Monday, August 10, 2020

The Continuing Travails of the President’s Attempt to Legislate a New Unemployment Assistance Program by Executive Fiat

David Super

      The President ensured a deadlock in negotiations by refusing to agree to substantial state fiscal relief.  In so doing, he abandoned the deal he made to pass the fourth coronavirus relief act, in which Democrats agreed to expedite passage of further business subsidies with none of their priorities in exchange for his commitment, confirmed in a tweet, that he would promptly support new state fiscal relief.  To ameliorate the political pressure to move forward further relief legislation, he announced on Saturday an initiative to use Federal Emergency Management Agency (FEMA) money to provide up to six weeks of addition enhanced unemployment benefits at a one-third reduction from the prior rate.  Now the realities of state fiscal crises that he insists on ignoring have scrambled those plans and sent the Administration veering deeper into uncharted – and unlawful – territory to try to make his initiative seem viable. 

     As I explained Saturday, his Presidential Memorandum directed FEMA to establish a new program with $44 billion from its Disaster Relief Fund to supplement unemployment benefits for many of the workers that had been receiving Federal Pandemic Unemployment Compensation (FPUC) before it expired in late July.  This initiative had several glaring shortcomings:

1.  The $400 per week that the Memorandum offered was a one-third reduction from previous levels. 

2.  The President excluded unemployed workers receiving less than $100 in regular unemployment benefits, largely people who had worked at or near the minimum wage and especially those in states with miserly unemployment compensation programs. 

3.  The funds identified were only sufficient to pay about six weeks of enhanced benefits even at the reduced rate.

4.  The program required financially strapped states to pay 25% of its benefit costs ($15 billion) and probably all its administrative expenses.

5.  As a new program, it required extensive reprogramming of states’ often-antiquated unemployment assistance computer systems, a task made considerably more difficult by the need to write code to exclude those with benefits less than $100 and to account for the required state match. 

6.  And the President raised grave doubts about the legality of his actions by disregarding the conditions the Stafford Act places on spending Disaster Relief Funds for unemployment assistance. 

Remarkably, in the last two days the Administration has managed to make many of these problems worse.

     The President’s announcement was greeted with broad public criticism on all these grounds.  Almost immediately it became clear that states could not fund the required match – a result of the same fiscal crises the President’s negotiators refused to effectively address in new relief legislation.  Democratic governors said so publicly, and apparently Republican governors sent the same message to the White House in private. 

     This triggered a flurry of inconsistent announcements from the Administration.  On leaving his golf course Sunday, the President stated that he had the option to fully fund the $400 weekly supplements if states could not find matching money.  Treasury Secretary Mnuchin repeated the President’s assertion. 

     This is incorrect.  Because the President’s initiative does not, and cannot, comply with the conditions on using FEMA funds for unemployment assistance in section 410(a) of the Stafford Act, the President has had to claim that he is acting under section 408(e).  And section 408(g)(2)(A) imposes a special 25% state matching requirement for aid provided under section 408(e).  Although the Stafford Act has numerous waiver authorities, and elsewhere allows the President to reduce or eliminate state matching requirements for other forms of aid, none of those authorities come close to allowing waivers of the state match for aid under section 408(e). 

     Perhaps realizing this, Sunday evening the Department of Labor emailed states to “permit[ them] to count their existing unemployment insurance (UI) weekly benefit payments from state funds as their cost share requirement”.  This raises two huge problems.  First, as the Department admits, “this means that an unemployed claimant will receive $300 per week in new FEMA-funded benefits” rather than the $400 the President promised.  The weekly supplement would be just half what FPUC provided.  For families at the brink of eviction, foreclosure, or utility shut-offs, or those running out of food, losing half of the supplement can mean the difference between austerity and catastrophe.  This is sadly another example of the neglect of acute poverty in political, legal and policy discourse. 

     Even apart from the parsimony of this new approach, it is not remotely legal.  Because he is operating outside of the Stafford Act’s authorization for unemployment assistance, the new benefit the President envisions is not part of regular unemployment benefits.  Therefore, moneys states spend on regular unemployment benefits is not “the non-Federal share” of the new benefit because it is not part of the new benefit.  Similarly, states’ existing unemployment spending is already mandated by state law and is already taken into account in lifting the large federal tax that applies to employers in states without compliant unemployment compensation systems.  That spending therefore is not “funds made available by the State” for this new benefit.  (A separate problem is that a large share of unemployment benefits now are funded by the federal government, not the states.)  Counting existing unemployment benefits as the state match under the Disaster Relief Program also violates OMB Circular A-87, which stipulates that “[t]o be allowable under Federal awards, costs must [n]ot be included as a cost or used to meet cost sharing or matching requirements of any other Federal award in either the current or a prior period”. 

     In addition, because this new benefit is outside the unemployment compensation system, states may not lawfully spend unemployment compensation funds to administer it.  These costs likely will be substantial because considerable reprogramming of state UI computers will be necessary.  States are already facing a cumulative $555 billion budget shortfall (not counting the shortfalls of localities, whom states may feel the need to assist).  Many states have shrunk their workforces and limited outside contracting, including the kind that would be required to reprogram their UI computers.  Some states also may have legal problems spending money not in their budgets to administer this new, short-lived program.  Given the lawlessness of the Administration’s actions to date, it seems possible it will simply instruct states to spend UI administrative funds on this new program in spite of the federal statute.  States reportedly have been told to expect formal guidance at the end of the week.

     Media accounts have focused on the risk of litigation over the legality of the President’s actions.  That is real, but several other consequences spring from this sort of rampant lawlessness.  States may be leery of providing these benefits for fear that they might not be reimbursed in the first place or that they may later be handed a large bill for all or the state share of these costs.  Having been burned this Spring when private assurances of flexibility were contradicted by rigid official interpretations of the CARES Act’s Coronavirus Relief Fund, states are disinclined to trust an email from DOL until confirmed in formal guidance.  The Supreme Court has implied that separation of powers concerns may preclude honoring financial commitments not authorized by Congress.  In addition, individual federal civil servants may feel apprehensive about participating in a program disbursing federal funds contrary to limitations imposed by Congress.  A federal employee who does so is subject to employment action, including dismissal, under the Anti-Deficiency Act and can, if they act “knowingly and willfully”, face criminal penalties.  This will probably not stop the program from going forward:  as we saw when the President ordered aid to Ukraine put on hold, if one official will not take an action that she or he regards as unlawful, someone else can usually be found who will.  We should not want a civil service, however, in which the key to advancement is blithely following orders one knows, or should know, are unlawful.

     In all this tumult, it is easy to lose sight all that the President could have done to relieve hardship in this crisis.  Although section 408 does not authorize unemployment assistance programs that depart from statutory conditions, it does provide the President wide latitude to offer housing assistance.  Contrary to the Administration’s claims, nothing in his executive order on evictions and foreclosures offers any protection to any vulnerable renters or homeowners.  It tells various officials to see what they can do to help, but if the Administration’s lawyers had identified anything it had the power to do without legislation one assumes that would have been in the order.  If the President had devoted the $44 billion to housing assistance, he could have done some real good. 

     Section 403 of the Stafford Act also allows FEMA to make “contributions to State or local governments” to aid in disaster relief.  The $44 billion is far less than state and local governments need, but it would help. 

     As a time when food prices are rising, households need more food assistance.  The Families First Coronavirus Relief Act authorized the Administration to provide supplemental allotments under the Supplemental Nutrition Assistance Program (SNAP) to compensate for those costs.  The Administration chose to implement this legislation in a way that targets aid on the least-poor SNAP recipients and gives nothing at all to roughly the poorest 35% of households.  Moreover, the Administration is now pulling back flexibility that the Families First Act allowed states to adapt SNAP administrative requirements to current conditions. 

     Most importantly, the President could return to the negotiating table with congressional Democrats.  He is claiming that Democrats “want to meet to make a deal”.  Literally, that is true:  the Democrats did not walk away from the table and have never expressed any reservations about returning.  Now that his gambit of trying to legislate unemployment benefits without Congress is falling apart, he should resume negotiations and move forward to a deal. 

     Even if he were to do so, and even if his negotiators came prepared to reciprocate to the Democrats’ concessions, no legislation likely could be drafted and passed by Congress before the end of next week.  Once one accounts for the time states will require to revive FPUC and implement any changes in the final deal, unemployed workers will have gone more than a month since their last FPUC payment before the next one arrives.  That is still probably less time than it would take for unemployed workers in most states to receive anything under the President’s new FEMA program, but it is much too long. 

     The immediate harm to families, and the near-term harm to the economy, are all too real.  Additional delay only makes it worse. 


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