National Association of Manufacturers)
U.S. workers await word from Congress and the Trump administration on the extension of unemployment benefits from the CARES Act that expired on July 25.