The Mechanics of President Trump's Disaster Relief Memorandum
States can choose to obtain additional funding for providing unemployment benefits.
Earlier today, I shared my tentative thoughts on President Trump's four new executive actions. This post will break down the mechanics of the Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019. I will address the other actions later.
The CARES Act created the Coronavirus Relief Fund (CRF) to cover costs incurred by state and local governments due to COVID-19. The memorandum states that the CRF currently about $80 billion.
The Department of Homeland Security also administers the Disaster Relief Fund (DRF). This fund, which predated the CARES Act, has $70 billion in funding. It is used, as the name suggests, for disasters. And the President has declared that the COVID-19 situation is a "disaster."
The memorandum directs that $44 billion from the DRF be provided to the states "[t]o provide financial assistance for the needs of those who have lost employment as a result of the pandemic." But by statute, any federal grant from the DRF must be supplemented by the states: the federal government provides 75% and the states provide 25%.
States are not obligated to request this funding. And if they decline to participate, they can keep all their current funding. I don't see an NFIB problem. Relatedly, if a state has the option to opt out, I do not know how they would have standing to challenge the memo. Perhaps a state could argue that this policy could decrease the funding available in the DRF for a disaster. But the policy expressly ensures that the DRF will not dip below $25 billion.
"At least $25 billion of total DRF balances will be set aside to support ongoing disaster response and recovery efforts and potential 2020 major disaster costs."
Would a court really say that $25 billion is not enough money, thus California could go to court? Standing will be hard to establish here here. In theory, if an active hurricane season depletes the DRF, the lost-wage benefits could terminate sooner rather than later. But I am confident Congress would not let those funds run dry. Trump is calling their bluff.
But here's the rub. The states can pay their 25% through the CRF. If I am reading this memo correctly, the states can shift the money offered by the federal government from the CRF to supplement the payments from the DRF. If the states follow Trump's plan, they may not have to use a penny of state money to provide these payments. In effect, Trump is getting around the 25% matching policy by letting states use another pool of federal money. My reaction here is tentative. Please e-mail me if I missed anything.
The memo states:
I am calling on States to use amounts allocated to them out of the CRF, or other State funding, to provide temporary enhanced financial support to those whose jobs or wages have been adversely affected by COVID-19. These funds, including those currently used to support State unemployment insurance programs, may be applied as the State's cost share with Federal DRF funds.
In short, the federal government will likely be paying for 100% of the assistance program for lost wages. States are not obligated to participate. But those who choose to participate may not have to actually tap state funds, unless the DRF drops below $25 billion, which very well may happen. There is a risk for governors, but one they would be willing to take.
But wait, there's more! HHS is "authorized to make available other needs assistance for lost wages . . . if the Governor requests lost wages assistance and agrees to administer delivery and provide adequate oversight of the program." The memo describes how the funds would be allocated:
In exercising this authority, the Secretary, acting through the FEMA Administrator, shall, subject to the limitations above, approve a lost wages assistance program that authorizes the Governor to provide a $400 payment per week, which shall reflect a $300 Federal contribution, to eligible claimants from the week of unemployment ending August 1, 2020.
Of course, the federal government will be covering the additional $100 through the CRF. Governors who apply will basically obtain a $400 weekly supplement for their citizens. Bring home the bacon! Perversely, Republican Governors are more likely to apply than Democratic Governors.
And this policy does not only apply to those who are on unemployment. It also applies to a "claimant [who] is unemployed or partially unemployed due to disruptions caused by COVID-19." "Partially employed," I think, means someone whose hours were reduced because of COVID. This category would also likely include those who are furloughed.
This policy will become very popular. There will be terrible optics to challenge it in court. For years, I have repeated the refrain, "I favor the policy, but it should be accomplished by legislation, not through executive action." When I repeated that line at CUNY Law, one of the protestors shouted "Fuck the law." Democratic AGs will have a tough time explaining why they are ripping away $400 a week from unemployed residents. Fuck the law!
This policy will not go on indefinitely–unlike DACA. There is an express termination clause:
The lost wages assistance program described in section 4(b) of this memorandum shall be available for eligible claimants until the balance of the DRF reaches $25 billion or for weeks of unemployment ending not later than December 6, 2020, whichever occurs first, at which time the lost wages assistance program shall terminate.
Legally speaking, the Court may be hesitant to enjoin a policy that will only last a few months. Politically, President Trump or a President Biden will be forced to continue renewing this policy indefinitely. Benefits are very hard to remove. Now Trump has entrenched a new benefit by executive action.
There is, of course, one natural stopping point. If legislation is enacted, the order terminates:
The lost wages assistance program shall terminate upon enactment of legislation providing, due to the COVID-19 outbreak, supplemental Federal unemployment compensation, or similar compensation, for unemployed or underemployed individuals.
Thus, in theory at least, Congress has some latitude to negotiate in the shadow of this memo.
This reaction is tentative. Please email me if I got anything wrong. I still haven't done the necessary research to determine if the statutes cited authorizes this action.